Rising trade tensions with the US will place further pressure on Botswana’s already challenging economic outlook, putting a strain on President Duma Boko’s newly elected administration and elevating political risks
GAZETTE REPORTER
While President Duma Boko’s historic victory in Botswana’s October 2024 general elections may have ended the Botswana Democratic Party’s (BDP) 58-year dominance, a new report has cautioned that his administration will have little time to celebrate.
According to a recent analysis by Business Monitor International (BMI), President Boko’s government, while buoyed by a strong parliamentary and popular mandate, faces deep-rooted economic challenges that are likely to overshadow any potential ‘honeymoon period’ in governance.
“While President Boko enjoys a strong parliamentary and popular mandate after unseating the Botswana Democratic Party in the October 2024 elections, his administration has inherited very substantial economic problems, and thus will almost completely forgo a governance ‘honeymoon period,’” the report says.
Major resource agreements
President Boko, who led the opposition UDC to a historic victory in the 2024 general elections, campaigned on a platform promising job creation, expanded social services, and a review of major resource agreements.
However, economic realities may force a reassessment of these goals.
BMI warns: “Macroeconomic pressures will force the government to adopt austerity measures, despite the Umbrella for Democratic Change’s (UDC) campaign platform of expanding social welfare.
“We expect that rising trade tensions with the US will place further pressure on Botswana’s already challenging economic outlook, putting a strain on President Duma Boko’s newly elected administration and elevating political risks.”
BMI says it expects the government to follow through with its 2025/26 fiscal year budget, reining in current expenditure to narrow the wide budget deficit (see chart below).
Tepid
“Although Boko’s administration will have little choice but to exercise austerity to maintain fiscal and external sustainability, it will be at odds with the UDC’s political platform,” says BMI.
The platform revolved around ‘fixing’ Botswana’s economic model, which is highly dependent on diamonds for growth and government revenue, while also expanding social welfare benefits such as healthcare, education and the minimum wage.
“As a result, we expect social risks to rise in 2025, as grievances over slow economic activity mount,” says BMI. “When the UDC was elected in 2024, the unemployment rate was officially estimated at 27.0%, a historical record (see chart below).”
The analysts at BMI say they “do not expect that employment rates will drop significantly in 2025, as economic activity will remain tepid and growth will be driven largely by strong statistical base effects given a full-year contraction in 2024”.
Strong popular mandate
“This will fuel popular frustration with economic management, and by implication the UDC,” they note.
“The government’s transparent communication regarding the current economic climate, combined with the UDC’s strong popular mandate, should provide the administration with some leeway before policymakers begin to feel the effects of rising socio-economic risks.”
On the policy front, BMI says it expects the government to prioritise economic diversification. “This will be driven by the need to mitigate the risk of a prolonged economic downturn by channelling resources into the non-mining economy, given the growing uncertainty around global demand for natural diamonds and the competition from lab-grown alternatives.
Policy priorities
“While we expect the government to execute a more conservative spending plan, we believe it will look to protect the capital expenditure budget in order to prioritise investments aimed at economic diversification.”
The report notes that at the World Economic Forum in January, President Boko emphasised that investment in renewable energy technologies, eco-tourism, the digital economy and climate-smart agriculture were policy priorities of the new administration.
“Nonetheless, we expect limited progress in 2025 due to the conservative budget and the long-term nature of diversification efforts,” says BMI.