Macroeconomic Update (April-May 2025)

According to BMI (Business Monitor International), Botswana’s Q4 2024 GDP contracted by 2.0% YoY, contributing to a full-year 2024 contraction of 3.0%. Mining sector collapse (-27.3% YoY in Q4) drove underperformance, though non-mining sectors showed resilience. Inflation eased to 2.3% YoY in April 2025, below the central bank’s 3-6% target band. March’s brief uptick (2.8%) reversed amid subdued demand.

The Bank of Botswana held the policy rate (interest rate) at 1.90% (April 2025), marking four consecutive holds. Real rates remain negative (-0.4%), sustaining accommodative conditions. Unemployment at 23.1% (Q4 2024), marginally below 2023’s 23.6% but structurally elevated. In terms of fiscal stance, the 2024 deficit hit 9.0% of GDP, with public debt rising to 27.4% of GDP. Revenue pressures persist amid diamond slump.

Botswana has consistently recorded trade deficits for over a year. In March 2025, the country recorded a trade deficit of P1,953.1 million, as shown by the chart below which shows data from January 2023 to March 2025.

• Imports: 74.8% from SACU (South Africa: 59.1%; Namibia: 14.9%).

• Exports: 51.9% to Asia (UAE: 23.6%; India: 17.3%), 23.6% to EU (Belgium: 23.5%)

The current account deficit is at BWP -8,164 million (Q4 2024). FX reserves stable at ~8 months of import cover, but diamond dependency exposes BoP to commodity shocks.

Mining’s significant GDP share leaves the economy vulnerable to diamond market volatility. Diversification into copper and eco-tourism is critical.

Policy & Regulatory Developments

The 2025/26 budget raised the top personal income tax to 26.5% (+1.5pp) from 25% and corporate tax rates. Revenue mobilization targets fiscal consolidation. With regards to tax code modernization, there’s currently a review underway to align with international best practices and digitalize administration.

Bank of Botswana (BoB) maintains a dovish posture despite inflation nearing the target floor. Forward guidance suggests rates to stay <2.0% through 2025. The Government of Botswana launched a 5-year anti-poaching strategy (2025-2030) to enhance wildlife protection via law enforcement coordination and community engagement. Aims to safeguard eco-tourism revenue (7% of GDP).

An upcoming Catalyst in Q3 2025 is diamond production data (August release), which may trigger fiscal policy adjustments.

Informal Economy & Structural Shifts

High unemployment (23.1%) fuels informalization, though data gaps persist. Mobile money adoption (e.g., Orange Money, MyZaka) suggests growing digital informal transactions and activity. Youth (15-24) unemployment, which exceeds 35%, is driving urban migration and informal service-sector growth. Tax administration modernization may formalize 15-20% of informal businesses by 2026.

Agri-informal trade resilience observed in satellite data, drought-resistant crop planting up 12% YoY in Kgalagadi region. Recurrent droughts threaten 40% of livelihoods tied to agriculture. Kgalagadi Drylands Ecosystem Project aims to bolster resilience

Outlook

Baseline Scenario (70% Probability):

Growth:

Gradual recovery to 3.2% in 2025, contingent on diamond market stabilization (H2 rebound likely). Non-mining sectors to drive near-term expansion.

Inflation:

Anchored below 4.0% through 2025, allowing BoB to hold rates.

Fiscal:

Deficit to narrow to 5-6% of GDP by 2026 as diamond revenues rebound and tax reforms bite.

Investment Themes:

Overweight: Copper mining, renewable energy infrastructure, conservation-linked tourism.

Underweight: Diamond extraction, import-dependent retail.

Downside Risks (30% Probability):

• Protracted diamond market weakness (BMI warning).

• Climate shocks disrupting agriculture and water supply.

• Slower-than-expected tax reform implementation.

In a broader Pan-African context, Botswana’s institutional strength offers relative stability vs. peers, but the diversification lag remains a structural weakness. Botswana outperforms Angola/Zambia in governance; trails Mauritius in economic complexity.

Sources

• Statistics Botswana: https://www.statsbots.org.bw/sites/default/files/International%20Merchandise%20Trade%20Statistics%20Monthly%20Digest%20-%20March%202025.pdf

• World Bank: https://www.worldbank.org/en/country/botswana/overview

• Business Weekly: https://businessweekly.co.bw/news/bmi-sees-dim-outlook-for-botswanas-economy-in-2025

• BDO Global: https://www.bdo.global/en-gb/insights/tax/expatriate-tax/botswana-2025-2026-budget-implications-for-direct-taxation-of-employees-and-businesses

Disclaimer

This website and all materials contained herein are issued by Regal Capital Botswana (Pty) Ltd ("Regal Capital") for informational purposes only and do not constitute investment advice, a solicitation, or an offer to buy or sell any financial instruments. The content is general in nature and does not consider specific investment objectives, financial situations, or individual needs. While Regal Capital strives for accuracy, no representation or warranty, express or implied, is made regarding the completeness, reliability, or accuracy of the information. Any opinions or estimates reflect the author’s judgment as of the publication date and are subject to change without notice. Regal Capital, its affiliates, directors, employees, agents, or contractors shall not be liable for any direct, indirect, or consequential loss or damage resulting from the use of or reliance on this website. Users should seek independent financial advice before making any investment decisions.

All intellectual property rights in this website are proprietary to Regal Capital or authorized third-party sources. No content may be reproduced, distributed, or transmitted without prior written permission. Investing involves risks, including potential capital loss. Past performance is not indicative of future results, and investments in foreign currencies are subject to exchange rate fluctuations. The strategies or instruments mentioned may not be suitable for all investors.

By accessing research materials, users acknowledge that Regal Capital and its affiliates may hold positions in securities discussed. Research is provided “as is” without warranties of accuracy or completeness and should not be considered a recommendation or solicitation. Users are encouraged to conduct their own due diligence and consult financial, legal, or tax advisors. Regal Capital is not liable for any trading losses, lost profits, or other damages resulting from reliance on its research. Use of this website is governed by the laws of Botswana, and users agree to the jurisdiction of its courts for any disputes

Contact

For more information visit our website at http://www.regalcapital.org or contact email [email protected]