Botswana must move beyond simply raising more development finance and focus on using capital more effectively to drive productive investment and structural economic reform. This is one of the central messages of the African Development Bank’s 2026 Country Focus Report, which highlights the economic pressures created by the global decline in diamond prices. The report warns that falling mineral revenues are exposing structural weaknesses that Botswana can no longer afford to overlook. These pressures include widening fiscal and external deficits, rising public debt and persistent unemployment, all of which reinforce the need for a stronger and more diversified economy. As Botswana considers its next phase of economic development, the challenge will be to ensure that available capital creates businesses, jobs, infrastructure and productive capacity that can support sustainable growth beyond mining.
The African Development Bank’s report places Botswana’s financing challenges within the broader context of its dependence on mineral revenues. Diamonds have historically been a major source of export earnings and government revenue, but the recent global slump in diamond prices has demonstrated the risks associated with relying heavily on one sector. When mineral revenues weaken, the effects can spread across government finances, foreign exchange earnings, investment and employment. The report therefore urges policymakers to accelerate economic diversification rather than simply attempting to replace declining revenues with additional borrowing or development finance. Botswana needs to build sectors that can generate sustainable economic activity and employment even when commodity markets experience prolonged downturns.
Moono Mupotola, Deputy Director General for Southern Africa at the African Development Bank, said Botswana’s long-term prosperity will depend not only on mobilising finance but also on deploying capital towards productive investment and structural transformation. Her remarks point to an important distinction between having access to finance and using that finance effectively. Development funding can provide significant value when it supports infrastructure, businesses, technology, skills development and industries capable of generating economic returns. However, borrowing more money without improving productivity or addressing structural weaknesses could increase financial pressures without creating sufficient growth. Botswana therefore needs to ensure that every major investment contributes to stronger productive capacity and supports the transition towards a more diversified economy.
The country still has several advantages that could support this transition. Botswana has maintained relatively strong institutions, substantial domestic savings and a well-regulated financial system, providing a foundation for long-term economic reform. These strengths can help the country mobilise local and international capital while maintaining confidence among investors and financial institutions. However, the African Development Bank cautions that the current economic trajectory cannot remain sustainable without a decisive shift away from capital-intensive mining. Mining can continue to play an important role in Botswana’s economy, but it cannot remain the primary engine of growth if the country wants to create broader employment opportunities. The priority must therefore be to use Botswana’s existing financial and institutional strengths to support sectors that can deliver more inclusive and job-rich growth.
Vice President and Minister of Finance Ndaba Gaolathe said the government is already working to improve the conditions required for long-term investment. These efforts include strengthening project preparation, advancing public-private partnerships and reforming capital markets to unlock additional investment. Strong project preparation is particularly important because investors need clear information about costs, risks, expected returns and implementation requirements before committing capital. Gaolathe stressed the importance of making projects under the Botswana Economic Transformation Programme investor-ready, saying, “Capital follows credibility.” His statement reflects the need for Botswana to develop projects that are commercially viable, properly structured and supported by credible institutions if the country wants to attract significant private-sector investment.
Public-private partnerships could play an important role in this process because they can bring together government resources and private-sector expertise. Botswana faces significant investment needs across infrastructure, energy, technology, manufacturing and other areas that could support economic diversification. Government cannot necessarily finance every project on its own, particularly at a time when fiscal pressures are increasing and mineral revenues are under strain. Well-designed partnerships can provide access to private capital while allowing government to retain a strategic role in national development. However, these arrangements must have clear regulations, transparent procurement processes and strong accountability to ensure that they deliver value for money and contribute to long-term economic objectives.
AfDB Country Economist Professor Theo Awanzam noted that Botswana enters this transition from a comparatively favourable position. The country combines high output per worker with moderate public debt, giving policymakers an important platform from which to pursue reforms. However, this advantage will only matter if Botswana can translate relatively strong productivity into broader economic opportunities. High output in a narrow range of sectors does not automatically create sufficient employment for a growing population. The challenge is therefore to extend productivity gains into industries that can employ more people while supporting entrepreneurship, innovation and the development of competitive local businesses.
Unemployment remains one of the major issues that Botswana must address as it works to diversify its economy. A development strategy that produces strong financial indicators but fails to create enough decent employment will not fully address the needs of households and communities. New investment should therefore be assessed not only by the amount of capital it attracts but also by the businesses it creates, the workers it employs and the skills it develops. Sectors such as manufacturing, tourism, agriculture, technology and business services could provide opportunities to broaden the economic base if they receive appropriate infrastructure, financing and policy support. Creating a more diverse economy can also reduce the vulnerability of households and government finances to sudden changes in international commodity markets.
Dr Sayed Timuno, Secretary for Macroeconomic and Financial Policy at the Ministry of Finance, highlighted fiscal prudence and institutional discipline as important strengths. He pointed to more than P2.7 billion in savings achieved through centralised government procurement as evidence of the potential benefits of stronger financial management. Procurement reform can help government reduce unnecessary expenditure while ensuring that public resources are directed towards priority services and investments. Savings of this scale also demonstrate why structural reform is not limited to attracting new sources of finance. Improving how existing resources are managed can create fiscal space that government can redirect towards productive projects, infrastructure and programmes that support economic transformation.
The African Development Bank’s recommendations therefore point towards a broader reform agenda rather than a single financing solution. Botswana needs to strengthen the institutions that prepare and manage investment projects while improving the environment for private-sector participation. It also needs to deepen capital markets, support businesses and encourage investment in industries that can generate employment and export earnings. Education and skills development will remain important because economic diversification requires workers who can meet the needs of emerging industries. The country must also ensure that its regulatory environment allows productive businesses to grow while maintaining the transparency and institutional stability that have contributed to Botswana’s reputation as an attractive investment destination.
The decline in diamond prices has created a difficult period for Botswana, but it also provides a clear warning about the risks of postponing economic reform. The country has an opportunity to use this period to reconsider how it mobilises, allocates and measures the success of development finance. Rather than focusing mainly on how much money can be raised, policymakers need to ask whether capital is producing sustainable economic value and expanding opportunities for citizens. This requires stronger project preparation, better partnerships, disciplined public spending and reforms that encourage investment outside the mining sector. The transition will require consistent implementation because economic diversification cannot be achieved through announcements alone.
Closing the meeting, Permanent Secretary Dr Tshokologo Kganetsano called for rigorous implementation of the recommendations contained in the report. His message reinforces the importance of turning policy proposals into measurable action that improves economic performance and expands opportunity. Botswana has important institutional and financial strengths, but these advantages must be used to address the structural vulnerabilities exposed by the downturn in diamond prices. The country’s future economic success will depend on whether it can convert capital into productive businesses, infrastructure, skills and jobs while maintaining fiscal discipline. Botswana must therefore move beyond simply raising more development finance and instead channel capital into productive investment and structural reform, ensuring that today’s financing and policy choices create broader prosperity and opportunity for generations to come.
