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For the second year running, Vice President and Finance Minister Ndaba Gaolathe’s budget is facing a crisis of confidence after international institutions once again projected economic growth far below treasury forecasts, raising questions about whether government is budgeting on optimism rather than economic reality.

The latest blow comes from the African Development Bank (AfDB) whose African Economic Outlook 2026 report projects Botswana’s economy will grow by just 1.2 percent in 2026 before improving to 3.5 percent in 2027. The forecast stands in sharp contrast to the far more optimistic outlook presented by Gaolathe in his February budget speech, where he projected economic growth of 3.1 percent.

The gap is more than a statistical disagreement. It raises uncomfortable questions about whether the country’s chief economic manager is underestimating the depth of Botswana’s economic crisis or overselling the prospects of a recovery that remains stubbornly out of reach.

The caution from the AfDB adds to a growing chorus of international institutions warning that Botswana’s economic recovery will be weaker and slower than government projections suggest. The World Bank reported that GDP growth is projected to reach 2.7percent in 2026 and average 3.2 percent in 2027-28. This outlook reflects a modest recovery in diamond sales (albeit remaining well below historical values), gradual improvements in electricity supply, and an improved business climate supported by trade, financial, and administrative reforms. Poverty, at the US$3 per day (2021 PPP) line, is projected to remain broadly unchanged at19.7percent(around 513,000 people) in 2026.

Rating agency SandP Global was equally pessimistic when it downgraded Botswana’s sovereign credit rating earlier this year, forecasting growth of only 2.5 percent in 2026 while warning that structural problems in the global diamond market remain far from resolved.

Fitch Solutions has also revised down its expectations for Botswana, forecasting growth of just 2.3 percent for 2026 and describing any recovery as narrow, fragile and heavily dependent on a turnaround in mining rather than broad-based economic expansion.

Taken together, the forecasts paint a troubling picture. Virtually every major external institution sees a weaker economy than the one being projected by the Ministry of Finance.

More significantly, this is becoming a pattern. Last year, Treasury projections were similarly oversold the recovery narrative. During his maiden budget speech in 2025, Gaolathe optimistically forecasted a 3.3% economic expansion for the year, anticipating a strong rebound in diamond demand. However, the government was forced to revise its projections dramatically downward to nearly zero growth by mid-year.

By the end of the year, the ministry had to adjust the forecast further into negative territory, ultimately projecting an overall economic contraction of almost 1% (-0.9%) for 2025.

In its African Economic Outlook 2026 report, the AfDB thinks the economy will come out of recession, but warns that the recovery depends a lot on things Botswana cannot control, especially the global diamond market.

‘The main downside risk remains uncertainty in the diamond market and the Middle East conflict,’ the report says, warning that outside shocks could easily disrupt Botswana’s recovery.

The bank says growth will be helped by new investments in mining and more activity in other sectors, especially services. There will also be investments in agro-processing, digital technology, renewable energy, and tourism.

The AfDB expects Botswana’s fiscal deficit to reach 8.9 percent of GDP in 2026, then drop a little to 8.0 percent in 2027. The growing budget gap will likely be covered by borrowing, which puts more strain on public finances as borrowing costs go up.

Inflation is expected to average 6.2 percent in 2026, then fall to 4.7 percent in 2027 because of strict monetary policy.

The current account deficit is expected to grow to 6.4 percent of GDP next year, then shrink to 4.5 percent in 2027. This shows ongoing problems in external trade, even though diamond exports are expected to recover.

The report also questions whether Botswana can fund its development goals.

The AfDB says Botswana struggles to raise large amounts of development money because of its small tax base, heavy reliance on minerals, limited capital markets, and higher borrowing costs. Recent credit rating downgrades have made it even harder and more expensive for Botswana to get long-term loans, even though its public debt is not very high.

To improve its finances, the bank suggests Botswana should widen its tax base, collect more non-tax revenue, cut down on illegal financial flows, and make public investment more efficient.

The AfDB also urges the government to develop local capital markets, get pension funds involved in infrastructure projects, and speed up reforms of state-owned companies.

Besides financial issues, the report also highlights serious social problems.

About 17 percent of people in Botswana still live in extreme poverty, and unemployment is high at 27.6 percent. Youth unemployment is even worse at 38.2 percent. The bank says slow growth in real GDP per person has held back inclusive development, even though Botswana has a fairly high Human Development Index score of 0.731. The report suggests that while leaders expect growth to return, many people in Botswana may still face tough times for years.

Botswana has slipped in Africa’s industrialisation rankings, dropping six places over the past 14 years. This decline is linked to weaker manufacturing and a more specialised export base, according to a new African Development Bank (AfDB) report.

The Africa Industrial Investment Barometer (AfIIB) and African Industrialisation Index (AII) 2025 report shows Botswana’s position fell from ninth in Africa in 2010 to 15th in 2024, despite some recent improvements.

Botswana’s industrialisation score dropped from 0.6049 in 2010 to 0.5853 in 2024. Although there was a small improvement from 2023, the score is still much lower than in 2010.

The AfDB notes that Botswana is among the countries with the biggest drops in industrial competitiveness in Africa.

‘Libya, Lesotho, Cabo Verde, São Tomé and Príncipe, Niger, Botswana, Equatorial Guinea, Sudan, Seychelles, Mali, and Madagascar experienced the biggest drop in the ranking, losing five ranks or more,’ the report states.

The AfDB says Botswana’s decline is mainly due to weaker industrial performance, not changes in supporting conditions.

‘Botswana, Lesotho, Libya, and Seychelles exhibit a similar pattern of decline, driven exclusively by underperformance in the performance dimension,’ the report notes.

Despite this slip, Botswana is working hard to move its economy beyond diamonds and into areas like manufacturing, agriculture, and technology. Through the Botswana Economic Transformation Programme (BETP), the government is changing trade rules, strengthening ties with neighbouring countries, and investing in big infrastructure projects to become a strong player in global industry.

Top officials, have said that Botswana should stop exporting raw materials. The country now focuses on processing agricultural products, adding value to minerals and diamonds, and growing advanced manufacturing.

As part of the ongoing efforts, President Duma Boko and South African President Cyril Ramaphosa have recently agreed to work more closely on trade, coordinate their industrial policies, and make the most of important minerals needed for electric vehicles and clean energy.

Meanwhile, on the report, it also says that while Botswana made progress in other areas, it has seen a ‘significant decline in productive capacity and performance in manufactured exports.’

These findings are a setback for Botswana, which has tried for years to move its economy beyond diamonds by focusing on industrialisation and manufacturing.

The report lists Botswana as one of Africa’s most specialised economies. South Africa is the most diversified, with a score of 0.555, while Botswana, Angola, and Zimbabwe have ‘very high levels of specialization’ above 0.85.

Since 2010, only Mauritius, Namibia, and Mozambique have managed to diversify their exports. Most African countries, including Botswana, have become more specialised.

These findings come as Africa overall is making progress in industrialisation. The African Industrialisation Index 2025 shows that 41 out of 54 countries improved their scores from 2010 to 2024, leading to a six percent rise in overall performance.

However, the report warns that Africa still faces big structural challenges. The continent makes up less than two percent of global manufacturing output and only 1.4 percent of global manufacturing exports. Manufacturing value-added per person is also lower than before 2014.

One key finding is that Morocco has passed South Africa to become Africa’s top industrial economy. This is due to export diversification, industrial upgrades, and steady policy implementation.

The AfIIB says Africa’s industrial future depends on stronger economic integration, better trade corridors, quality infrastructure, and common standards under the African Continental Free Trade Area (AfCFTA).

AfDB Director for Industrial and Trade Development, Ousmane Fall, said the findings should be both a warning and a guide for policymakers.

‘This report is a roadmap as much as a diagnosis. It shows that 41 of our 54 countries are now moving in the right direction, but it also reminds us that industrialization at scale demands resilient infrastructure, value addition close to source, and finance mobilized on African terms,’ said Fall.

Dr. Harouna Kaboré, President of WITBA Invest, said Africa’s main challenge is not a lack of industrial strategies but the failure to implement them.

‘The continent’s real deficit is no longer the absence of industrial strategies. What is still lacking is execution discipline, continuity in public policy, and systemic coherence between financing, energy, infrastructure, human capital, governance, and industrial vision,’ he said.

When looking at the continent as a whole, Africa is poised for a significant transformation in both consumer markets and manufacturing. However, this transition will require time and concerted effort. The continent faces substantial challenges, such as inadequate infrastructure, fragmented markets, skills shortages, and inconsistent regulatory environments. Nevertheless, the potential benefits are considerable, and the outcomes of either success or failure will have far-reaching implications.

By 2050, Africa’s population is expected to reach 2.5 billion, with half of the population under the age of 25. This demographic trend positions Africa as one of the largest emerging consumer markets globally, characterised by increasing demand for modern goods, services, and economic opportunities.

Despite significant potential, Africa continues to rely heavily on imports of finished products. Although the continent is abundant in raw materials essential to global industries, including cocoa, coffee, cobalt, and other critical minerals, much of the value is realized outside Africa through processing and manufacturing. Currently, Africa contributes only 2% to global manufacturing output, which exposes many economies to external trade disruptions, currency fluctuations, and ongoing trade imbalances.

Establishing a robust manufacturing sector is not only an economic necessity but also a means to achieve long-term resilience and inclusive growth. Industrialisation generates employment, reinforces domestic value chains, and increases public revenues for investment in healthcare, education, and essential services. It contributes to higher living standards, poverty reduction, and the development of more balanced and self-sustaining economies. Furthermore, industrialisation supports community stability, promotes technological advancement, and provides young people with the skills required to succeed in a rapidly changing global economy.

The rationale for advancing industrialisation in Africa is increasingly compelling. The continent has the necessary resources, skilled workforce, and demographic advantages to emerge as a major manufacturing center. The primary challenge lies in converting this potential into sustained economic transformation.