Botswana’s Diamond Downturn Puts UDC Election Promises Under Pressure

Botswana’s economic slowdown is creating a difficult test for the Umbrella for Democratic Change (UDC) government as it seeks to implement election promises while public finances come under increasing pressure.

The African Development Bank’s Botswana Economic Outlook 2026, released last week, shows the extent of the country’s exposure to weaker diamond revenues. The report says Botswana’s real GDP contracted by 0.7% in 2025, compared with 2.8% growth in 2024, largely because of weaker diamond production and subdued government spending.

The economic deterioration comes as the UDC faces expectations created by its October 2024 election victory. The party campaigned on improving living standards, creating jobs, raising incomes and reducing Botswana’s longstanding dependence on diamonds.

Among its commitments were a P4,000 minimum wage, an old-age pension of P1,800 a month and the creation of 500,000 jobs. The government has also pledged to diversify the economy.

President Duma Boko acknowledged that the jobs target had not yet been achieved when questioned by an SABC political anchor about the commitment. “Not yet,” Boko said before explaining the challenges facing his administration.

The scale of the economic slowdown makes delivery of those promises more difficult.

Diamond Dependence Narrows Fiscal Room

The mining sector contracted by 10.7% in the year to September 2025, while diamond production declined by 11.4%, according to the AfDB report.

The bank attributes the pressure to weaker global demand for natural diamonds, growing competition from laboratory-grown diamonds, a 2.3% reduction in planned production and new US import tariffs.

Diamonds account for about 30% of Botswana’s GDP and nearly 80% of its export earnings, meaning a sustained downturn in the sector has consequences well beyond mining.

Mineral revenues fell by 23.4% in 2025, contributing to a widening fiscal deficit. The deficit increased to 9.5% of GDP from 7.3% in 2024, while government revenue declined to 23.3% of GDP and expenditure rose to 33.3%.

Public debt also increased, from 33.1% to 40.7% of GDP, with the government relying heavily on domestic borrowing to finance the deficit.

The 2026/27 Budget projects a deficit of P26.35 billion, or 8.9% of GDP. It also anticipates public debt exceeding the statutory ceiling during the financial year.

That leaves the UDC facing a constrained fiscal position as it attempts to meet commitments that could require substantial and, in some cases, recurring expenditure.

The proposed P1,800 monthly old-age pension, for example, would provide additional support to older people but would also create a permanent spending obligation. Similarly, the proposed P4,000 minimum wage could raise household purchasing power while increasing labour costs for businesses, particularly smaller firms operating on narrow margins.

Jobs And Diversification At The Centre Of The Challenge

The promise to create 500,000 jobs presents perhaps the most difficult test.

The target cannot realistically be achieved through government employment alone and will depend substantially on the expansion of private businesses and investment. Yet access to finance remains a constraint for Botswana’s small and medium-sized enterprises.

Private-sector credit is equivalent to about 30% of GDP, compared with roughly 90% in South Africa. Collateral requirements and other lending conditions can make it difficult for smaller enterprises, including youth- and women-led businesses, to obtain the capital required to expand.

That financing gap matters because sectors identified as potential drivers of economic diversification — including tourism, manufacturing, agro-processing and digital services — require a viable SME base to generate sustained employment.

The AfDB also identifies knowledge-based services as an area with potential to provide new employment and export opportunities. Developing these industries, however, will require investment in infrastructure, skills, technology and access to finance.

The government therefore faces a timing problem. It is under pressure to provide immediate economic relief while also investing in sectors whose contribution to growth and government revenues may take years to materialise.

Private Investment Key To UDC’s Economic Agenda

The economic downturn has increased the urgency of the UDC’s pledge to diversify Botswana away from diamonds.

The AfDB highlights the need for a business environment that enables companies to grow, including better access to finance, fewer regulatory barriers, stronger public-private partnerships and greater investment.

Implementation of National Development Plan 12 and the Botswana Economic Transformation Programme will therefore be important to the government’s diversification strategy.

Investment in digital skills, research and development, renewable energy and climate resilience will also form part of the longer-term effort to improve productivity and competitiveness.

For the UDC, the central challenge is to reconcile immediate political and social expectations with the realities of a deteriorating fiscal position.

Batswana voted for higher incomes, more employment, stronger social protection and a more diversified economy. The government is now attempting to pursue those objectives while the country’s principal source of export earnings and mineral revenue is weakening.

The diamond downturn has consequently made the government’s economic programme harder to finance while making diversification more urgent.

The UDC’s longer-term test will be whether it can use the available fiscal and investment capacity to develop a broader private sector capable of generating the jobs, exports and revenues needed to reduce Botswana’s dependence on diamonds.