Botswana is being urged to strengthen and diversify its economic development strategy in response to shifting diamond revenues, productivity challenges, and the urgent need for broader economic diversification.
This advice comes from the African Development Bank (AfDB) in its 2026 Country Focus Report, *Mobilizing Botswana’s Development Financing at Scale in a Fragmented World*. The report explores how Botswana can sustain growth and secure development financing amid a changing global landscape.
Botswana stands at a pivotal point in its economic journey. While the country has maintained macroeconomic stability and posted average economic growth of around 5 percent over the past two decades, the AfDB stresses that more must be done to turn this growth into widespread structural transformation.
At the heart of this effort is the need to gradually reduce dependence on diamonds and expand other productive sectors. The AfDB points out that Botswana’s growth has leaned heavily on capital accumulation and the diamond industry, while industrialization, export diversification, and productivity gains have lagged. This makes broadening the country’s revenue base critical as the government seeks to maintain development spending and adapt to fluctuating mineral revenues.
The report highlights a drop in domestic fiscal revenue from US$6.2 billion in 2021 to US$5 billion, with the revenue-to-GDP ratio falling from 31.4 percent to 24.9 percent. To counter this, the bank recommends expanding economic activity and revenue collection in sectors like agro-processing, manufacturing, tourism, knowledge-based services, and other higher-value industries.
The informal sector also presents an opportunity to widen the tax base. Although Botswana’s informality rate is low compared to many African countries, this sector accounted for about 30.1 percent of GDP in 2023. Rather than depending solely on enforcement, the AfDB suggests making formalization easier and more appealing through simpler business registration, lower administrative costs, digital payments, better access to finance, and enhanced business support services.
Digitalization could be a game-changer by simplifying business registration, tax filing, and access to financial services, while helping the government improve revenue administration.
The AfDB also sees public-private partnerships (PPPs) as a key avenue to boost infrastructure investment without putting all the pressure on government finances. Botswana has made strides in developing its PPP framework, including finalizing a draft PPP Bill in 2025. Still, the report notes that stronger capabilities in project preparation, financial modeling, risk assessment, and contract management will be crucial to build a robust pipeline of bankable projects. Botswana has identified 184 projects under its Botswana Economic Transformation Programme (BETP), with sectors like energy, water, and transport ripe for PPP-driven private capital.
The bank highlights Botswana’s pension funds as another untapped resource. With assets equivalent to about 68.6 percent of GDP in 2025, these funds represent a substantial pool of long-term domestic capital that could back infrastructure and other productive investments—if the right projects and investment tools are put in place. Infrastructure bonds, pooled investment vehicles, and similar instruments could link institutional savings to projects that drive economic diversification.
The report also spotlights the potential of diaspora capital. Botswana received US$128.3 million in remittances in 2024, a 110 percent jump since 2021. The AfDB suggests the country could build on this momentum by establishing a formal diaspora policy, investment platforms, and tools like diaspora bonds.
Natural resources feature prominently in the recommendations. While diamonds remain central to Botswana’s economy, the AfDB believes the country can increasingly tap into its broader natural capital—wildlife, rangelands, and ecosystems. Emerging opportunities in carbon markets, biodiversity credits, conservation finance, and nature-based tourism could provide fresh investment and revenue streams, all while promoting environmental sustainability.
Foreign investment is another area with room for growth. FDI flows dipped to 2.4 percent of GDP in 2024, down from 3.8 percent in 2023. Investment has mostly focused on mining, especially diamonds, while greenfield investment in manufacturing, services, and agro-processing remains limited.
The AfDB also argues that Botswana could benefit from shifts in global supply chains by positioning itself as a stable investment and production hub in Southern Africa. This would involve strengthening regional trade and transport links, fostering local supplier development, and encouraging skills and technology transfer through investment partnerships.