How Botswana is Looking to Zimbabwe for Growth

By Dr Admire Dube

HARARE – BOTSWANA, long lauded as Africa’s economic exemplar, faces a pivotal moment. From its independence from the United Kingdom in 1966 through the early 2000s, it sustained an enviable 7% average annual growth, driven by diamond wealth, making it the continent’s only consistent high-growth performer.

Yet, since 2009, growth slowed to below 3% annually, and this year, 2025, it’s economy is projected to record its first negative growth as the economy shrinks by -0.4%, according to IMF estimates.

This regression is being generally attributed to plummeting of global natural diamond demand amid lab-grown alternatives and shifting certification policies.

Diamonds are significant for Botswana.

With a nominal GDP of US$19.40 billion in 2024, diamonds still account for 80% of exports (US$2.81 billion) and 30% of government revenues, but their volatility, evidenced by a 50% plunge in Debswana sales to 20.9 billion BWP, has exposed more than just structural frailties.

Fiscal deficit, at 9% of GDP (24 billion BWP), youth unemployment at 43.86%, and a recently flaring up public health crisis where a funding gap of 700 million BWP, manifested in medicine shortages, underscoring the urgency of diversification.

As the country’s “Vision 2036” targets high-income status by 2036, it’s economy is no longer playing ball and the newly installed government, led by President Duma Boko, has accelerated regional integration, initiated by previous administrations, particularly with Zimbabwe, whose 17 million-people-strong market and historical economic symbiosis offer a lifeline to avert recession and foster inclusive growth.

The Diamond Trap: Economic Fragility and the Health Crisis

Botswana’s diamond dependency, at 27.5% of GDP and 75% of foreign exchange, has unravelled under global market shifts. The rise of lab-grown diamonds, being 60-85% cheaper, and flooding markets from mostly Chinese factories, have dealt mortal blows to natural diamond demand over the last five years, crashing rough stone prices by half, and that of polished ones by 35%.

The Gemological Institute of America’s (GIA), which is the eminent and standard quality assessment entity for diamonds, has this year even shifted their grading system for diamonds, also known as certification, from evaluating each stone against the 4Cs – cut, colour, clarity, colour, and carat – to merely “premium” or “standard.”

This has been necessitated by that lab grown stones, which are chemically and structurally the same as mined diamonds which are brought to market, are mostly all of such a high quality rendering granular separation of the 4Cs unnecessary. This has made it a no brainer for consumers to pick a mined but inferior stone carat for carat price, as those of similar quality get up to as high as 3 times the price, only because it is mined.

Because of these falling diamond prices and general softening of demand for mined diamonds in the global market, this has resulted in revenue shortfalls for Botswana and ballooning fiscal deficits, all pushing public debt to current 27.4% of GDP.

This might appear a comfortable ratio by other African country standard. However, for Botswana, a country that has never sought multilateral institutional support (the likes of World Bank and IMF), and used to budget surpluses and have comfortable sovereign fund, suddenly having negative growth and debts higher than a quarter of GDP is quite disconcerting for the authorities there.

With government expenditure currently hovering around 30% of GDP (US$5.82 billion) the debt levels are certainly looking to widen. Some sectors are already feeling the pinch. This August 2025 public health was critically tested, as declared by President Duma Boko, where non-urgent surgeries had to be suspended to concentrate on diabetes, hypertension, cancer, asthma, tuberculosis, and HIV.

Admittedly, the crisis was, in part, due to Central Medical Stores’ dysfunction as 700 million BWP was pilfered via inflated drug quotes, exacerbated by U.S. Aid cuts from PEPFAR and the Global Fund programs.

A 250 million BWP emergency allocation and military distribution mitigated rural cut-offs, but protests, led by figures like Dr. Alfred Madigele and Dr. Patrick Molutsi, decried corruption and mismanagement, with Botswana Development Corporation’s Oteng Keabetswe noting import cost surges amid other structural matters.

All these are challenges emanating from a shrinking national purse ultimately, and the authorities are grappling with arguably the most broke Botswana administration, in relative terms, since the country’s inception in 1966.

As government expenditure and net exports shrink, what’s left supporting economic growth remains foreign investments and household expenditure. Looking at the later, which stands at 55% (US$10.67 billion) it faces the scourge of inflation, projected at above 4% by year end.

Again, not a high figure by African metrics, but Botswana has never been measured by those metrics anyway. Looking at its peers, however, it seems these countries, used to breathing rarefied economic stability air, are equally trending in the similar “unfamiliar” inflation numbers (Mauritius 3,6%; Namibia 4%; Rwanda 7%!)

But that’s an entirely new discussion.

Back to Botswana, foreign investment shores up the Botswana economy at 25% of GDP (US$4.85 billion) per annum. It’s not growing now, but at least it’s not falling either. Be that as it may, stagnation will be keeping the authorities awake at night considering all else happening around the fundamentals.

Actually, amid that constant in investment, private sector contributions have dropped to 15% engendered by risk aversion. Foreign Direct Investment (FDI), for its part, increased by roughly the same percentage hence the stable combined investment number. Some purple patch there showing external belief still in the country.

Regional Integration: A Strategic Pivot

To escape this trap, Botswana has had to leverages the Southern African Development Community (SADC) and African Continental Free Trade Area (AfCFTA). SADC’s Free Trade Area (since 2008) grants access to a 350-million-person market, while AfCFTA’s 1.3 billion people and US$3.4 trillion GDP aim to boost intra-African trade from 18% to over 50% by 2030.

The March 2025 AfCFTA National Consultative Forum finalised Botswana’s roadmap, targeting manufacturing, agro-processing, and services, aligning with NDP12 (2025–2030) for inclusive growth.

Infrastructure synergies, like the Southern African Power Pool and Namibia’s DR3403 road upgrade (December 2025 completion), enhance SADC connectivity, while the 120MW Independent Power Producer project (phased in 2025) eyes energy exports.

The 2024/2025 Botswana budget’s PPP bill and ‘Chema-Chema’ fund all bolster informal sector inclusion, with tariffs below regional averages cutting mobility costs. This is a country primed to reap the rewards of integration.

That is a good thing, because the country realises it does not have the population, the local industry or the exports desirable to pick itself up by the bootstraps. Therein comes its regional integration thrust with Botswana looking squarely to Zimbabwe, than any other, for growth.

Zimbabwe as Botswana’s Structural Lifeline

Zimbabwe’s market is a natural growth engine, even for the largest economy in Africa, South Africa, as it is rooted in decades of structural integration, offering opportunities for neighbouring countries, more so for Botswana now considering the aforementioned.

Zimbabwean migrants to Botswana peaked at around 10% of that neighbouring country’s whole population in 2009. These migrants filled Botswana’s skill gaps, and they comprising up to 64% of all non Batswana at that time.

In education, Zimbabweans, fleeing a system that lost 35,000 teachers back home, dominated: half of the University of Botswana’s staff and large shares of primary/secondary educators that drove pedagogical advances there were from this migrant pool. In finance, 4 of 10 major banks in Botswana have had a Zimbabwean CEO in the last 25 years alone, leveraging Harare’s banking expertise.

High Court judges, lawyers, and engineers from Zimbabwe shaped judicial, legal, and infrastructure frameworks, from rail expansions to Debswana’s mining operations. Even healthcare, nursing and medical doctors, they have a healthy dose of Zimbabwean background staff.

This symbiosis – evident in Shona’s inclusion in Botswana’s schools alongside Setswana – makes Botswana an economic extension of Zimbabwe, rendering its pivot to Harare organic. With manufacturing negligible at under 6% of GDP, Botswana’s economy is will do well to lean on this human capital to counter diamond volatility and youth unemployment, (per Okun’s Law).

Tripartite Open Borders: Botswana, Namibia and Zimbabwe’s Market Revival

On August 15, 2025, Botswana, Namibia and Zimbabwe inked a tripartite agreement effective September 1, 2025. This allows ID-only border crossings between the three countries (but no European Union style employment and settlement migration – yet), building on the 2023 Botswana-Namibia bilateral deal. Namibia’s 2.6 million population is marginal, similar to Botswana’s, but Zimbabwe’s 17 million offer scale for both.

South African is the major manufacturer and exporter to the three, for all kinds of products from milk to machinery. Ironically, over 70% of all products retailed in Botswana and Namibia are imported from South Africa rather than locally produced.. Resultantly, South Africa has no biting need currently for a similar agreement, although it has agreed in principle to join later, and already has one in the works with Botswana and Namibia, who are its Rand Money Union partners.

It’s key to note that, resultantly, the two nations have become unwitting “warehouses” for South Africa (in technical terms). Besides mining diamonds, tourism and for Botswana, animal husbandry, while for Namibia it is its fisheries, these two are now stages in the value chain for South African manufacturers.

South Africa’s stringent visa regime for Zimbabweans, back then (before the current visa-on-entry system), funnelled traffic more towards the closer and visa-lenient Botswana, transforming its cities into boomtowns, for this retailing sector.

Thus, a drop in the “warehouse economy”, as we are witnessing, means those other pillars supporting the economy, of government expenditure, investment, and net exports, have to stand firmer to maintain a healthy economy. That way Botswana will ameliorate the pain of mined diamond industry decimation.

As it turns out, post-2013, Zimbabwe’s recovery commenced, which has seen manufacturing rise to be the biggest contributor to GDP at present (above 15% of GDP or US$6.8 billion in 2024) surpassing even mining.

This has seen commerce between the two countries dry up. In the same period, remittances to Zimbabwe have been a constant haemorrhage, reducing domestic consumption of the diaspora community. This ebb in trade has been largely to blame for the collapsing retail shops around Botswana, like Choppies, which initially followed into Zimbabwe, set up there, but now has had to not only close as much as 30 stores by 2025, but also faces layoffs back home in Botswana.

Botswana’s open-borders push then is more than a push for SADC solidarity – it’s a calculated bid to widen its market, now as an exporter rather than a pitstop. Zimbabwe offers untapped potential: a reviving industrial base hungry for Botswana’s minerals, energy, and logistics services, plus a consumer class eager for diversified imports. By easing ID-only flows, Botswana positions itself as a revived gateway, potentially adding 1-2% to GDP through trade revival and job creation in border economies.

That is if we ignore risks that include difficulty of controlling immigration, which could strain local resources and infrastructure, meant for 2 million people, give or take.

Still, for a nation staring down stagnation, this tripartite pact signals Botswana’s pragmatic pivot: integrate not just regionally, but Zimbabwe-centrically, to reignite the sparkle dimmed by diamonds’ eclipse.

Diversification Imperatives and Challenges

Amid escalating fiscal pressures, Botswana’s Pula Fund, now diminished to a 20-year low of under 5 months of import cover, has increasingly been liquidated to finance recurrent budget deficits and current account shortfalls, eroding its intergenerational equity function and amplifying macroeconomic vulnerabilities in a context of subdued global diamond demand that has contracted production by 8% year-on-year in 2025.

To mitigate these liquidity strains and bolster revenue diversification, strategic outward FDI into Zimbabwe’s untapped resource sectors emerges as a very viable conduit, leveraging the new sovereign wealth fund’s mandate for offshore growth investments to generate repatriated yields.

This is far better than current state where it’s become an ever dwindling reserve covering consumptive gaps instead of being a stabilising counterweight to economic outages. This is not necessarily announced policy but a valid deduction nonetheless, that it will serve (more like save) Botswana’s tested economy.

Complementing this, is a compelling case for Botswana where, besides just investing what’s left of their savings, they could coalesce, along with Namibia and Zimbabwe, to harness their 15% stake in De Beers, coupled with the trio’s aggregate diamond mining output exceeding 30 million carats annually, into a trilateral Antwerp-equivalent mined diamond hub in Southern Africa!

By integrating Botswana’s dominant cutting and polishing infrastructure (handling over 70% of regional throughput), Namibia’s offshore extraction expertise for high-value marine deposits, and Zimbabwe’s alluvial and open-pit capacities, this consortium could verticalise the value chain, capturing 20-30% premiums through enhanced beneficiation and market aggregation, thereby erecting a resilient African behemoth creating a niché mined diamonds only system which can stand against synthetic diamond disruptions and commodity volatility.

Outlook: Zimbabwe as Botswana’s Growth Anchor

Botswana has been the shining beacon of stable economic management thus far. That there are threats isn’t saying the edifice has collapsed. Far from it. It is against its stellar erstwhile performance that current critique is being drawn, but compared to its peers in the region, and even those abroad, like China, the country is punching above its weight. Observations and advice are merely from a stand point of how it can maintain the surge, or at least supplant the decline before it happens, as headwinds gather.

Harare’s fundamentals ratios are still a far cry from what Botswana is still, bar the quantities and values involved. Yes there is rebuilding of the economy in Zimbabwe, both literally and financially. But marriage to Botswana may add on to that impetus so their joining is not necessarily out of charity.

So, as Botswana approaches its 59th Independence Day on September 30, 2025, its strategic embrace of its much younger, and therefore inexperienced neighbours signals a bold reimagining of its economic future, prioritising resilience through regional synergy.

“As African leaders, we must find each other, trade with one another, and build unity, for it is only through collaboration and economic integration that we can truly transform the lives of our people,” said President Duma Boko on the 23rd of June, 2025, while in Luanda, Angola, for the US-Africa Business Summit.

President Boko is heralding a new era of prosperity rooted in partnership and innovation. This vision positions Botswana to celebrate its independence with renewed confidence, ready to be part of a larger and diversified regional collective, showing all the way that it is the most mature democracy in the region.

• Dr Admire Maparadza Dube is a non-executive director at FinAcco Capital, providing strategic leadership for the Holding Business and finance functions for the Operating Units. He has a wealth of experience in executive positions spanning banking, project management, wealth management, financial planning, the statutory environment, tax and customs procedures in Financial Services companies, Banks, Energy sector, Wealth Management and a Tax Authority
• He holds an Honours Degree in Banking & Finance, MSc in Development Finance, a CFA Charter Holder, as well as Internal Controls Investments and Certificates. He recently graduated with a Ph.D. in Finance and his thesis was : The Relevance of Central Banks In A More Global Economy Where More Exogenous Factors Than Local Policies Determine Direction of National Macroeconomics.
• His career objectives are to grow professionally in the fields of Finance & Admin, Strategy, Capital Markets and Economic planning & Research to realise his full potential leading to a simultaneous growth of his organisations and make a positive impact in his community.
• http://www.admiremaparadzadube.com
• X: @admire_dube