Gov’t fiscal crunch squeezes business confidence
Lewanika Timothy | Monday September 1, 2025 06:00
The Business Expectations Survey (BES) for the second quarter of this found that long-term expectations of the business environment are skewed to the downside, with the main worries fuelled by the government's limping revenues and spending.
The researchers found that businesses were wary of market conditions following a series of government announcements to cut spending and halt an array of planned and budgeted expenditure.
“Firms were less optimistic about business conditions in the 12 months to June 2026. “This cautious outlook is likely to be linked to the country’s weaker fiscal position, characterised by lower revenues, constrained cash flow and, therefore, restrained pace of spending, mainly due to a drop in diamond export earnings,” researchers found.
The bulk of what Botswana produces in goods and services, otherwise known as GDP, is mainly dependent on government expenditure. Government is the biggest spender in the economy through procurement from the private sector, and when government spending slows, it means less demand for its products and services, which harms business confidence.
The quarterly Business Expectations Survey collects information on perceptions of the domestic business community regarding the prevailing state of the economy and expectations.
In completing the survey, businesses responded to questions on various topics, including the prevailing business conditions, outlook for both economic growth and inflation. In the June survey, the BoB sent out questionnaires to 100 business across 13 sectors and achieved a 57% response rate.
Recently, the Minister of Finance and Vice President, Ndaba Gaolathe, announced in Parliament that cost-cutting measures implemented across public sector agencies had curtailed spending by P5 billion, bringing it down from P58.2 billion the prior year to P52.7 billion this year.
The government has had to apply the brakes on spending due to revenues being on a freefall, with the mainstay of the country’s economy, diamonds, selling at a snail's pace. The Umbrella for Democratic Change (UDC) government, which assumed power last year in November, has announced that it has spent P5 billion less than what its predecessor government had spent in an eight-month comparison between November 2024 and June 2025.
Responding to a question in Parliament, Gaolathe said that the country's fiscus was still struggling, with expenditure still outpacing revenues.
“In 2024–2025, expenditure for the period was P52.7 billion, lower than P58.2 billion recorded in the 2023–2024 period. This demonstrates personal restraint despite unavoidable obligations,” he said.
The restraint in spending comes as the diamond market continues to face severe headwinds affecting mineral revenue for the government. This has forced government to scramble for every pula that enters its coffers, as pressure from monthly salaries and supplier payments continues to grow.