Cautious optimism: An uncertain year beckons

Mbongeni Mguni - Pauline Dikuelo - Lewanika Timothy | Monday December 22, 2025 10:01

The economy is expected to contract this year, as familiar challenges from 2024 persist into the current financial cycle. Despite a negative economic output, there are silver linings that could support a recovery trajectory next year. Along with the silver linings, there are also dark clouds of uncertainty and, indeed, dread.

Copper shoots upOne major reason for hope going into 2026 is the greater gains recently seen in copper. This week, copper prices exploded to record highs again, not because the world is running out of the metal but in part because the United States (US) is scooping up so much of it that everyone else is scrambling for what is left. Benchmark three-month copper hit an all-time high of $11,952 a metric tonne on the London Metal Exchange on Friday. By press time on Wednesday, the base metal was trading around $11,655 per tonne, up roughly 33% for the year. The US has been aggressively stockpiling metal ahead of potential tariffs, pulling huge volumes out of the tradable global system and tightening supplies everywhere else. For a country with a rich Kalahari Copperbelt, the rise and rise of copper prices will benefit the fiscus through increased mineral tax and the possible opening of more copper mines that will bolster exports and increase earnings.

Between January and August, copper exports grew to over P7 billion, driven by surging international demand, compared to last year’s P6.8 billion over the same period, according to the latest data from the central bank.

Khoemacau grows biggerThe country’s largest copper mine, Khoemacau, has budgeted P3 billion for major expansion of its operations next year, signalling confidence in the copper market. The expansion is expected to increase jobs and boost production. The multi-billion-pula expansion of the Khoemacau Copper Mine is gaining momentum, with early works already underway.

So far, more than $21.3 million (P270 million) has been channelled towards feasibility drilling, including $11.6 million (P150 million) for the study itself. Early works—covering land acquisition, new camp construction, pipelines, roads, and terraces—are budgeted at $68 million (P880 million), whilst the acceleration plan, which includes the new processing plant’s early works, box cuts, and engineering studies, will cost $128.7 million (P1.6 billion).

In total, MMG Khoemacau has approved and committed $229.5 million, equivalent to over P3 billion, towards the project.

The mammoth injection is not just a boon for exports and tax revenues, but sends signals of confidence to other global investors that Botswana remains a country of high mineral prospects and a dream address for investment.

Diamond hopes?The mainstay of the country’s economy has been in free fall, although slight supply improvements have been seen lately in the midstream. The industry’s prolonged downturn is related to weak retail demand, which has seen rough diamond polishers stuck with huge inventory levels that prevented them from buying more from producer countries such as Botswana. This has resulted in deep fiscal issues for Botswana, with low mineral revenues affecting the budget.

There have been signs of recovery and hope, though. According to data from the Gem and Jewellery Export Promotion Council (GJEPC), India’s exports of jewellery and gems saw strong growth in November, growing by almost 20% year over year to reach $2.50 billion. Strong performances were witnessed across all important categories, especially cut and polished diamonds, which saw a sharp increase in exports.

The pushing of more product from the midstream creates room for more orders from rough diamond producers like Botswana, which may, in time, signal increased revenue and mining output.

Whilst this signals more reasons to be hopeful, in the same period, lab-grown diamonds also saw consistent increases, which is indicative of the growing acceptance of economical and sustainable alternatives around the world—a growing threat to rough diamond production.

Another worrying figure is the fact that the total amount of exports from India in April to November was essentially unchanged at about $18.85 billion, indicating a slow and uneven recovery in the state of global demand.

Post-Trump market calmWhilst it may appear paradoxical, the global tariffs imposed by US President Donald Trump and the resultant shock in markets, including Botswana, could actually be a positive in 2026.

The tariffs have forced the reconfiguration of trade strategy, relationships, and routes the world over, including for Botswana, which managed to negotiate its level to 15%, from the initial 37%.In some ways, the tariffs actually helped invigorate the country’s diamond sector, as exporters front-loaded their goods earlier in the year to avoid the onset of the tariffs in August. Rather than holding onto stock and waiting for more punitive tariffs, exporters had to double down on securing sales and shipping out their stones. This trend is reflected in the diamond export figures for the second quarter, which averaged P5.5 billion, compared to P2.6 billion in the first quarter.

Going into 2026, markets have largely priced in or accommodated the tariffs, easing their potency as an economic shock, especially for export-sensitive countries such as Botswana.

UDC promisesThe impact of Umbrella for Democratic Change (UDC) electoral promises on the fiscus is expected to soften in the 2026–2027 financial year, boding well for the trajectory towards budget sustainability.

Campaign promises for greater social protections, such as increases in the Old Age Pensions, plans to narrow the gap between allowances for students in Technical and Vocational Education and Training (TVET) institutions and those of other tertiary institutions and others, were accommodated in the current financial year.

Their inclusion was part of the fulfilment of campaign promises, but these bumped up expenditures at a time when the fiscus could ill afford it, especially as they are a recurrent cost which will feature in the upcoming budget.

Cold comfort for the technocrats at the Finance ministry is the fact that rather than being a surprise like in 2025–2026, the greater social security spending is now known and can be planned for, thus lessening its shock impact.

However, there are still plans for the P300 monthly allowance for newborns, free sanitary pads for female students, and increases in tertiary students’ allowances to consider as potential upside risks for the 2026–2027 forecasting.

Civil service wage auditThe planned audit of the civil service wage bill is either a welcome bright spot or an ominous development, depending on which side one stands. For fiscal authorities, the work being done with the World Bank to audit the civil service wage bill is critical in ironing out inefficiencies and moving towards the sustainable, high-performance model required by the country’s drive towards transformation.

At present, according to International Monetary Fund (IMF) estimates, the wage bill accounts for about 13% of Gross Domestic Product (GDP) and 58% of total taxes, well above levels in peer countries such as those in the Southern African Customs Union (SACU) and in the Southern African Development Community (SADC). The IMF and other experts have repeatedly cautioned about the size and efficiency of the civil service, a sensitive debate in the country, given that many citizens are directly and indirectly reliant on government for employment.

Of the forecast spending of P97 billion for the current financial year, just over P35 billion was earmarked for personal emoluments and pensions, the majority of which goes to civil servants’ salaries. The ongoing audit could result in the weeding out of ghost employees, recoveries of any longstanding obligations to government, optimisation of the allowance system, and a shift towards a result-based structure, in line with the ambitions of the National Development Plan 12.

Uncontrolled gov’t spendingWhilst a range of cost-cutting measures were adopted during the year, the latest information emerging from the Finance ministry indicates that line ministries continue to kick against the goads.

According to Permanent Secretary Tshokologo Kganetsano, there appears to be a “growing appetite” for spending across all ministries. Presenting to an estimates committee recently, the PS said: “We are still either in denial or we don’t seem to appreciate that the situation requires that we tighten our belts. You cannot spend that which you do not have, and that is the bottom line.” Earlier in the year, the ministry initiated austerity measures relating to travel and overtime, whilst also centralising the generation of Government Purchase Orders, the principal notes through which different arms of government buy goods and services.

However, from the PS’ comments, it appears some ministries continue to strain the leash to spend money that government can ill afford, going against the spirit of cost containment that the Finance ministry has been preaching about since at least November last year.