The negative expectations are mainly driven by dampened demand levels in international markets for commodities such as diamonds as well as geopolitical conflicts that have up-ticked the cost of inputs for enterprises.
The central bank’s Business Expectations Survey for the fourth quarter of last year showed that generally, firms maintained a grim outlook on the country’s economy, mainly due to the slow economic environment and unfavourable demand in international markets. The survey sampled responses from 100 businesses covering 13 sectors.
The survey indicates that whilst some sectors expected an improvement in the general output of the economy, mining and agriculture believe they are in for an uphill battle.
“Looking ahead, all sectors were optimistic about the first quarter of 2025 and the year to December 2025, except the mining and quarrying sector, which was pessimistic, and the agriculture sector, which remained neutral,” BoB researchers noted.
“The pessimism in the mining and quarrying sector for the first quarter of 2025 may be attributable to a combination of factors, such as the global decrease in demand, and economic uncertainty associated with geopolitical conflicts, as well as competition from other luxury goods.”
Sales of the country’s primary commodity, diamonds, fell by 50% in the 10 months to October this year, underlining the depth of the downturn facing the gemstones and the broader economy.
Figures released by the Bank of Botswana recently indicate that between January and October, Debswana sold P22.7 billion in rough diamonds, compared to P45.2 billion over the corresponding period in 2023.
Agriculture, which has trended below optimal for decades, was affected by a strong El Niño in the 2024–2025 cropping season, crippling yields. According to the BES, firms also expect the lending environment to be favourable in 2025, with increased expectations that monetary policy will ease, making capital cheaper for businesses.
“Firms expect lending interest rates to decrease in all markets (domestic, South Africa, and elsewhere) as indicated by the negative net balances in 2025. Firms also anticipate an increase in the volume of borrowing from all markets in 2025, as shown by the positive net balances,” researchers noted.
Lending is an important aspect of business operations as businesses are able to borrow capital for expansionary investments which in turn creates more economic output and growth. When firms expect decreases in the cost of capital, they are able to stir economic activity through investment and general purchases.
Overall, firms were less optimistic about business conditions in the fourth quarter of 2024. The reduced optimism is reflected in the anticipated decrease in inventory levels, imports, and exports of goods and services.
Optimism is expected to improve in 2025, with firms hoping for a stronger recovery as the year progresses.
