The Growth Nobody Feels

Botswana’s economy is growing again. At least that is what the latest GDP figures just published by Stats Botswana tell us. After a turbulent 2025 and a fourth-quarter contraction of 5.4%, the economy expanded by 3.5 percent during the first quarter of 2026.

On paper, that sounds like the beginning of better times. Positive GDP growth is usually associated with recovery, renewed confidence and rising prosperity. Yet across Botswana the mood feels very different.

Businesses remain cautious. Households are tightening their belts. Investment continues to fall.

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Government is cutting expenditure. Debswana is restructuring its operations and reducing costs. Employers remain reluctant to recruit, while consumers are becoming increasingly selective about how they spend every pula.

For many families, life simply does not feel like an economy in recovery. This raises an obvious question. How can an economy be growing when so few people appear to be experiencing the benefits?

The answer lies not in politics, nor in public perception, but in one of the most misunderstood concepts in economics. GDP measures production. It does not necessarily measure prosperity.

That distinction is more important than many people realise. The accompanying infographic tells the story far better than the headline GDP number alone. The first thing your eye notices is the large green arrow at the top of the page.

If that were the only statistic available, we might reasonably conclude that Botswana had entered a period of broad-based recovery. But then your eye moves across the 2nd Republic Policy Think Tank’s dashboard. Suddenly the picture changes.

Instead of looking at an economy driven by growing demand, we find an economy where almost every major indicator of demand is pointing downwards. So where did the growth come from? The answer sits almost unnoticed in the middle of the dashboard.

At first glance that sounds encouraging. More goods have been produced. More diamonds have been mined.

More economic activity has taken place. But inventories are simply goods that have been produced but not yet sold. Imagine a farmer harvesting a bumper crop but leaving much of it in the barn because buyers have not yet arrived.

The farmer has certainly produced more. But he has not earned more income until someone purchases the crop. The same principle applies to diamonds.

If Debswana extracts another million carats, GDP immediately increases because production has occurred. But if many of those diamonds remain in storage awaiting buyers, they become inventories. They add to GDP today without generating export earnings, tax revenue or household income until they are eventually sold.

This is why economists often say that GDP measures production rather than sales. The distinction may sound technical, but its consequences are very real. It explains why positive GDP growth can coexist with weak business conditions, subdued consumer confidence and falling investment.

It also explains why many Batswana are struggling to reconcile the official statistics with their own daily experience. The behaviour of Botswana’s largest institutions reinforces this picture. If business leaders genuinely believed that demand had returned, they would be expanding factories, ordering new machinery, recruiting workers and borrowing to finance future growth.

Instead, many are doing the opposite. Debswana has embarked on a significant programme of cost reduction and operational restructuring. Faced with a prolonged period of weak global diamond demand, it is focusing on efficiency, postponing selected expenditure and reshaping its workforce through voluntary separation programmes.

Government is behaving in much the same way. Rather than increasing expenditure, it has tightened spending controls, strengthened oversight of public finances and introduced measures aimed at containing the long-term growth of the public service wage bill. Neither institution is behaving irrationally.

Both are responding prudently to the same economic reality. Actions often tell us more than statistics. Economists call this revealed preference.

Rather than asking what organisations say, observe what they actually do. Companies expecting strong demand recruit. Companies expecting weak demand reduce costs.

Governments expecting buoyant revenues expand spending. Governments expecting prolonged fiscal pressure consolidate expenditure. Both Botswana’s largest company and Botswana’s largest employer are signalling caution. That should make us equally cautious about interpreting one quarter of positive GDP growth as evidence that the economy has fully recovered.

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