Botswana’s persistent electricity crisis is emerging as a major threat to the country’s economic recovery, with experts warning it could potentially lead to a credit rating downgrade if not addressed urgently.
Razia Khan, Standard Chartered Bank’s Chief Economist for Africa and the Middle East, sounded the alarm in an exclusive interview, highlighting how the power shortages are disproportionately affecting the non-mining sector – previously the bright spot in Botswana’s economy.
“The non-mining sector had been performing well even as we saw contractions in mining,” Khan told this publication.
“But the big concern for 2025 will be how we reignite economic growth when businesses can’t access reliable power – which is absolutely essential for nearly every sector of the economy.”
Khan advised government against being reactive but to be proactive to the crisis. She noted that while authorities plan to issue a Request for Proposals (RFP) for renewable energy projects this week, Botswana needs a more comprehensive, long-term energy strategy. The economist argued that the country’s current focus on coal projects, while understandable given Botswana’s coal reserves, fails to address both immediate needs and future opportunities.
“Botswana should be investing aggressively in renewables right now,” Khan emphasised. “Not only would this provide more immediate relief to the power shortage, but it would give the country a competitive advantage in the long run because renewable energy generation costs are significantly lower over time.”
She added that international funding for renewable projects is far more accessible than financing for coal plants.
The power crisis presents Botswana with both challenges and opportunities, according to Khan. While the electricity shortages are undoubtedly damaging to business activity and growth prospects, especially in the crucial non-mining sectors, they also create an opportunity to develop an entirely new economic engine through renewable energy.
When asked about the potential for credit rating downgrades, Khan noted that rating agencies typically react to existing problems rather than anticipating future ones. “Last year was very difficult for Botswana – we saw a budget deficit of around 9 percent of GDP, the country is running two deficits now, and external factors and balances are not looking good,” she explained.
“Any rating reaction we see now is a response to these existing problems. There is a real risk of Moody’s downgrading Botswana when they release their rating this April – we’ve already seen S&P issue a negative outlook.”
However, Khan stressed that the more important question isn’t what rating agencies will do, but what Botswana can do to strengthen its fiscal position. “The focus should be on building fiscal resilience and implementing structural reforms that will put the economy on a more sustainable path,” she said.
The economist’s warning comes as businesses across Botswana continue to grapple with erratic power supply, which has forced many to reduce operations or invest in expensive backup power solutions. The manufacturing sector, retail businesses, and service providers have been particularly hard hit, with many reporting significant losses due to operational disruptions.
As the government works to repair failed units at the Morupule B power station and negotiate additional power imports from neighboring countries, experts like Khan argue that Botswana needs to view the current crisis as a wake-up call to modernize and diversify its energy sector. With economic growth projections for 2025 already being revised downward and credit rating agencies closely monitoring the situation, the coming months will be critical for Botswana’s economic trajectory.
The power crisis has underscored Botswana’s vulnerability to energy shocks and exposed the need for comprehensive energy sector reforms.
As Khan noted, “This isn’t just about keeping the lights on today – it’s about ensuring Botswana has a competitive, reliable energy system that can power economic growth for decades to come.”
