As global trade tensions escalate with new U.S. import tariffs, Botswana’s government will remain steadfast in its long-term economic strategy rather than implementing knee-jerk reactions, a senior finance ministry official has stated.
Naledi Madala, Senior Policy Advisor at the Ministry of Finance, emphasised this measured approach during Standard Chartered Bank’s recent economic briefing on Thursday.
“If we are going to react to everything, then we are also going to create a lot of problems,” Madala told an audience during the briefing. “Because something is happening today doesn’t mean that you need to respond tomorrow, think about the long term, think about why you have made the policy, think about the reasons behind the policy.”
The comments come as U.S. President Donald Trump imposed a 37 percent tariff on Botswana imports, labeling the move “Liberation Day.” The U.S. government claims this rate represents half what Botswana charges on American imports.
Diversification imperative
Botswana’s traditional economic pillars – diamond revenues and Southern African Customs Union (SACU) receipts – face mounting pressure, though a resilient non-mining sector provides some buffer. With aspirations to achieve high-income status, the nation recognises the urgency to reduce dependence on the U.S., its crucial diamond market.
There is a lot going on, Madala said adding that the government’s goal is to make sure that planning across the entire government system is taken a lot more seriously than it has ever been before.
She said this is important because previously when “we’re in a recession, you will see that government will react by saying we’re cutting spending, we’re putting up a travel moratorium, etc”. Her observation is that Botswana hasn’t yet faced a prolonged crisis that forced lasting reform – when diamond revenues rebound, it tends to revert to old patterns.”
This observation found support from Absa Bank Botswana Managing Director Keabetswe Pheko-Moshagane, who warned during the bank’s results presentation that while diamond demand may recover, “if Botswana previously earned P100 from diamonds, it might now only get P60, never returning to P100.”
Global uncertainty
Standard Chartered Bank’s Africa and Middle East economist Razia Khan anticipates the tariffs will fuel global uncertainty but echoed calls for Botswana to avoid reactionary measures. “We’re still assessing the global implications,” she said. “Botswana’s challenge is compounded by existing pressures from lab-grown diamonds and weak demand.”
Khan analysed the Trump administration’s apparent logic: “By making imports difficult, they may believe manufacturing will return to the U.S. But manufacturing follows cost competitiveness – can high-cost U.S. locations really attract it back?” She also questioned whether American workers still want manufacturing jobs.
The economist highlighted widespread confusion about the tariffs’ rationale, noting U.S. consumers worry about inflationary impacts. “This external environment makes diamond demand recovery particularly challenging for Botswana,” Khan concluded.
SA headwinds
Rising tensions between the United States and South Africa, fueled by aid cuts and potential trade disruptions under a returning Trump administration, also pose threat to Botswana’s economy through trickle-down effects.
The African Growth and Opportunity Act (AGOA), which grants tariff-free access to the U.S. market for African manufacturers since 2000, is central to this uncertainty. The agreement allows eligible African countries to export over 1,800 products duty-free to the U.S. if they meet requirements including progress toward a market-based economy, rule of law, political pluralism, and avoiding actions that undermine U.S. national security or human rights.
While historically enjoying bipartisan support, AGOA expires on September 30, 2025. With Trump now in his second term and his preference for bilateral trade deals over multilateralism, its renewal is uncertain – especially amid tensions with South Africa.
AGOA impact
For Botswana, AGOA’s potential demise appears to have limited direct impact. Gomolemo Basele, an economist at First National Bank of Botswana (FNBB), notes that while Botswana would be affected if U.S. support ceases, the country exports less than $1 million worth of goods to the U.S. under this agreement.
“The impact on Botswana, if AGOA benefits are removed, will be limited,” Basele said.
Additionally, the direct vulnerability to potential U.S tariff impacts remains small. In 2024, total U.S. goods trade with Botswana reached $509.5 million, with U.S. exports to Botswana rising 52.7 percent to $104.3 million (up $36 million from 2023) and U.S. imports from Botswana falling 17.4 percent to $405.1 million (down $85.3 million), leaving the U.S. with a $300.8 million trade deficit, down 28.7 percent ($121.3 million) from 2023.
Although Botswana maintains a trade surplus – boosted by duty-free diamond exports outside AGOA – the U.S. imposed retaliatory tariffs as Trump seeks to address what he calls unfair trade practices.
Basele emphasises that Botswana’s minimal exports to the U.S. reduce its vulnerability. “Botswana does not export any of the items on the U.S.’s critical imports list,” he added.
SA threat
The greater threat to Botswana comes through South Africa, its largest trading partner. South Africa supplies most of Botswana’s imports (food, fuel, machinery) and serves as an export conduit. South Africa’s AGOA status is at serious risk under Trump’s proposed “Liberation Day” tariffs. Trump imposed 30% tariff on the country.
South Africa’s auto industry, which exported over $2 billion in vehicles and parts to the U.S. in 2024 (64 percent of its AGOA exports), faces a planned 25 percent tariff. The National Association of Automobile Manufacturers of South Africa warns of economic fallout, with DA leader John Steenhuisen cautioning that losing AGOA could cost 112,000 jobs and jeopardise R435 billion in the automotive trade.
South Africa’s citrus sector, the world’s second-largest exporter, could also suffer, with 9 percent of exports going to the U.S. and 35,000 jobs tied to AGOA, according to the Citrus Growers Association. Investment strategist Osagyefo Mazwai from Investec Wealth & Investment estimates that a U.S. import halt could reduce South Africa’s GDP by 2.7 percent, given the U.S. accounts for 9 percent of its export value.
SACU may underperform
This economic pressure on South Africa could affect the Southern African Customs Union (SACU), a critical revenue source for Botswana.
“SACU receipts contribute significantly to government revenue but are volatile and depend heavily on South Africa’s economic performance,” Basele explained. “We expect Botswana’s share to be lower than recent levels.”
Inflation outlook
Beyond fiscal risks, Basele warned that global trade restrictions could drive inflation and hinder economic growth. “The U.S. tariffs and retaliatory actions have an inflationary impact on affected goods and services,” he said.
However, there may be some opportunity. Basele noted that while inefficient, the situation could boost local production to meet demand for tariffed goods, providing short-term growth. Over the medium-to-long term, however, these tariffs would likely hinder growth.
For Botswana, Basele suggested this could be a time to diversify trade relationships beyond South Africa by developing competitive goods and services.
“This would allow local businesses to grow beyond Botswana’s borders and leverage existing trade agreements,” he said.
