Economists at Absa have issued a warning regarding the trajectory of Botswana’s non-mining sector, indicating that the segment is rapidly losing momentum after a period of relative resilience. Although the non-mining economy grew by an average of 2.7 percent, serving as a buffer against the ongoing downturn in the diamond market, analysts project a far more challenging operating environment over the next 18 months.
Ridle Markus, Sub-Saharan Africa Macroeconomist at Absa Group, noted a distinct growth rotation taking place, explaining that primary economic momentum is swinging away from non-mining industries and back toward the mining sector, which is now expected to lead national growth figures. However, this transition is coming at a cost to broader domestic employment.
“The non-mining sector is facing a much more challenging environment going into 2027,” Markus stated, pointing out that job losses are already occurring across several non-mining industries as activity slows.
A primary driver of this projected deceleration is elevated inflation, which continues to erode household purchasing power. Although consumer price growth moderated slightly to 9.4 percent in July, after reaching a high of 10.7 percent in June following sharp fuel price increases, Markus emphasised that price growth remains significantly above the central bank’s target band of 3 to 6 percent. He expects inflation to stay outside this preferred range until at least early next year, further worsened by a recent nine percent increase in electricity tariffs and persistent volatility in global oil markets, which raises fears that the recent drop in fuel prices might not hold.
Adding to these inflationary risks are projected severe environmental conditions. Drier conditions brought on by the El Niño weather phenomenon could exert significant strain on local and regional agriculture. While food carries a modest weight of roughly 3.6 percent in the Consumer Price Index basket – meaning direct upward pressure on national headline inflation may remain moderate – the agricultural sector itself faces heightened disruption.
Furthermore, regional climate conditions pose indirect risks to energy supply. Markets such as Mozambique rely heavily on hydroelectric power generation, meaning prolonged dry weather could disrupt regional power trade and affect imported electricity supplies. Markus cautioned that these agricultural pressures could ultimately stretch already thin public finances.
“The dry conditions could really force the government’s hand in declaring another emergency in the agriculture sector and having to continue to support the agriculture sector at a time when public finances are under massive strain,” Markus noted. Weather forecasting models confirm severe dry conditions, though the full extent of the impact will only become clear as the season progresses.
Meanwhile, the mining sector presents a complex outlook. While domestic output is set to expand significantly – supported by government expectations of at least a 20 percent increase in diamond production this year – Markus emphasised that this rebound is largely driven by statistical base effects rather than a structural shift in global demand.
“It is a reflection of base effects and shutdowns in some of the key markets last year that is causing this huge spike, not because anything globally has changed materially,” he said.
Following sharp contractions in output during preceding periods, production at Debswana recorded substantial gains in early quarters of 2026. These gains are expected to boost overall GDP figures for specific quarters. However, fluctuations in production schedules and mine shutdowns mean quarter-on-quarter growth will remain uneven, with potential contractions projected for subsequent periods before temporary rebounds occur.
Higher production volumes, Markus warned, will not automatically translate into improved fiscal revenue for the state. Diamond export receipts fell in value during the first quarter despite higher physical production, highlighting a growing disconnect between volume and monetary yields caused by lower international prices. Absa projects that while physical export volumes will rise, overall export revenues to the government may fall, leaving fiscal buffers under continued pressure despite the headline expansion in mining output.
