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Liquidity emerged as a defining theme at Bank Gaborone’s Insights & Impact Roundtable, with banking leaders warning that tight funding conditions now pose one of Botswana’s most pressing economic risks. Discussions revealed that banks are rethinking their models—exploring regional funding, non-traditional instruments, and fee-based income—to remain resilient amid escalating deposit costs.
The discussions focused on economic diversification, support for small and medium enterprises (SMEs), and financial sector innovation, highlighting collaboration as a key driver for national transformation. The dialogue comes against a challenging backdrop. Botswana faces headwinds from a downturn in the diamond market, a depreciating Pula, tightening liquidity, and a recent sovereign credit downgrade, all reshaping the operating environment for businesses, policymakers, and financial institutions.
“These challenges are real, and they ripple across every sector, affecting businesses, households, and communities. But moments like these also present opportunities — opportunities to rethink, to innovate, and to collaborate,” said Olebile Makhupe, Managing Director at Bank Gaborone. She cautioned that Botswana may face an even tougher period before conditions stabilise, noting that the Botswana Economic Transformation Programme (BETP), while pivotal for sustainable diversification, will take time to deliver results.
“We recognise the central role of the BETP in shaping our growth path, but implementation will require time, and we must prepare for the period before those outcomes materialise,” she said. Makhupe stressed the need for a clear interim revenue strategy, calling on the private sector to reflect on what can fill the gap while long-term reforms take root. “We have to think differently, and as a bank, we have already started thinking that way,” she added.
Liquidity pressures dominated the conversation. Makhupe described liquidity as the most pressing economic risk currently facing Botswana, warning that high borrowing costs are unsustainable for corporates. “This type of interest rate environment wipes businesses out,” she said. Bank Gaborone has already shifted its strategic focus, exploring alternative funding sources beyond traditional channels.
“We realised that the liquidity we need will not come from traditional sources. As banks and businesses, we must rethink our funding models. Botswana alone will not support long-term growth; we have to look to regional opportunities and alternative funding streams,” Makhupe said. She added that the bank is engaging development finance institutions to design new financing structures for SMEs, emphasising non-traditional instruments to help businesses navigate the liquidity squeeze.
“If we do not adapt our thinking and funding approaches, both as lenders and as businesses, we will face significant strain because of this liquidity situation,” Makhupe said. “All of us have to start thinking differently. We need to figure out how to generate income that is not solely based on Botswana. An export-led economy has to be a priority. At the same time, we must look at how we fund ourselves through non-traditional financing options. Only if we shift our thinking in this way can we get out of this liquidity situation.”
This view is shared by Absa Bank Managing Director Keabetswe Pheko-Moshagane, who agrees that the biggest structural change ahead lies in the cost of liquidity. “If we continue with this liquidity pressure, the deposit price will keep escalating,” she said recently during the bank’s results presentation.
As a banking sector, the question becomes: how do they continue to lend at a price that consumers can afford?
“That’s going to be the biggest challenge. You either develop an instrument that helps you bring in liquidity at a reasonable price so the business can keep lending, or you shift your resource allocation—into fee income, into risk management products, and into advisory services.”
SMEs, which have felt the sharpest edge of the liquidity contraction, received particular attention. Bank Gaborone stressed its commitment to practical, solutions-driven support for small businesses, working closely with entrepreneurs to structure workable financing solutions. This includes exploring blended and alternative funding arrangements and linking SMEs with appropriate partners when traditional lending is insufficient. “Support may not always come directly from our balance sheet, but we will connect SMEs to the right partners. Our role is to advise, support, and help enable access to capital,” said Reetsang Taudi, Treasurer at Bank Gaborone.
The liquidity crunch has been exacerbated by a sharp fall in Government Purchase Orders, which dropped from P1.6 billion in May to P400 million in October 2025, slowing cash circulation and pushing SMEs into survival mode. “We had to cut deep. The numbers were unsustainable, and inefficiencies went unchecked for years. Every thebe now counts,” said Naledi Madala, Senior Policy Advisor to the Vice President, explaining that expenditure cuts are part of efforts to curb wastage and enforce spending discipline.
The private sector, however, has decried these austerity measures, noting that many SMEs dependent on government contracts are now struggling with delayed payments and shrinking cash flow. “Payments that used to take 30 days now take months, if they come at all. SMEs are collapsing because money is not circulating,” said business consultant Buca Matenge. Economist Keith Jefferis described the moment as a structural turning point, warning that while the cuts are fiscally necessary, they expose Botswana’s overreliance on state spending to drive growth. “This is not just a slowdown; it is a structural adjustment. The economy must learn to stand without government propping it up,” he said.
