The Botswana Energy Regulatory Authority (BERA) has announced significant adjustments to electricity tariffs, set to take effect from July 1, 2025.
This pivotal decision follows an application by the Botswana Power Corporation (BPC) for a substantial 38% upward tariff adjustment for the upcoming 2025/26 financial year. BERA’s approval introduces a nuanced, dual-pronged approach: a welcome 30% reduction for domestic customers consuming less than 200 kilowatt-hours (kWh) per month, alongside an average 24% increase for all other customer categories. This strategic move aims to bolster BPC’s financial health and ensure a stable electricity supply amidst the nation’s challenging economic climate.
The New Electricity Bill: Who Pays What?
The approved tariff adjustments is expected to reshape electricity bills across Botswana, with distinct impacts on different consumer groups. From 00:01hrs on Tuesday, July 1, 2025, these new rates will be in effect.
For a specific segment of the population, there will be a notable decrease in utility expenses. Domestic customers whose monthly electricity consumption falls below 200 kWh will benefit from a substantial 30% reduction in their tariffs. This targeted relief directly addresses the prevailing socio-economic conditions, aiming to alleviate financial pressure on vulnerable households. The decision to lower costs for low-consumption users, even as BPC sought a significant overall increase, underscores a deliberate policy choice to balance the utility’s financial needs with the public’s capacity to afford essential services, particularly for those with limited means.
Conversely, the majority of electricity consumers will face higher costs. All other customer categories, encompassing higher-consumption domestic users, commercial enterprises, and industrial clients, will experience an average 24% increase in their electricity tariffs. This broader increase is deemed crucial for BPC’s financial recovery and its ability to sustain operations. This differentiated approach represents a strategic distribution of the financial burden, placing a greater share of BPC’s recovery costs on those assumed to have a higher capacity to absorb them, such as larger households and businesses. This approach also seeks to minimise widespread public discontent and maintain social stability during a period of national economic strain.
Unpacking BPC’s Financial Struggles and BERA’s Mandate
The Botswana Power Corporation (BPC), a state-owned utility established in 1970 by an Act of Parliament, holds the critical responsibility for the generation, transmission, and distribution of electricity throughout Botswana. Its primary thermal power station, Morupule, situated near Palapye, plays a central role in the nation’s power supply. The recently approved tariff adjustments are explicitly designed to support BPC’s financial recovery, address its substantial debt levels, and enhance its capacity to meet operational obligations, thereby ensuring a stable electricity supply for the country.
BPC has been grappling with deep-seated financial distress. In April 2025, Moody’s Investors Service downgraded BPC’s outlook from stable to negative, a move that mirrored a similar action taken against the Government of Botswana just days prior. This downgrade highlighted BPC’s increasing reliance on government support, stemming from weakened fiscal buffers at the sovereign level and escalating financial strain within BPC’s own operations. The utility has contended with rising input costs, delays in implementing necessary tariff adjustments, and the challenges posed by aging infrastructure.
The financial difficulties are further compounded by operational inefficiencies. BPC faces high generation costs, particularly from the Morupule B power plant, which has been plagued by delays and cost overruns. Current data indicates a significant cost recovery gap, with ratepayers paying approximately 60% of the actual cost of electricity (an average selling price of 94 thebe/kWh against an average operating cost of 118 thebe/kWh). This underpricing prevents BPC from accumulating surplus cash reserves, hindering its ability to invest in maintaining and upgrading its infrastructure and addressing high transmission and distribution losses. Moreover, high system losses, encompassing both technical and non-technical factors like pilferage and meter errors, have averaged 15% over the past three years, contributing substantially to financial leakage. This creates a self-perpetuating cycle where poor financial health leads to operational inefficiencies, necessitating government bailouts and, ultimately, the need for tariff increases.
Providing regulatory oversight is the Botswana Energy Regulatory Authority (BERA), established in 2016 and commencing operations in September 2017. BERA’s mandate is to provide an efficient energy regulatory framework across various energy sectors, including electricity. Its core responsibilities involve setting and maintaining service standards, ensuring sustainable and secure supplies, protecting the environment, and, critically, providing economic regulation to deliver reliable, affordable, and quality services while safeguarding consumers from the monopoly power of energy providers. BERA positions itself as an “independent, transparent and fair energy regulator”. The fact that BERA approved a modified tariff structure—a 24% increase instead of the requested 38%, coupled with a 30% reduction for low-consumption users—demonstrates its active role in navigating the inherent tension between BPC’s critical need for financial viability to ensure supply and the socio-economic burden on consumers. The negative outlook from Moody’s on BPC further underscores the urgency and pressure on BERA to facilitate BPC’s recovery to prevent broader systemic risks to the country’s public sector.
Tariff adjustments amidst challenging economic conditions
These significant electricity tariff adjustments are being implemented against a backdrop of considerable economic challenges in Botswana. The nation’s economy is currently facing substantial headwinds, which were a key consideration for BERA in its decision-making process.
The International Monetary Fund (IMF) projects a -0.4% real Gross Domestic Product (GDP) growth for Botswana in 2025, marking a second consecutive year of economic contraction, following an even sharper decline of -3.0% in 2024. This economic slowdown is further corroborated by S&P Global Ratings, which revised Botswana’s sovereign credit outlook to negative in March 2025. S&P cited a 3.3% contraction in the first three quarters of 2024, primarily attributed to a steep 23.4% decline in diamond trading and mining activities. Government finances are also under pressure, with estimated fiscal deficits of 9.0% of GDP for the fiscal year 2024-25 and a planned 7.6% for FY2025-26. The government has transitioned from a net asset position in 2023 to a net debt position in 2024. This macroeconomic weakness creates a difficult environment for implementing utility cost increases, as it adds to existing financial burdens for households and businesses, potentially exacerbating the economic slowdown and making a robust recovery more challenging.
The diamond sector, a cornerstone of Botswana’s economy, remains particularly vulnerable. Diamonds account for approximately 80% of Botswana’s exports, roughly a third of government fiscal receipts, and a quarter of the country’s GDP. The sector has been impacted by weakened Chinese demand, increasing competition from lab-grown diamonds, and volatility stemming from sanctions on Russian diamonds. While a new agreement signed with De Beers in February 2025, which will increase Botswana’s share of diamonds to 50%, offers long-term optimism, the immediate outlook for this crucial sector remains challenging.
In terms of inflation and the cost of living, Botswana’s annual inflation rate stood at 1.9% in May 2025, a slight decrease from 2.3% in April. In January 2025, the rate was 2.5%. Notably, the “Housing, Water, Electricity, Gas & Other Fuels” category contributed a negligible -0.0% to the annual inflation rate in May 2025, indicating that electricity costs were not a primary driver of inflation prior to this adjustment. The average cost of living index in Botswana was approximately 30.1 as of April 2025. Monthly basic utilities, including electricity, heating, cooling, water, and garbage, for a 915 sq ft apartment average P627.78, though this figure can vary widely.
The government’s strategy to reduce the fiscal drain from state-owned enterprises like BPC, by enabling their financial recovery through measures like tariff adjustments, presents a complex policy dilemma. While aiming for broad fiscal consolidation, pushing a significant cost burden onto consumers and businesses during an economic downturn risks dampening domestic demand and business activity, potentially counteracting the very economic growth needed for overall fiscal recovery.
Ripple Effects: Impact on Households and Businesses
The new electricity tariffs are anticipated to have diverse ripple effects across Botswana’s economy, particularly impacting households and the business sector.
The differentiated approach to household tariffs means varying impacts. The 30% reduction for domestic customers consuming less than 200 kWh per month will provide significant financial relief to low-income households, directly addressing concerns about the affordability of essential services. However, domestic customers consuming more than 200 kWh per month will absorb the average 24% increase. This could lead to higher household utility bills, adding to the existing cost-of-living pressures.
For businesses, especially the vital Small and Medium-sized Enterprises (SMEs) that constitute the bulk of Botswana’s private sector, the 24% average increase will directly impact operational costs. High electricity tariffs and unreliable supply already hinder productivity and competitiveness for SMEs, often compelling them to rely on costly diesel generators. This tariff increase will further escalate these operational expenses, potentially stifling growth and diversification efforts in crucial sectors such as manufacturing, agribusiness, tourism, and digital services. This raises concerns about the broader economic strategy, as the World Bank has highlighted that unreliable and uneven electricity supply impedes progress in these industries, which are critical for Botswana’s efforts to diversify its economy away from its traditional reliance on diamonds. The increased operating costs could make Botswana less attractive for new investments and hinder the expansion of local SMEs, thereby undermining the very diversification efforts essential for long-term economic stability.
Furthermore, Botswana’s national electrification rate, estimated at 71% in 2023, shows significant disparities between urban and rural areas. Poor electrification in rural areas already undermines agro-processing, digital infrastructure, and the delivery of essential services. Increased tariffs for businesses in these regions could further impede local economic development. There is also a concern that the 24% increase for higher-consuming households and smaller businesses could inadvertently push more entities towards off-grid, often more expensive, and environmentally damaging alternatives like charcoal and diesel, which are already resorted to due to high electricity tariffs and unreliable supply. This would not only increase their operational costs but also complicate Botswana’s climate commitments and public health outcomes.
The Push for Energy Efficiency and Renewables
In light of the tariff adjustments, BERA and BPC are strongly encouraging electricity consumers and the public to adopt energy efficiency and conservation practices. This call is not merely an environmental plea; it is a practical measure for consumers to mitigate the impact of the tariff increases. By reducing their consumption, households and businesses can manage their utility bills more effectively, thereby indirectly contributing to the overall stability of Botswana’s power supply and BPC’s financial health by reducing overall demand on a strained system. This implicitly acknowledges that the tariff hike alone is not the sole solution for consumers or the utility.
Botswana’s energy landscape is currently heavily dependent on coal, with over 90% of its electricity generation originating from coal-fired plants like Morupule B. However, the nation has articulated ambitious plans to strategically shift towards renewable energy sources. The country aims to add 1.5 GW of solar power by 2030, targeting 30% renewable energy in its power generation mix. This is a significant step towards enhancing energy security and reducing reliance on costly coal and electricity imports. Key projects underway include the 100 MW Selebi Phikwe solar project, supported by a $152 million loan from the African Development Bank, and a 200 MW solar PV project slated to launch in the second quarter of 2025.
Beyond these large-scale initiatives, grassroots green energy programs are also gaining traction. For instance, the “Green Energy Transition for Sustainable Agriculture” program provides grants to smallholder farmers, enabling them to transition from expensive diesel generators to solar solutions, such as solar water pumps. This transition has significantly cut expenses for farmers and reduced CO2 emissions, demonstrating the tangible benefits of localised renewable energy adoption. While the tariff adjustments are crucial for BPC’s immediate financial recovery, the deeper issues of rising input costs and ageing infrastructure point to systemic challenges. The long-term solution for ensuring a stable electricity supply and reducing reliance on government bailouts lies in successful energy diversification. Botswana’s ambitious solar targets aim to reduce dependence on costly coal and imports. The tariff adjustments, by stabilising BPC, are anticipated to provide the necessary financial breathing room for these critical renewable energy investments to materialise, ultimately leading to a more sustainable and cost-effective energy future for the nation.
Looking Ahead
As the new electricity tariffs take effect on July 1st, Batswana are encouraged to carefully understand the changes and proactively explore ways to manage their electricity consumption. The adjustments represent a critical step in Botswana Power Corporation’s journey toward financial sustainability and improved service delivery, vital for the nation’s energy security.
