Shrub encroachment is a well-documented phenomenon affecting many of the world’s drylands. The alteration of vegetation structure and species composition can lead to changes in local microclimate and soil properties which in turn affect carbon cycling. The objectives of this paper were to quantify differences in air temperatures, soil carbon, nitrogen, and CO2 efflux under trees (Vachellia erioloba), shrubs (Grewia flava), annual and perennial grasses (Schmidtia kalahariensis and Eragrostis lehmanniana) collected over three seasons at a site in Kgalagadi District, Botswana, in order to determine the vegetation-soil feedback mechanism affecting the carbon cycle. Air temperatures were logged continuously and soil CO2 efflux was determined throughout the day and evening using closed respiration chambers and an infrared gas analyser. There were significant differences in soil carbon, total nitrogen, CO2 efflux, light and temperatures beneath the canopies of trees, shrubs and grasses. Daytime air temperatures beneath shrubs and trees were cooler compared to grass sites, particularly in summer months. Night time air temperatures under shrubs and trees were, however, warmer than at the grass sites. There was also significantly more soil carbon, nitrogen and CO2 efflux under shrubs and trees compared to grasses. Whilst the differences observed in soils and microclimate may reinforce the competitive dominance of shrubs and present challenges to strategies designed to manage encroachment they should not be viewed as entirely negative. Our findings highlight some of the dichotomies and challenges to be addressed before interventions aiming to bring about more sustainable land management can be implemented.