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Undiversified revenue stream a ticking bomb - Experts

Publishing Date : 11 February, 2019

Author : REARABILWE RAMAPHANE

Botswana’s continued dependence on mineral revenue has been underscored as a ticking bomb that will lead the country into an economic crash if serious efforts to diversify revenue streams are not put to place. This emerged during several engagement post 2019/20 Budget Speech delivered by the Minister of Finance & Economic Development, Kenneth Matambo on Monday.


For the coming 2019/financial year commencing in April this year, total revenue and grants are estimated at P60.20 billion.  Mineral revenue remains the highest contributor at P21.09 billion or 35.62 percent of total revenue and grants, while customs and excise revenue is estimated at P14.02 billion.  Non-mineral income tax is estimated at P11.55 billion, while VAT is expected at P9.12 billion. Minister Matambo acknowledged that however, there are downside risks to these revenue estimates, arising mainly from the continued high volatility of the mineral and customs and excise revenues.


Total expenditure and net lending for the financial year 2019/2020, on the other hand, is estimated at P67.54 billion, resulting in a budget deficit of P7.34 billion or minus 3.5 percent of GDP. When sharing his views at the First National Bank Botswana Budget review session on Tuesday Moathodi Sebabole, Chief Economists at FNB noted that Botswana’s stable fiscal stance and prudent public finance administration record was commendable saying that however over reliance of one revenue stream as a major income earner was worrisome.


 Sebabole noted that Botswana’s heavy dependence on a single commodity as a key economic driver coupled with unexplored and narrow economic base was a major credit constraint.

This has also been reiterated by international finance and economic commentator and rating agency, Moody’s in their annual report released in October last year.


 Botswana is currently heavily reliant on the mining sector as the main foreign income earner and key fiscal revenue window predominantly the diamond industry.

The country’s flagship diamond company, Debswana, a 50-50 venture between global diamond giants De Beers is the largest private sector employer, only the Government of Botswana employs more people than Debswana.


The mining sector accounts for almost a quarter of the national Gross Domestic Product (GDP).

This according to Moody’s and many other global finance and economic observers, signals a ticking time bomb and continues to pose a threat to the country future as diamonds and minerals are finite and also vulnerable to global economic uncertainties in terms of fluctuating commodity prices


Taking a look at the past three financial years, total revenues and grants for 2017/2018 financial year were at P56.41 billion, while total expenditure and net lending amounted to P58.39 billion, resulting in the overall deficit of P1.98 billion, or 1.1 percent of GDP. Matambo explained on Monday that this negative budget outturn was due to the lower tax collections during the year.


“Efforts will therefore, be intensified to ensure efficiency in the collection of tax revenues by the Botswana Unified Revenue Service through the continuous review of tax laws and leveraging on the use of ICT to enhance compliance,” he said. During the 2018/19 financial year coming to end in April this year the revised budget forecast for the 2018/2019 depicts a deficit P6.96 billion, or 3.5 percent of GDP, compared to the original budget deficit of P3.59 billion. Matambo explained that total revenue and grants have been revised downwards by 12.6 percent to P58.23 billion, due to forecast underperformance of the mineral and non-mineral income tax revenue items.


Mineral revenue has been revised downwards by 17.5 percent in light of the decision by Debswana to commence the implementation of Cut 9 project at Jwaneng and Cut 3 project at Orapa during this financial year, financed through forfeited dividends. Total expenditure and net lending for 2018/2019 shows a decrease of P2.68 billion from the original budget of P67.87 billion to P65.19 billion, due to the continued underperformance of the development budget.


The development budget for 2018/2019 is revised from the original figure of P19.31 billion to P16.62 billion, to reflect the implementation capacity of both the public and private sectors to execute projects. Going forward Minister Matambo noted the 2019/20 budget proposals are informed by the need to consolidate the country’s gains in various areas of development and address the challenges to achieve sustained economic growth to support employment creation and poverty alleviation.


“Our focus will be placed on high impact infrastructure development; human capital development, especially technical and vocational education; and national ICT backbone. In addition, Government will continue to implement social welfare programmes, as part of its efforts to address poverty among the most vulnerable groups of the society” he said. Minister Matambo further revealed that Government has taken a decision to set up a Project Management Office during the 2019/2020 financial year to ensure effective implementation of projects.


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