Botswana is a Net Food Importing Developing Country (NFIDC), leaving a significantly unexplored business opportunity to increase domestic production of basic foodstuffs, particularly cereals such as grain sorghum and maize and pulses, says the Botswana Investment and Trade Centre (BITC), the country‘s investment promotion and trade facilitation agency.
Cereal national demand stands at 200 000 tons per year, of which according to Botswana Investment and Trade Centre (BITC), on its weekly trade opportunities alert, only 17 percent is supplied through local production. This information also corroborates with figures shared by Botswana Millers Association at the Budget review seminar held by First National Bank Botswana, in Gaborone recently. According Nkosi Mwaba, President of the Association, South Africa produces in a year 18 times what Botswana produces in the same period.
Mwaba explained that on average Botswana produces 120 metric tons of maize per annum while South Africa produces 3500 000 metric tonnes during the same period. “This basically means what South African produces in 3 weeks we take the whole year to produce” he said. These figures spark conversation around the country’s efforts towards attaining food security. The agricultural sector has also, on several occasions been underscored as the missing puzzle in Botswana‘s economic diversification and employment creation efforts.
Currently within the agricultural sector, Botswana earns significant revenue from the Beef sector; however the industry has been facing its own challenges and not performing well, not as much fast evolving and growing as compared to the Namibian and Brazilian ones. Over the years, initiatives have been put in place aimed at instilling the innovative culture amongst Botswana economic engines and service delivery mechanism.
The fundamental focus currently is on transforming the economy to being knowledge based, export led as well as private sector dominated where government only plays the role of facilitator and regulator. BITC says investments in arable agriculture will; stimulate private sector development, create employment, create value-addition opportunities, and enhance food security and ultimately exports. â€¨
However, as Botswana is by in large a semi-arid landlocked country with poor rainfall, arable farming finds itself in a compromised position leaving irrigative and innovation, modern farming techniques as the only way out, the latter however requires significant financing to set up and particular sets of skills to implement and effectively run. On the part of lack of financing, against the run of suggestions and many recommendations Ministry of Agriculture continues to receive very little from the national recurrent budget.
Experts and agricultural advocates says the lack of adequate budget allocations to agricultural sector, subsequently means no infrastructure development to support the sector, no road networks to connect farm lands with market places, no development of innovative solutions in response to climate challenges facing the sector. The common denominator in various submissions by different speakers centered on the fact that agriculture has demonstrated before through numerous scientific studies and economic research findings as a sector with significant potential to remedy Botswana’s economic diversification headache.
Still at FNBB Budget review early this month, Bokomo Botswana Chief Executive Officer (CEO) Werner De Beer said low produce of maize and wheat locally continues to impedes and frustrate their business expansion quests. Bokomo which processes the two raw cereals to various consumer products says having to import raw material from South Africa comes with transportation costs which in turn shrinks their profits margins.
“We have a policy to supply local farmers but unfortunately they can only provide six percent of our plant capacity demand,” he said. De Beers further revealed that currently Botswana imports in excess of P460 million worth of maize and wheat annually, an opportunity which he says lies for Batswana arable farmers to tap into. Botswana government has however been coming up with several schemes to support the agricultural sector.
BITC says in their investment opportunities alert that the Pandamatenga agricultural Infrastructure development project, located in an area receiving the highest average annual rainfall, and could create spin-offs in sunflower processing instead of exporting sunflower production for processing. “The Zambezi Agro-commercial Development Project presents another investment opportunity. The Zambezi River will supply irrigation to will help increase 20 000 hectares of agricultural development”
Similarly, recommendations from the National Master Plan for Arable Agricultural and Dairy Development (NAMPAADD)report identify projected irrigation in Mmadinare-Tobane (750 hectares), supplied by Shashe Dam, and in Selebi-Phikwe (1,019 hectares) supplied by Letsibogo Dam. Spin off investment opportunities of these projects include horticulture packaging and gross sales to domestic and international markets at standardized rates.
This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.
The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.
Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.
He was speaking in Parliament on Tuesday delivering Parliament’s Finance Committee report after assessing a motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.
Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.
The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.
The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.
The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.
This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.
Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.
Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.
However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.
Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.
When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.
This as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.
Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.
The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.
Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.
In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.
Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.
Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.
Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.
Acknowledging the need to draw down from GIA no more, current Minister of Finance Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”
He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”