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LEA, ITC partner to develop SMMES

Local Enterprise Authority (LEA) this week announced collaboration with International Trade Centre (ITC) to unearth the value of SMMES in Botswana.  LEA is Botswana ‘s coordinated and focused one-stop shop authority that provides development and support services to the local industry needs of SMMEs.

The International Trade Centre as global trade body operating as a joint technical cooperation agency of the World Trade Organization (WTO). The two organizations have partnered and signed a Memorandum of Agreement (MOA) to conduct the Small and Medium Enterprises Competitiveness Survey (SMECS). According to a communiqué issued by Boikhutso Kgomanyane Director of Corporate and Stakeholder Communications at LEA , the research will among others identify the status of the SMME sector in Botswana, and identify the needs of the SMMEs.

“The survey findings and recommendations will assist in informing decisions, policy formulation and development of targeted and relevant interventions to grow the SMME sector” reads an extract from the statement. According to LEA, the output of the agreement will significantly contribute towards the diversification of the economy and significantly impact SME sector in Botswana. The data collection exercise for this study commenced in January 2019, and it will form a baseline for future research work between LEA and ITC.

Small, Medium and Micro Enterprises (SMMEs) are the backbone of most economies of the world. SMMEs provide a means for economically empowering the economy of every nation. According to a study conducted by Wilbert R. Mutoko a lecture at Botswana Accountancy Collage in 2014, Botswana SMMEs contribute only 35 percent to GDP.  In the past decade there has been an on-going debate on SMME development and SMMEs’ contribution to Botswana.

The debate has involved SMMEs significance towards employment creation, poverty eradication, and economic diversification. Mutoko observes that SMMEs face tremendous challenges that threaten their survival and growth. The challenges include lack of or limited access to markets, financial inadequacies, limited management skills, poor work ethics and lack of competitiveness.

“SMMEs play a major role in many economies. Botswana is a country with very high reliance on government sponsorship and tenders. Many SMMEs depend for business by tendering to the government because the economy has for a long time been skewed towards the public sector. Although the government of Botswana has started privatizing national corporations, a lot still needs to be done,” writes Mutoko

LEA as a parastatal under the Ministry of Investment, Trade & Industry (MITI) is the main anchor of the ministry’s SMME‘s Development Apex.  MITI says Botswana takes SMMES seriously as a key economic vehicle that creates jobs and income for many of ordinary Batswana hence the SMME Development as Apex number 1. This was said by Minister of Investment Trade & Industry Bogolo Kenewendo when delivering the ministry‘s road map last year.

 “This is a vital instrument in inclusive growth and development of the informal sector which actually puts bread on the table for many of our unskilled and semi-skilled people,” she said. Under the SMME development basket Ministry of Investment Trade & Industry says it will prioritize entrepreneurship and advancement of small scale businesses. MITI also intends to robustly combat regulatory impediments for SMMEs. Kenewendo noted that a task team was already on ground to review regulatory burdens that may negatively impact SMMEs and hinder their flourish and income generating potential.

“This will entail working closely with relevant Institutions to undertake impact assessment before any Law, Bye Law, Directive or policy is implemented to ensure that it does not create any impediments to SMME development and growth” she said
Still under the SMME Development MITI will put in place a one –ministry Approach as well as develop and implement a change in management framework across the Ministry and its parastatals.

Kenewendo explained that this would entail sharing infrastructure and increasing the ministry footprints across the country on a use basis as opposed to holder as is currently the case.  “It will further ensure consistency in information dissemination by all front desk officers to provide clients with basic information about services offered by the ministry departments /parastatals.”

 Furthermore to continue facilitating SMMEs growth Honorable Kenewendo highlighted that her ministry will develop a supplier directory by sector and region. She explained that this will facilitate stakeholders such as business community and local authorities to have access to service providers within their jurisdiction. “This will create a captive market and further enhance quality and productivity of such providers of goods and services,” she explained, adding that it will enable ease of access to funding as the market will be defined and guaranteed,

LEA under the stewardship of Dr Racious Moatshe says the partnership with International Trade Center will go a long way into pushing their mission of promoting and facilitating entrepreneurship and SMME development through targeted interventions in pursuit of economic diversification.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020

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.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

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.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

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”

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