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X-ray view into Matambo’s briefcase

In two days’ time, the Minister of Finance and Economic Development Kenneth Matambo will open his iconic briefcase and the nation expects it to be pregnant with hope as it is always the case with any Budget Speech of a government especially on its election year.

However the 2019/20 Budget was planned at a menacing projected budget deficit of P5 billion, increasing fiscal policy uncertainties which experts see as a gloomy picture for Botswana. This is mainly due to the fact that President Mokgweetsi Masisi’s first impression will be judged by the speech this Monday. The 2019 Budget Strategy Paper which was unveiled at last year’s Budget Pitso projected that total revenues are forecast to be lower than projected total expenditures, resulting in a budget deficit of P5.11 billion, or 2.4 percent of GDP.

“With total revenue and grants estimated at P61.28 billion, which is lower than the projected total expenditure of P66.40 billion, the budget deficit is estimated at P5.11 billion, or 2.4 percent of GDP,” said the 2019 Budget Strategy Paper giving a gloomy hope to the coming Budget Speech. According to the 2019 Budget Strategy Paper, budget deficits are forecast in the medium-term, mainly as a result of lower revenue collections, resulting from the expected sluggish mineral revenue receipts and volatility of the Customs and Excise revenue.

On the other hand, emerging expenditure pressures, from both development and recurrent expenditure sides, should continue to be managed in order to ensure fiscal sustainability, the Paper further states. When responding to the perpetual incurrence of budget deficit in his maiden State of The Nation Address which was announced last two months, President Masisi decried of P1.98 billion budget deficit recorded in the 2017/18 year which was followed by an expected “moderate” budget deficit for the 2018/19 financial year.

The upcoming Budget Speech will come at the right time for Botswana’s current National Development Plan 11 (NDP 11, 2017-2023) as in his last year’s State Of The Nation Address Masisi revealed that NDP 11 is due for its Mid-Term Review in the next financial year( meaning the 2019/20) which will be launched by Monday’s budget speech). This is where Masisi promised that “it is during this process that most of our transformative adjustments will be effected.”

Matambo’s pre-budget document, the Budget Strategic Paper 2019 states: “The strategic thrust for the next financial year 2019/2020 continues to be centred around the broad national priorities identified in NDP 11, which are: Developing Diversified Sources of Economic Growth; Human Capital Development; Social Development; Sustainable Use of Natural Resources, Good Governance and Strengthening of National Security, as well as monitoring and evaluation.”

When commenting on government’s continual battle against fiscal deficits, Masisi promised that despite the constrained fiscal outlook his government is committed to the principle of a balanced budget in the medium term, as outlined in the current National Development Plan (NDP11). The public’s high expectation on this year’s Budget Speech to be more promising as it is elections year coincides with the rating agency Moody’s view which expects pressure on spending by government in this important time of Botswana’s history.

Recent Moody’s view sees uncertainty and delay in fiscal consolidation efforts towards the 2019 General Elections and the rating agency highly expects Matambo’s Monday speech to vindicate that.  “Ahead of elections in Botswana, the authorities now envisage a more gradual pace of fiscal consolidation…,” said Moody’s. A public voice echoed by workers who now regard themselves as the “working poor” has been reverberating for years and this year it is even louder towards the national polls hence an expected spending pressure by government.

Unionist Tobokani Rari did not mince words when making his promises heard by this publication. He said since 2011 he does not remember government attempting to cushion workers who have continued to struggle against inflation or cost living since the 2009 global recession.
With regards to cushioning of workers from inflation, Rari said, the government has been accumulating arrears since 2011 as it has been increasing salaries with small percentages which would not cushion against inflation; only around 3 percent and 4 percent.

“This was not enough as the actual inflation was never met halfway by reasonably increasing prices. The increment of lesser percentages did not reflect compensation of inflation and rather it fell short by almost 16 percent,” said Rari who is against these lesser salary increments which would never compensate for erosion of salaries. Rari expects Masisi’s administration to bring back lost value of workers salary and he also believes this would enhance productivity.

He said Masisi should prioritize in human resource as it is a vital remedy for a healthy economy. It appears the NDP 11 reiterates Rari’s comments that government has been doing less in terms of increasing productivity which is vital for economic health. “With the positive relationship between total factor productivity and economic growth in Botswana, the failure to effectively address the issue of low productivity undermines the country’s ability to operate at its full potential,” says the NDP 11 which was released in 2016.

The NDP 11 further says the country’s ambition of being an upper income country may be difficult to realise in the foreseeable future. Any significant improvements in productivity in both the public and private sectors will have salutary effects on the economic growth and overall health of the economy, according to NDP 11.Meanwhile a Malaysian private consultancy firm appointed by government, Performance Management and Delivery Unit (PEMANDU), has secretively proposed that government increase salaries by 20 percent in a pyramid manner.

This means that the additional cost to the government will be P1.23 billion per annum and this is expected to be in Matambo’s briefcase. While economist Moatlhodi Sebabole is talking against irresponsible spending by the treasury in any occasion or important season like the time of elections, the expert encourages cautious spending by government and believes the current projected deficit was in no way over the bar or overboard.

He gave a scenario of 2009 when Botswana was waking up from global recession with a heavy fiscal deficit of over P9 billion-a time when the economy was still smaller than it is today. According to Sebabole, a projected deficit of P5, 11 billion should not scare as it is not that bad as it seems and will be recovered. Sebabole also welcomes the treasury’s current projected deficit saying it is a counter-cyclical fiscal policy.

He said in this kind of fiscal policy government has spent its revenues on mining projects like the development of Cut 9 in Jwaneng and the Cut 3 at Orapa projects which is expected to bring back returns that will cushion the impending fiscal deficits.  Sebabole believes that the fiscal deficits may shrink even to P1.6 billion, even below the expected estimates. The economist believes fiscal consolidation by government should not in any way astray from the NDP 11 route and achievement of Vision 2036 goals or pillars.

 “In my view I believe in cautious fiscal spending. In every hot national event fiscal spending pressures is expected to cater for management of elections and when the fiscal policy is under pressure to deliver in an election year,” said Sebabole. Sebabole believes government has always been spending within the fiscal spending threshold which also coincides with the fiscal rule. He explained that the fiscal rule has always been to spend not above 4 percent of the GDP and this should be maintained even at a time of elections.

Permanent Secretary to the President and Secretary to the Cabinet Carter Morupisi told this publication that government will not be swayed by pressure of elections year and the budgetary process have not changed like in the past years. He echoed Masisi and Matambo’s last year comments that the upcoming Budget Speech will be mirroring priorities of NDP 11. “That will be the principal of good governance. Government should remain committed to prioritizing ongoing projects first before looking and new commitment,” he said.

Morupisi explained that a budget is prepared by looking at projected revenues and spending which are mostly planned on assumptions. He highlighted that after looking at ongoing projects compulsory payments will be made as in salaries of workers and government debts.
Priorities versus Promises. According to the 2019 Budget Strategy Paper one of the Fiscal Policy Objectives is to; manage the fiscal risks in a prudent manner and to ensure fiscal consolidation through expenditure prioritization that will result in quality spending.

Government’s main priority is to keep it’s spending below 4 percent of the GDP in the face of a projected fiscal deficit of P5. 11 billion which is the 2.4 percent of the GDP, according to Morupisi.  Also the PSP says top on Matambo’s list will be closing government’s ongoing projects and paying debts and liabilities as well as pay workers’ salaries.Matambo at the Budget Pitso said the projected P5.11 billion budget deficit will be financed through a combination of borrowing, both domestically and externally, and drawing down on government cash balances.

 “Government remains committed to pursuing fiscal sustainability and thus, additional measures to raise domestic revenues or trim the planned expenditure during the implementation of the Plan will be considered, if necessary, to restore the fiscal balance to sustainable levels,” says this year’s budget paper. As a self-proclaimed ‘Jobs President’, Masisi has a bigger headache before him, to increase employment while making sure that the jobs he created are decent. In his maiden SONA Masisi highlighted poverty and unemployment “as a matter of urgency.”

Masisi’s administration lives with the promise of increasing jobs. This is why Masisi further announced that his administration has come up with the National Employment Policy (NEP) to address the unemployment problem facing the country and live to his title of ‘Jobs President’.
Another promise by Masisi is to increase workers’ salaries or improve their living conditions. This is why the same NEP’s other goal is “to assist the country to achieve productive, gainful and decent employment for all, to contribute to the reduction of income inequality and as well as to support Government’s poverty eradication efforts.

“It is seen that the NEP in this aspect supports the NDP 11 which states that one of the problems facing the country is the decline in total factor productivity, especially labour productivity. NDP 11 complained that, “growth in labour productivity in the country, as measured by value added per person employed, has been declining over the past two decades.” The NEP gets technical and financial support from World Bank. The Draft National Employment Policy for Botswana is expected to be delivered by March 2019, a month after the Budget Speech.

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Banking on Your Terms: Exploring the World of Self-Service Banking

23rd February 2024

In today’s digital age, banking is no longer just about visiting a branch during business hours. It’s about putting you, the customer, in the driver’s seat of your financial journey. But what exactly is self-service banking, and how do you stand to benefit from it as a customer?

Self-service banking is all about giving you the power to manage your finances on your terms. Whether you want to check your account balance at midnight, transfer money while on vacation, or deposit cash without waiting in line, self-service banking makes it possible. It’s like having a virtual branch at your fingertips, ready to assist you 24/7.

This shift towards self-service banking was catalyzed by various factors but it became easily accessible and accepted during the COVID-19 pandemic. People of all ages found themselves turning to digital channels out of necessity, and they discovered the freedom and flexibility it offers.

Anyone with a bank account and access to the internet or a smartphone can now bank anywhere and anytime. Whether you’re a tech-savvy millennial or someone who’s less comfortable with technology, you as the customer have the opportunity to manage your finances independently through online banking portal or downloading your bank’s mobile app. These platforms are designed to be user-friendly, with features like biometric authentication to ensure your transactions are secure.

Speaking of security, you might wonder how safe self-service banking really is. Banks invest heavily in encryption and other security measures to protect your information. In addition to that, features like real-time fraud detection and AI-powered risk management add an extra layer of protection.

Now, you might be thinking, “What’s the catch? Does self-service banking come with a cost?” The good news is that for the most part, it’s free. Banks offer these digital services as part of their commitment to customer satisfaction. However, some transactions, like wire transfers or expedited bill payments, may incur a small service fee.

At Bank Gaborone, our electronic channels offer a plethora of services around the clock to cater to your banking requirements. This includes our Mobile App, which doesn’t require data access for Orange and Mascom users. We also have e-Pula Internet Banking portal, available at https://www.bankgaborone.co.bw as well as Tobetsa Mobile Banking which is accessible via *187*247#. Our ATMs also offer the flexibility of allowing you to deposit, withdraw cash, and more.

With self-service banking, you have the reins of your financial affairs, accessible from the comfort of your home, workplace, or while you’re on the move. So why wait? Take control of your finances today with self-service banking.

Duduetsang Chappelle-Molloy is Head: Marketing and Corporate Communication Services

 

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Botswana records over P6 billion trade deficit

7th February 2024

Botswana has recently recorded a significant trade deficit of over P6 billion. This trade deficit, which occurred in November 2023, follows another deficit of P4.7 billion recorded in October of the same year. These figures, released by Statistics Botswana, highlight a decline in export revenues as the main cause of the trade deficit.

In November 2023, Botswana’s total export revenues amounted to P2.9 billion, a decrease of 24.3 percent from the previous month. Diamonds, a major contributor to Botswana’s exports, experienced a significant decline of 44.1 percent during this period. This decline in diamond exports played a significant role in the overall decrease in export revenues. However, diamonds still remained the leading export commodity group, contributing 44.2 percent to export revenues. Copper and Machinery & Electrical Equipment followed, contributing 25.8 percent and 10.1 percent, respectively.

Asia emerged as the leading export market for Botswana, receiving exports worth P1.18 billion in November 2023. The United Arab Emirates, China, and Hong Kong were the top destinations within Asia, receiving 18.6 percent, 14.2 percent, and 3.8 percent of total exports, respectively. Diamonds and Copper were the major commodity groups exported to Asia.

The Southern African Customs Union (SACU) received Botswana’s exports worth P685.7 million, with South Africa being the main recipient within SACU. The European Union (EU) received exports worth P463.2 million, primarily through Belgium. Australia received exports worth P290 million, while the United States received exports valued at P69.6 million, mostly composed of diamonds.

On the import side, Botswana imported goods worth P9.5 billion in November 2023, representing an increase of 11.2 percent from the previous month. The increase in imports was mainly driven by a rise in Diamonds and Chemicals & Rubber Products imports. Diamonds contributed 23.3 percent to total imports, followed by Fuel and Food, Beverages & Tobacco at 19.4 percent and 15.0 percent, respectively.

The SACU region was the top supplier of imports to Botswana, accounting for 77.7 percent of total imports. South Africa contributed the largest share at 57.2 percent, followed by Namibia at 20.0 percent. Imports from Asia accounted for 9.8 percent of total imports, with Diamonds, Machinery & Electrical Equipment, and Chemicals & Rubber Products being the major commodity groups imported. The EU supplied Botswana with imports worth 3.2 percent of total imports, primarily in the form of Machinery & Electrical Equipment, Diamonds, and Chemicals & Rubber Products.

Botswana’s recent trade deficit of over P6 billion highlights a decline in export revenues, particularly in the diamond sector. While Asia remains the leading export market for Botswana, the country heavily relies on imports from the SACU region, particularly South Africa. Addressing the trade deficit will require diversification of export markets and sectors, as well as efforts to promote domestic industries and reduce reliance on imports.

 

 

 

 

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Business sector optimistic about 2024

7th February 2024

The business sector in Botswana is optimistic about the year 2024, according to a recent survey conducted by the Bank of Botswana (BoB). The survey collected information from businesses in various sectors, including agriculture, mining, manufacturing, construction, and finance, among others. The results of the survey indicate that businesses expect trading conditions to improve in the first quarter of 2024 and remain favorable throughout the year.

The researchers found that firms anticipate improvements in investment, profitability, and goods and services exported in the fourth quarter of 2023 compared to the previous quarter. These expectations, combined with anticipated growth in all sectors except construction and real estate, contribute to the overall confidence in business conditions. Furthermore, businesses expect further improvements in the first quarter of 2024 and throughout the entire year.

Confidence among domestic market-oriented firms may decline slightly in the first quarter of 2024, but overall optimism is expected to improve throughout the year, consistent with the anticipated domestic economic recovery. Firms in sectors such as mining, retail, accommodation, transport, manufacturing, agriculture, and finance are driving this confidence. Export-oriented firms also show increased optimism in the first quarter of 2024 and for the entire year.

All sectors, except agriculture, which remains neutral, are optimistic about the first quarter of 2024 and the year ending in December 2024. This optimism is likely supported by government interventions to support economic activity, including the two-year Transitional National Development Plan (TNDP) and reforms aimed at improving the business environment. The anticipated improvement in profitability, goods and services exported, and business investment further contributes to the positive outlook.

Firms expect lending rates and borrowing volumes to increase in the 12-month period ending in December 2024. This increase in borrowing is consistent with the expected rise in investment, inventories, and goods and services exported. Firms anticipate that domestic economic performance will improve during this period. Domestic-oriented firms perceive access to credit from commercial banks in Botswana to be relaxed, while export-oriented firms prefer to borrow from South Africa.

During the fourth quarter of 2023, firms faced high cost pressures due to increased input costs, such as materials, utilities, and transport, resulting from supply constraints related to conflicts in Ukraine-Russia and Israel-Hamas. According to the survey report, the firms noted that cost pressures during the fourth quarter of 2023 were high, mainly attributable to increase in some input costs, such as materials, utilities, and transport arising from supply constraints related to the Ukraine-Russia and Israel-Hamas wars. “However, firms’ expectations about domestic inflation decreased, compared to the previous survey, and have remained within the Bank’s 3 – 6 percent objective range, averaging 5.4 percent for 2023 and 5.4 percent for 2024. This suggests that inflation expectations are well anchored, which is good for maintenance of price stability,” reads the survey report in part.

However, firms’ expectations about domestic inflation decreased compared to the previous survey, and inflation expectations remained within the Bank’s objective range of 3-6 percent. This suggests that inflation expectations are well anchored, which is beneficial for maintaining price stability.

In terms of challenges, most firms in the retail, accommodation, transport, manufacturing, construction, and finance sectors considered the exchange rate of the Pula to be unfavorable to their business operations. This is mainly because these firms import raw materials from South Africa and would prefer a stronger Pula against the South African rand. Additionally, firms in the retail, accommodation, transport, and mining sectors cited other challenges, including supply constraints from conflicts in Russia-Ukraine and Israel-Hamas, as well as new citizen economic empowerment policies that some firms considered unfavorable to foreign direct investment.

On the positive side, firms highlighted factors such as adequate water and electricity supply, a favorable political climate, an effective regulatory framework, the availability of skilled labor, and domestic and international demand as supportive to doing business in Botswana during the fourth quarter of 2023.

Overall, the business sector in Botswana is optimistic about the year 2024. The anticipated improvements in trading conditions, supported by government interventions and reforms, are expected to drive growth and profitability in various sectors. While challenges exist, businesses remain confident in the potential for economic recovery and expansion.

 

 

 

 

 

 

 

 

 

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