Rating agency Moody's hawk-eyed prediction sees Botswana going at a snail’s pace in fiscal consolidation efforts and this could increase policy uncertainty ahead of the 2019 general elections. “Ahead of elections in Botswana, the authorities now envisage a more gradual pace of fiscal consolidation…” the rating agency said in an outlook this week.
Botswana is bracing for national elections in eight months. According to Moody’s, upcoming elections could increase policy uncertainty and delay fiscal consolidation efforts in countries like Botswana who are having elections this year. Elections will take place in a number of Sub Saharan Africa countries, including South Africa, Nigeria, Senegal, Botswana, Namibia, Cameroon and Mozambique in 2019.
Moody’s is of the view that some of the factors that are constraint to credit quality is political ranging from domestic civil unrest, conflicts, succession risk, or simply from policy unpredictability and their credit implications vary across the region. The rating agency also believes that political risk is an ever present credit constraint in Sub-Saharan Africa. However, Moody’s expects limited election-related policy uncertainty in Botswana, Namibia, Senegal and Ghana, “given their track records of political stability.”
“Overall, we expect the pace of fiscal adjustments to remain gradual at best as growth implications, political considerations and budget rigidities complicate consolidation efforts in some countries. (eSwatini, Namibia, Kenya), while in others, spending pressures ahead of elections may delay fiscal consolidation plans like in Botswana,” says Moody’s outlook. Moody’s also expects fiscal balances to improve or stabilize in most countries, with the median fiscal deficit of our rated Sub-Saharan Africa sovereigns narrowing to 3.1 percent of GDP in 2019 from an estimated 3.7 percent in 2018.
The rating agency also states that commodity exporters will achieve the largest deficit reduction in 2019 while some fiscal deterioration will occur across non-resource rich countries. Moody’s outlook for sovereign creditworthiness in 2019 in Sub-Saharan Africa remains negative overall, reflecting the rating agency expectations for the fundamental credit conditions that will drive sovereign credit over the next 12-18 months.
The negative outlook reflects still present credit challenges stemming from fiscal and external vulnerabilities amid tightening global liquidity conditions and intensifying global trade tensions, despite gradually improving growth prospects, according to Moody’s. Despite predicting that spending pressures ahead of elections may delay fiscal consolidation plans, Moody’s further stated that “we expect government debt ratios to deteriorate only marginally or stabilize in 2019, reflecting ongoing fiscal consolidation and the positive impact of higher growth rates on the denominator of debt-to-GDP.”
Moody’s Assistant Vice President Daniela Re Fraschini said: “Our negative outlook for sovereigns in Sub-Saharan Africa is driven by persistent credit challenges related to their ongoing fiscal and external vulnerabilities. That said, we expect credit pressures to ease relative to previous years, despite a more challenging external environment, as credit profiles display some resilience at their lower rating levels."
In this elections year, public servants expect government to increase their salaries and the sitting President Mokgweetsi Masisi soon after becoming a state head last year rode in that promise, experts and observers believe this will increase spending pressures ahead of this year’s general elections. In his maiden State of the Nation Address Masisi hinted that he is going to increase public servants salaries.
"I wish to inform this August House that Government has appointed a consultant (PEMANDU Associates SDN.BHD of Malaysia) to, among others, review the current Public Service remuneration system in terms of salaries, allowances and benefits. The consultancy work is expected to be concluded before the end of December this year. Once the PEMANDU report has been finalized, Government will engage Public Sector Unions on the recommendations thereto,” said Masisi who is expected to heed the political pressure by increasing public servants salaries.
Last year Masisi also appointed a commission mandated to review salaries of senior government officials and politicians. This commission is mandated to inquire into salaries, Conditions of Service and Other Entitlement of the President, Vice President, The Speaker of the National Assembly, Ministers, Deputy Speaker, Assistant Ministers, Leader of Opposition, Members of Parliament, Chief Justice, President of the Court of Appeal, Justices of Appeal, Judges of the High Court, Chairman of Ntlo ya Dikgosi, Members of Ntlo ya Dikgosi, Chairpersons of District Councils, Mayors, their Deputies, Chairpersons of Sub-Councils and their Deputies and Councillors. Masisi also said to the commission, "don't be intimated, feel free to recommend salary deductions if you feel so.”
“The Commission is expected to submit its recommendations in December this year (2018). It is the wish of Government for any recommendations agreed upon to be budgeted for and effected on 1st April, 2019,” said Masisi in his State of the Nation Address. Unemployment remains Masisi’s government’s biggest task towards this year’s elections and creation of jobs has been perpetually high on the incumbent president’s campaign card. Unemployment rate in Botswana is estimated to be around 19 percent.
Masisi’s administration has come with a National Employment Policy (NEP) which will come with implementable solutions to address the unemployment problem facing the country. “The goal of the NEP 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.
To develop the NEP, Government obtained financial and technical support from the World Bank,” said Masisi in his first State of the Nation Address. Masisi added that the Draft National Employment Policy for Botswana is expected to be delivered by March, 2019, seven month before the general election in October 2019.
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The recent study on youth entrepreneurship in Botswana has identified difficult access to funding, land, machinery, lack of entrepreneurial mindset and proper training as serious challenges that continue to hamper youth entrepreneurship development in this country.
The study conducted by Alliance for African Partnership (AAP) in collaboration with University of Botswana has confirmed that despite the government and private sector multi-billion pula entrepreneurship development initiatives, many young people in Botswana continue to fail to grow their businesses into sustainable and successful companies that can help reduce unemployment.
University of Botswana researchers Gaofetege Ganamotse and Rudolph Boy who compiled findings in the 2022 study report for Botswana stated that as part of the study interviews were conducted with successful youth entrepreneurs to understand their critical success factors.
According to the researchers other participants were community leaders, business mentors, Ministry of Trade and Industry, Ministry of Youth, Gender, Sport and Culture, financial institutions, higher education institutions, non-governmental institutions, policymakers, private organizations, and support structures such as legal and technical experts and accountants who were interviewed to understand how they facilitate successful youth entrepreneurship.
The researchers said they found that although Botswana government is perceived as the most supportive to businesses when compared to other governments in sub-Saharan Africa, youth entrepreneurs still face challenges when accessing government funding. “Several finance-related challenges were identified by youth entrepreneurs. Some respondents lamented the lack of access to start-up finance, whereas others mentioned lack of access to infrastructure.”
The researchers stated that in Botswana entrepreneurship is not yet perceived as a field or career of choice by many youth “Participants in the study emphasized that the many youth are more of necessity entrepreneurs, seeing business venturing as a “fall back. Other facilitators mentioned that some youth do not display creativity, mind-blowing innovative solutions, and business management skills. Some youth entrepreneurs like to take shortcuts like selling sweets or muffins.”
According to the researchers, some of the youth do not display perseverance when they are faced with adversity in business. “Young people lack of an entrepreneurial mindset is a common challenge among youth in business. Some have a mindset focused on free services, handouts, and rapid gains. They want overnight success. As such, they give up easily when faced with challenges. On the other hand, some participants argue that they may opt for quick wins because they do not have access to any land, machinery, offices, and vehicles.”
The researchers stated that most youth involved in business ventures do not have the necessary training or skills to maintain a business. “Poor financial management has also been cited as one of the challenges for youth entrepreneurs, such as using profit for personal reasons rather than investing in the business. Also some are not being able to separate their livelihood from their businesses.
Lastly, youth entrepreneurs reported a lack of experience as one of the challenges. For example, the experience of running a business with projections, sticking to the projections, having an accounting system, maintaining a clean and clear billing system, and sound administration system.”
According to the researchers, the participants in the study emphasized that there is fragmentation within the entrepreneurial ecosystem, whereby there is replication of business activities without any differentiation. “There is no integration of the ecosystem players. As such, they end up with duplicate programs targeting the same objectives. The financial sector recommended that there is a need for an intermediary body that will bring all the ecosystem actors together and serve as a “one-stop shop” for entrepreneurs and build mentorship programs that accommodate the business lifecycle from inception to growth.”
Botswana Housing Corporation (BHC) is said to have recorded an operating surplus of P61 Million, an improvement compared to the previous year. The housing, office and other building needs giant met with stakeholders recently to share how the business has been.
The P61 million is a significant increase against the P6 million operating loss realized in the prior year. Profit before income tax also increased significantly from P2 million in the prior year to P72 million which resulted in an overall increase in surplus after tax from P1 million prior year to P64 million for the year under review.
Chief of Finance Officer, Diratsagae Kgamanyane disclosed; “This growth in surplus was driven mainly by rental revenue that increased by 15% from P209 million to P240 million and reduction in expenditure from P272 million to P214 million on the back of cost containment.” He further stated that sales of high margin investment properties also contributed significantly to the growth in surplus as well as impairment reversals on receivables amounting to P25 million.
It is said that the Corporation recorded a total revenue of P702 million, an 8% decrease when compared to the P760 million recorded in the prior year. “Sales revenue which is one of the major revenue streams returned impressive margins, contributing to the overall growth in the gross margin,” added Kgamanyane.
He further stated professional fees revenue line declined significantly by 64% to P5 million from P14 million in the prior year which attributed to suspension of planned projects by their clients due to Covid-19 pandemic. “Facilities Management revenue decreased by P 24 million from P69 million recorded in prior year to P45 million due to reduction in projects,” Kgamanyane said.
The Corporation’s strength is on its investment properties portfolio that stood at P1.4 billion at the end of the reporting period. “The Corporation continues its strategy to diversify revenue streams despite both facilities management income and professional fees being challenged by the prevailing economic conditions that have seen its major clients curtailing spending,” added the CEO.
On the one hand, the Corporation’s Strategic Performance which intended to build 12 300 houses by 2023 has so far managed to build 4 830 houses under their SHHA funding scheme, 1 240 houses for commercial or external use which includes use by government and 1 970 houses to rent to individuals.
BHC Acting CEO Pascaline Sefawe noted that; BHC’s planned projects are said to include building 336 flat units in Gaborone Block 7 at approximately P224 million, 100 units in Maun at approximately P78 million, 13 units in Phakalane at approximately P26 million, 212 units in Kazungula at approximately P160 million, 96 units at approximately P42 million in Francistown and 84 units at approximately P61 million in Letlhakane. Emphasing; “People tend to accuse us of only building houses in Gaborone, so here we are, including other areas in our planned projects.”