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Botswana Vision 2036 a pipeline dream – World Bank

Realising a ‘prosperity for all’ goal by 2036 could be another wild-goose chase for opulence like Vision 2016 if the latest publication by the World Bank is anything to go by.

The World Bank’s biennial “Poverty and Shared Prosperity Report; Piecing Together the Poverty Puzzle” has forecasted that by 2030 Sub-Sahara Africa including Botswana will still be struggling to wipe out poverty-this is six years before Botswana’s Vision of 2036 where this country is set to achieve the “Prosperity for All” status. According to economists, social commentators and politicians, Botswana failed to achieve its previous goal of Vision 2016-the World Bank paints a gloomy picture for the Vision 2036 goal.

World Bank indicates that by 2030, the world is expected to have wiped out extreme poverty except for Sub-Saharan Africa—where over 25 percent of the population will be living on less than $1.90 a day. Despite forecasting that extreme poverty would still be in double digits in Sub-Saharan Africa by 2030, the forecasts indicate that the world would need to grow at an unusual strong pace in order to meet the 3 percent target.

The World Bank also advises that the target would be met if all countries grow at an average annual rate of 6 percent and the income of the bottom 40 grows 2 percentage points faster than the average. Alternatively, the landmark could be reached if all countries grow at an average pace of 8 percent according to the World Bank.

The World Bank Group has set two goals for the world to achieve by 2030: To end extreme poverty by decreasing the percentage of people living on less than $1.90 a day to no more than 3 percent and to remote shared prosperity by fostering the income growth of the bottom 40 percent for every country. These goals coincides with Botswana’s Vision 2036 where Botswana is expected to achieve a high income economy and where they will be ‘prosperity for all.’

When adding his comment on the “Piecing Together the Poverty Puzzle,” the World Bank Group President Jim Yong Kim said: “Poverty is on the rise in several countries in Sub-Saharan Africa, as well as in fragile and conflict-affected states. In many countries, the bottom 40 percent of the population is getting left behind; in some countries, the living standard of the poorest 40 percent is actually declining. To reach our goal of bringing extreme poverty below 3 percent by 2030, the world’s poorest countries must grow at a rate that far surpasses their historical experience.

There is no room for complacency. We must intensify the effort to promote economic growth in the lagging countries and ensure that the poorest 40 percent of the population benefits more from economic progress.” A startling revelation from the latest World Bank publication is that 3.4 billion people still struggles to meet basic needs-living on less than $5.50 a day. The World Bank has concluded that nearly half the population lives on less than $5.50 a day.  

According to the World Bank, living on less than $3.20 per day reflects poverty lines in lower-middle-income countries, while $5.50 a day reflects standards in upper-middle-income countries. The World Bank has a commitment to achieve the goal of ending extreme poverty, defined as living on less than $1.90 a day, by 2030.  “Over 1.9 billion people, or 26.2 percent of the world’s population, were living on less than $3.20 per day in 2015. Close to 46 percent of the world’s population was living on less than $5.50 a day,” the World Bank said.

According to the 2015 Botswana Poverty Assessment report by World Bank, Batswana are living in extreme poverty and nearly half of them are children. Most of them remain poor or at risk for falling back into poverty, according to the World Bank report. On a high note, the 2015 Botswana Poverty Assessment also found that poverty declined from 30.6% to 19.4% between 2002-2010, particularly in rural areas, due to increased labour and agriculture-related incomes and more opportunities for the poor. This resulted in 180,000 people being lifted from poverty, 87 percent of which live in rural areas, the report says.

Other research from the World Economic Forum shows that Botswana is among the most unequal countries in the world, contributing to scepticism on attaining its Vision. In this year’s Global Competitiveness Report Botswana scored 60.5 in Income Gini. The Gini index of 0 represents perfect equality, while an index of 100 implies perfect inequality.  Currently Botswana is the fourth most unequal in the world after Haiti, Namibia and South Africa.

According to the World Bank, Botswana and other Sub-Saharan countries Africa now account for most of the world’s poor, and unlike most of the rest of the world the total number of poor there is increasing.  The World Bank says this is due to conflict and weak institutions, and a lack of success in channelling growth into poverty reduction.  The World Bank further states that extreme poverty is increasingly becoming a Sub-Saharan African problem.

African countries have struggled partly because of their high reliance on extractive industries that have weaker ties to the incomes of the poor, the prevalence of conflict, and their vulnerability to natural disasters such as droughts, according to World Bank. The 2016 Macro poverty outlook for Botswana by the World Bank highlighted this country’s risks and challenges sees Botswana as heavily dependent on commodity exports and public sector activity and will remain exposed to external shocks.

This country is highly reliant on extractive industries, especially diamond mining. “Therefore, a key risk facing the economic outlook arises from potentially slower than expected recovery of global demand for commodities including diamonds. For example, a slowdown in major economies, would further constrain diamond and other commodity production, with spill over effects across government revenues and exports. In the medium-term, structural reforms remain critical for managing volatility and sustainability risks such as reforms in the water and energy sectors, as well as policies that address labour market distortions,” said the World Bank report on Botswana.

Sub-Saharan countries like Botswana are also said to be grappled by weak institutions according to the World Bank. In Botswana’s case it should be weak parastatals or state owned companies. The 2018 Competitiveness Report released last week saw Botswana placed at 104 out of 140 countries in the category of ‘Reliability of Water Supply.’

This means Water Utilities Corporation is failing as a nation’s water supply. The utility also bears the mandate of providing safe water but the same Global Competitiveness Report finds that Botswana is susceptible to production of unsafe water, putting it on a worst rate of 102 on the ‘Exposure to unsafe drinking water’ mini index. 

In this mini index, Botswana is better than 38 countries when it comes to production of safe water. Another weak institution which could have caught the eye of the World Bank is the Botswana Power Corporation which is mostly the reason for this country scoring number 117 out of 140 countries in the mini-index of Electrification Rate according to the recent Global Competitiveness Report. The World Bank provides analysis and advice for developing countries like Botswana. It is a source of financial and technical assistance to developing countries around the world in order to work on poverty eradication.

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Mowana Mine to open, pay employees millions

18th January 2022
Mowana Mine

Mowana Copper Mine in Dukwi will finally pay its former employees a total amount of P23, 789, 984.00 end of this month. For over three years Mowana Copper Mine has been under judicial management. Updating members, Botswana Mine Workers Union (BMWU) Executive Secretary Kitso Phiri this week said the High Court issued an order for the implementation of the compromise scheme of December 9, 2021 and this was to be done within 30 days after court order.

“Therefore payment of benefits under the scheme including those owed to Messina Copper Botswana employees should be effected sometime in January latest end of January 2022,” Kitso said. Kitso also explained that cash settlement will be 30 percent of the total Messina Copper Botswana estate and negotiated estate is $3,233,000 (about P35, 563,000).

Messina Copper was placed under liquidation and was thereafter acquired by Leboam Holdings to operate Mowana Mine. Leboam Holdings struck a deal with the Messina Copper’s liquidator who became a shareholder of Leboam Holdings. Leboam Holdings could not service its debts and its creditors placed it under provisional judicial management on December 18, 2018 and in judicial management on February 28, 2019.

A new company Max Power expressed interest to acquire the mining operations. It offered to take over the Mowana Mine from Leboam Holdings, however, the company had to pay the debts of Leboam including monies owed to Messina Copper, being employees benefits and other debts owed to other creditors.

The monies, were agreed to be paid through a scheme of compromise proposed by Max Power, being a negotiated payment schedule, which was subject to the financial ability of the new owners. “On December 9, 2021, Messina Copper liquidator, called a meeting of creditors, which the BMWU on behalf of its members (former Messina Copper employees) attended, to seek mandate from creditors to proceed with a proposed settlement for Messina Copper on the scheme of compromise. It is important to note that employee benefits are regarded as preferential credit, meaning once a scheme is approved they are paid first.”

Negotiated estate is P35, 563,000

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Councilors’ benefits debacle-savingram reveals detail

18th January 2022

A savingram the Ministry of Local Government and Rural Development sent to Town Clerks and Council Secretaries explaining why councilors across the country should not have access to their terminal benefits before end of their term has been revealed.

The contents of the savingram came out in the wake of a war of words between counselors and the Ministry of Local Government and Rural Development. The councilors through the Botswana Association of Local Authorities (BALA) accuse the Ministry of refusing to allow them to have access to their terminal benefits before end of their term.

This has since been denied by the Ministry.  In the savingram to town councils and council secretaries across the country, Permanent Secretary in the Ministry of Local Government and Rural Development Molefi Keaja states that, “Kindly be advised that the terminal benefits budget is made during the final year of term of office for Honorable Councilors.”  Keaja reminded town clerks and council secretaries that, “The nominal budget Councils make each and every financial year is to cater for events where a Councilor’s term of office ends before the statutory time due to death, resignation or any other reason.”

The savingram also goes into detail about why the government had in the past allowed councilors to have access to their terminal benefits before the end of their term.  “Regarding the special dispensation made in the 2014-2019, it should be noted that the advance was granted because at that time there was an approved budget for terminal benefits during the financial year,” explained Keaja.  He added that, “Town Clerks/Council Secretaries made discretions depending on the liquidity position of Councils which attracted a lot of audit queries.”

Keaja also revealed that councils across the country were struggling financially and therefore if they were to grant councilors access to their terminal benefits, this could leave their in a dire financial situation.  Given the fact that Local Authorities currently have cash flow problems and budgetary constraints, it is not advisable to grant terminal benefits advance as it would only serve to compound the liquidity problems of councils.

It is understood that the Ministry was inundated with calls from some Councils as they sought clarification regarding access to their terminal benefits. The Ministry fears that should councils pay out the terminal benefits this would affect their coffers as the government spends a lot on councilors salaries.

Reports show that apart from elected councilors, the government spends at least P6, 577, 746, 00 on nominated councilors across the country as their monthly salaries. Former Assistant Minister of Local Government and Rural Development, Botlogile Tshireletso once told Parliament that in total there are 113 nominated councilors and their salaries per a year add up to P78, 933,16.00. She added that their projected gratuity is P9, 866,646.00.

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Households spending to drive economic recovery

17th January 2022

A surge in consumer spending is expected to be a key driver of Botswana’s economic recovery, according to recent projections by Fitch Solutions. Fitch Solutions said it forecasts household spending in Botswana to grow by a real rate of 5.9% in 2022.

The bullish Fitch Solutions noted that “This is a considerable deceleration from 9.4% growth estimated in 2021, it comes mainly from the base effects of the contraction of 2.5% recorded in 2020,” adding that, “We project total household spending (in real terms) to reach BWP59.9bn (USD8.8bn) in 2022, increasing from BWP56.5bn (USD8.3bn) in 2021.”  According to Fitch Solutions, this is higher than the pre-Covid-19 total household spending (in real terms) of P53.0 billion (USD7.8bn) in 2019 and it indicates a full recovery in consumer spending.

“We forecast real household spending to grow by 5.9% in 2022, decelerating from the estimated growth of 9.4% in 2021. We note that the Covid-19 pandemic and the related restrictions on economic activity resulted in real household spending contracting by 2.5% in 2020, creating a lower base for spending to grow from in 2021 and 2022,” Fitch Solutions says.

Total household spending (in real terms), the agency says, will increase in 2022 when compared to 2021. In 2021 and 2022, total household spending (in real terms) will be above the pre-Covid-19 levels in 2019, indicating a full recovery in consumer spending, says Fitch Solutions.  It says as of December 6 2021 (latest data available), 38.4% of people in Botswana have received at least one vaccine dose, while this is relatively low it is higher than Africa average of 11.3%.

“The emergence of new Covid-19 variants such as Omicron, which was first detected in the country in November 2021, poses a downside risk to our outlook for consumer spending, particularly as a large proportion of the country’s population is unvaccinated and this could result in stricter measures being implemented once again,” says Fitch Solutions.

Growth will ease in 2022, Fitch Solution says. “Our forecast for an improvement in consumer spending in Botswana in 2022 is in line with our Country Risk team’s forecast that the economy will grow by a real rate of 5.3% over 2022, from an estimated 12.5% growth in 2021 as the low base effects from 2020 dissipate,” it says.

Fitch Solutions notes that “Our Country Risk team expects private consumption to be the main driver of Botswana’s economic growth in 2022, as disposable incomes and the labour market continue to recover from the impacts of the Covid-19 pandemic.”
It says Botswana’s tourism sector has been negatively impacted by the Covid-19 pandemic and the related travel restrictions.

According to Fitch Solutions, “The emergence of the Omicron variant, which was first detected in November 2021, has resulted in travel bans being implemented on Southern African countries such as South Africa, Botswana, Lesotho, Namibia, Zimbabwe and Eswatini. This will further delay the recovery of Botswana’s tourism sector in 2021 and early 2022.”  Fitch Solutions, therefore, forecasts Botswana’s tourist arrivals to grow by 81.2% in 2022, from an estimated contraction of 40.3% in 2021.

It notes that the 72.4% contraction in 2020 has created a low base for tourist arrivals to grow from.  “The rollout of vaccines in South Africa and its key source markets will aid the recovery of the tourism sector over the coming months and this bodes well for the employment and incomes of people employed in the hospitality industry, particularly restaurants and hotels as well as recreation and culture businesses,” the report says.

Fitch Solutions further notes that with economies reopening, consumers are demanding products that they had little access to over the previous year. However, manufacturers are facing several problems.  It says supply chain issues and bottlenecks are resulting in consumer goods shortages, feeding through into supply-side inflation.  Fitch Solutions believes the global semiconductor shortage will continue into 2022, putting the pressure on the supply of several consumer goods.

It says the spread of the Delta variant is upending factory production in Asia, disrupting shipping and posing more shocks to the world economy. Similarly, manufacturers are facing shortages of key components and higher raw materials costs, the report says adding that while this is somewhat restricted to consumer goods, there is a high risk that this feeds through into more consumer services over the 2022 year.

“Our global view for a notable recovery in consumer spending relies on the ability of authorities to vaccinate a large enough proportion of their populations and thereby experience a notable drop in Covid-19 infections and a decline in hospitalisation rates,” says Fitch Solutions.
Both these factors, it says, will lead to governments gradually lifting restrictions, which will boost consumer confidence and retail sales.

“As of December 6 2021, 38.4% of people in Botswana have received at least one vaccine dose. While this is low, it is higher than the Africa average of 11.3%. The vaccines being administered in Botswana include Pfizer-BioNTech, Sinovac and Johnson & Johnson. We believe that a successful vaccine rollout will aid the country’s consumer spending recovery,” says Fitch Solutions.  Therefore, the agency says, “Our forecasts account for risks that are highly likely to play out in 2022, including the easing of government support. However, if other risks start to play out, this may lead to forecast revisions.”

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