Botswana has once again earned an unfavourable ranking in the Doing Business Report 2019 published this week, World Bank Report.
Just a fortnight ago, Botswana fell down the pecking order in the annual Global Competitiveness Report 2018, published by the World Economic Forum, from 85th to 90th out of 140 countries. Botswana has also fallen in the Doing Business ranking, from 71 in the 2017 report, and 81 in 2018 and 86 in the latest report, out of 190 countries. Doing Business captures several important dimensions of the regulatory environment as it applies to local firms.
Doing Business 2019 measures the processes for business incorporation, getting a building permit, obtaining an electricity connection, transferring property, getting access to credit, protecting minority investors, paying taxes, engaging in international trade, enforcing contracts and resolving insolvency. Doing Business collects and publishes data on labour market regulation with a focus on the flexibility of employment regulation as well as several aspects of job quality
Doing Business captured a record 314 regulatory reforms between June 2, 2017, and May 1, 2018, based on the average of each economy’s distance to frontier scores for the 10 topics included in the aggregate ranking. This therefore means, the report does capture business reforms which took place in Botswana after President Mokgweetsi Masisi took office in April 2018, though few or insignificant to make a change in overall ranking.
The report indicated that Botswana made dealing with construction permits easier by streamlining the inspection system through allowing the use of in-house or third-party engineers. In the 2018 report, it was noted that Botswana made registering property more difficult by reducing the efficiency of its Registrar of Deeds as it implements the computerization of manual records.
Doing Business Report gave Botswana a positive in 2018 remark in paying taxes in Botswana, indicating that government made paying taxes easier by establishing an online system for filing and paying taxes but that did not help the country to improve its ranks this year. It is also highlighted in the previous report that when it comes to trading across borders, Botswana made it easier by implementing a new automated customs data management system.
In the 2019 report, at least six countries are placed ahead of Botswana in overall ranking, namely; Mauritius (20), Rwanda (29), Morocco (60), Kenya (61), Tunis (80) and South Africa (80) being ranked ahead of Botswana. Four economies—Côte d’Ivoire, Kenya, Rwanda and Togo—Sub-Saharan Africa is the most represented region in the Doing Business 2019 list of 10 top improvers.
The report reveals that digitisation was a common theme among the business regulatory reforms recorded by these four economies. Côte d’Ivoire and Togo introduced online systems for filing corporate income tax and value added tax returns, while Kenya simplified the process of providing value added tax information by enhancing its existing online system, iTax. Rwanda streamlined the process of starting a business by replacing its electronic billing machine system with new software that allows taxpayers to issue value added tax invoices.
The free software, which is provided by the office of the Revenue Authority, allows taxpayers to issue value added tax invoices from any printer, eliminating the previous requirement to purchase and set up a special billing machine. Togo made it faster to check company name availability by fully operationalizing its online one-stop shop. Digital solutions were also implemented in the area of property registration. Togo developed an ambitious digitization project for modernizing its land administration system and, by February 2018, 97.2% of all land titles in Lomé had been scanned.
In Kenya, the Ministry of Lands and Physical Planning implemented an online land rent financial management system on the eCitizen portal, enabling property owners to determine the amount owed in land rent, make an online payment and obtain the land rates clearance certificate digitally. Rwanda’s Land Management and Use Authority launched a new website, which now includes statistics regarding the number of land disputes registered in 2017 for all judiciary districts.
The National Agricultural Export Development Board of Rwanda also introduced an online system, allowing certificates of origin to be issued electronically. Doing Business measures aspects of business regulation affecting domestic small and medium-size firms defined based on standardized case scenarios and located in the largest business city of business.
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”