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WEF report highlights Masisi’s uphill battle

The latest Global Competitiveness Report by the World Economic Forum (WEF) burst President Dr Mokgweetsi Masisi’s bubble with regards to his self assured perpetual talk of “harnessing Botswana’s competitiveness,” an early blow for him particularly looking at his task to lead the economy towards 2036.

A poor rating in reliability of water supply in Botswana where this country is pegged at number 104 out of 140 countries is evidently a sorry state of affairs. Botswana has proved to have poor water infrastructure with the constant failure of the North South Carrier project.
This poor water infrastructure was also complimented by prolonged dry spells in rainfall emanating from poor climatic conditions hence the running dry of capital city feeding dam, the Gaborone dam.

Water problems could not escape the other WEF mini-index which highlights thatBotswana is susceptible to production of unsafe water. This country is placed on number 102, meaning that Botswana is better than only 38 countries in terms of production of safe water.
In the past superpower USA has called on its citizen in Botswana to reject the water in this country as it is contaminated.Access to water and sanitation are recognized by the United Nations as human rights, reflecting the fundamental nature of these basics in every person’s life.

Water services is under the custody of the embattled Water Utilities Corporation (WUC) which has been running at a loss for years and been accused for mismanagement and misappropriation of funds. Masisi takes a country whose current electrification rate is poor, which places Botswana at number 117 out of 140. In the mini-index of electric power transmission and distribution losses Botswana is at position 80 meaning a failure on the side of another struggling parastatal, Botswana Power Corporation.

Botswana fares poorly on the degree of integration of Botswana within the global air transport network as this country is number 127 in the airport connectivity index. This means this country’s airports are only better than 13 countries in the WEF.  As proved by the current Parliamentary Committee on Statutory Bodies and State Enterprises sittings which has exposed corruption, misappropriation and mismanagement of funds, Masisi has a mammoth task of cleaning almost all the state owned enterprises or parastatals.

Despite Ministry of Finance and Development Planning’s initiative of hosting annual budget Pitsos, the WEF is not convinced about transparency of Botswana’s budgetary system. According to the Global Competitiveness Report, Botswana is below par in terms of the budget transparency index which looks at the extent to which a country or government publishes data related to budget and spending. After taking oath in April this year, Masisi has always tried to make his government transparent and accountable, but WEF is not buying the talk yet.

The Global Competitiveness Report also shows Botswana to be behind in digital migration despite this country’s efforts to be an innovation hub. In digital skills among population index Botswana scored number 100 out of 140 countries. This gloomy picture was also complimented by bad ratings in the ease of finding skilled employees index where Botswana is number 92.

Last few weeks universities were graduating thousands of students out to the employment market and they may contribute to the WEF findings and rendered as unready for the labour market. Despite government having difficulty in finding ready-made skilled people, Botswana is seen to be reluctant in hiring foreigners. In the index of Ease of hiring foreign labour Botswana is one of the ten worst performers, scoring the one of the most dismal score in all the mini-index of 134 out of 140 countries.

When it comes to hiring foreigners, Botswana is better than only six countries. Botswana has been said to be having unfriendly immigration laws and had high numbers of prohibited immigrants, something which Masisi has promised to work on. Visa and work permits application were said to be a tough terrain for foreigners, Masisi said he is working on making the laws friendly and liberal. The WEF is the International Organization for Public-Private Cooperation and engages the foremost political, business and other leaders of society to shape global, regional and industry agendas.

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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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