Accountant General Emma Peloetletse revealed that the Ministry of Finance and Development Planning bypassed Parliament when sourcing a P1 billion loan for De Beers during the recessionary phase which nearly collapsed the mining sector few years ago.
Peloetletse said this before the Public Accounts Committee (PAC) after Bonnington South legislator Ndaba Gaolatlhe asked about the process used to facilitate the loan. The accountant general revealed that due process was not followed. “The honest truth us that the De Beers wanted stimulus but did not follow the right process to get it. The right process should have been going to Parliament. It (loan) should have been ratified or approved by Parliament, but that process was not followed,” said Peloetletse.
Gaolatlhe commended the accountant general of taking the blame after doing something unprocedural, saying this should not be a norm or a trend. He said this was not the first time something like this happened in government, citing Water Utilities Corporation as an example of what “caused a discomfort at the time.
Gaolatlhe also asked the Ministry of Finance and Development Planning its intentions on ints investment on De Beers given the advent of artificial diamond. The legislator said at this time of Botswana still assessing its partnership with De Beers, it is worth knowing about the rising phenomenon of synthetic diamonds.
The rise of artificial diamonds is believed to be a major threat on natural diamonds and some fear economies which are dependent on diamond production like Botswana will suffer in the long run when the world stops digging for diamonds from the ground and start manufacturing them in laboratories. The biggest diamond producer in the world, a partner to Botswana in diamond production and sales, has announced in the middle of this that it is also venturing heavily on artificial diamonds after taking years raising crusades to campaign against man made diamonds.
“Even though I do not intend to speak for the ministry of minerals I can just say we are aware of the competitive stage that we are in. It should be noted that our investment on De Beers also cuts across artificial diamonds. However this does not take away the fact that what we produce is original. We should cherish our original diamonds. What is original is original,” said Peloetletse.
Also at the same PAC when the finance ministry’s accounts were being perused, a lot of irregularities were picked up and members of parliament took turns to pour scorns on this country’s purse custodian. Specially Elected MP Mephato Reatile found a disturbing occurrence when looking into revenue results as according to him the treasury’s planning and forecasting leaves a lot to desire.
It was disappointing for Reatile for the ministry whose responsibility is to take care of the public purse to fail to predict economic climate by underestimating what it is going to collect. For example, Reatile said, the ministry would budget P1 million only to receive P28 million. According to Reatile, this is what the ministry discourages but practices, a practice of financial hypocrisy.
According to the Mp, for the estimated P848 million budgeted on Bank of Botswana, P2.8 billion was collected and this shows a huge discrepancy by the treasury. This prompted apologies and admission of guilty on the part of secretary for Development and Budget in the Ministry of Finance and Economic Development Grace Muzila who said “we did not take note. We missed it (the discrepancy).”
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”