In a bid to unearth communities’ economic potential as well as push citizen economic empowerment, the Ministry of Investment Trade & Industry (MITI) has unleashed a strategy to transform cooperative societies as a key vehicle in the eradication of poverty and job creation.
MITI through its Department for Co-operative Development continues to implement the Co-operative Transformation Strategy, with a view to revamp and resuscitate Co-operatives to become competitive, profitable, viable and sustainable business enterprise. There are currently 271 Registered Co-operative Societies (financial and non-financial) across the Country employing over 130 people.
The Minister of Investment Trade & Industry, Bogolo Kenewendo underscored the importance of cooperatives societies in her ministry‘s mandate when addressing a series of Kgotla Meetings in Ngamiland recently. She said her ministry continues to develop and implement initiatives geared towards Co-operative Growth, capacity building, diversification and sustainability.
“The Co-operative movement, globally and locally have been urged to commit in the fulfillment of the Millennium Development Goal number one of eradicating extreme poverty and hunger by focusing on revival of the agricultural Co-operatives,” she said. Generally cooperatives have been the anchor of community development in Botswana even at pre-independence transition. During the post colonial epoch, cooperatives and community syndicate business models became the pillar of Botswana’s economic growth especially in the areas of Agriculture.
However as modern means of economic survival took shape the concept of cooperatives hit diminishing trends. It is only of late that the government of Botswana decided to take deliberate action towards revitalization cooperative societies and community business models into significant economic role players. Early this year local cooperative societies began a process to build a centralized digital database of their operations to reduce setbacks and financial losses.
The initial processes of the system development, dubbed, “All Cooperatives Management Information Solution (CoopMIS),” are already underway with the project expected to start soon. Kenewendo said that cooperatives needed to embrace good governance, business acumen mentality and robust winning strategies for their success. “The cooperative sector shows growth, not only in number, but in value as well. This is demonstrated by the level of investment, employment created and the benefits to the membership,” she said
Cooperative movement around the world is increasingly being promoted by international development organizations as a means to enhancing participatory and inclusive development. This is a result of the participatory nature of cooperatives that embrace communities’ investment that promotes multiple growth opportunities. Besides providing means for economic growth, cooperatives also provide an opportunity for empowerment of local communities, socially and economically. Financial cooperatives such as Savings and Credit Co-operative Society (SACCOS) are also very pivotal in today‘s economic growth and diversification quest.
Observers note that as Botswana seeks to divert from mineral sector dependence and develop other economic sectors for sustainable growth and consequently realize improved lives for its citizenry especially the local communities and furfural settlers financial cooperatives were key in that quest .
The entire financial sector plays a crucial role realizing this, specifically in resource mobilization and raising capital for investment and development of other sectors such as property & real estate, agriculture, manufacturing, tourism and hospitality. Apart from the banking sector which is fragile and vulnerable to economic uncertainties the financial sector is significantly boosted by the pension funds, capital and asserts management industry with Botswana’s largest fund, BPOPF playing a major role and taking the lead in wealth accumulation.
THE SACCOS MODEL
Of recent Savings and Credit Co-operative Society (SACCOS) movement has also been establishing itself as significant segment of the non-banking financial sector. SACCOS is a self-help and self-reliant democratically member-driven financial co-operative, owned, governed and managed by members with a common bond or common economic need.
It is a very integral wealth accumulation tool that can boost the financial sector in funding developmental undertakings like infrastructure, capacity building & human resources development, research & innovation and consequently birth economic growth as well as the much needed diversification.
Mr Boniface Tsheko Deputy Director in the Department of Co-operative Development under the Ministry of Investment Trade & Industry (MITI) describes SACCOS as a non banking financial institutions set up by people who want to solve a common problem for themselves and is managed by themselves.
This may include people working for the same employer, belonging to the same labour union, social fraternity, or living in the same community. The SADC region has over 6 000 registered SACCOS with a total membership of 1.6 million and an asset base of over US$823 million.
Of this, the contribution of Botswana to the stated statistics is 64 registered SACCOS while membership is over 25 000 and an asset base of over US$9 million. SACCO’s members agree to pool their resources together and grant loans to one another at reasonable rates.
This model allows members to benefit from higher returns on savings, lower interest rates on loans and low bank and finance charges on average. SACCOS helps members create opportunities such as starting small businesses, growing farms, building family homes and educating their children and other domestic needs, without unending state of dependency.
Under informal and non registered operations ordinary Batswana gather up funds and lend money amongst themselves on interest basis to expand the fund and later split after an agreed period of time. This financial syndicate model popularly known as ‘’Motshelo’’ is unregulated but gathers Batswana especially low income earners significant capital for their household requisite and small business. Motshelo has established itself as a form of cooperative financial platform key to resources and funds mobilization for Batswana.
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”