Connect with us
Advertisement

Special Funds hold over P8 billion

As of last Friday, all of government’s 34 Special Funds stood at a total of 8 billion pula, Minister of Finance and Economic Development, Kenneth Matambo revealed to the media this Tuesday at the ministry headquarters.


The briefing followed the minister’s presenting to parliament progress of the funds last week Friday. Matambo shared that since his ministry had now taken charge of all government special funds, his ministry would facilitate the transfer of the funds into the Government Remittances Account held at the Bank of Botswana immediately.  
 

“We have began the process of transferring all these funds into into the Government Remittances Account held at the Bank of Botswana,  this is to ensure that government closely monitors the use of such funds thereby ensuring compliance with both the Public Finance Management Act and the Fund Order,” he said.
 

Matambo also said that following approval by cabinet, his ministry as highlighted in parliament on Friday will review all the 34 special funds, “This is a key process that will inform many of decisions to make afterwards such as possible abolishment of some funds, but the interest here is to improve their management and administration, and we anticipate that the process of an intensive review be completed in 3-4 months.”


On Friday Minister Matambo told lawmakers that as the overall custodian of the country's public finances, his ministry was concerned with the management of several of the special funds citing non-compliance issues such as use of funds for unintended purpose as one of the key concerns.


“From now on and as of after the review we will be very effective in ensuring that these funds which are resourced by public monies will not be diverted to what it wasn’t established for, we will be the ones making payments and authorizing any transaction so we will screen prior to issuing out this monies for any financial requisite,” he said.


A unit has been established under the office of the Accountant General to ensure that there is compliance with the Public Finance Management Act provisions as well as to ensure consistency with domestic anti-money laundering and counter financing of terrorism laws and standards.


Matambo noted that where the review reveals non-compliance with the statute establishing the special fund or where there was proof of gross mismanagement, the ministry would exercise its powers and re-designate another public officer to take over the administration of the fund.


The establishment of special funds by government is guided by Section 117 of the Constitution of Botswana and Section 37(1) of the Public Finance Management Act of 2011 which states that “any fund of public revenues established by any written law for some specific purpose or any trust fund held by government and any fund created by the minister in exercise of powers conferred upon him by Section 38”. From this definition, three types of Special Funds can be created: (i) through any written law; (ii) by deed of trust; and (iii) through a Fund Order.”


Regardless of the type, collectively, all Special Funds are implemented through a Statutory Instrument known as a Fund Order. Among the key components of a Fund Order are: (i) purpose for which the Fund is established: (ii) sources of funding for the Fund; (iii) the accounting officer for the Fund, who is responsible for its administration; and

(iv) investment of surplus funds. With regards to the latter i.e. investment of surplus funds, Section 40 (5) of the Public Finance Management Act states that “…any moneys held in a Special Fund which are not required for immediate use may be invested in accordance with the objects of such Special Fund as the Accountant General may direct.”
 

Government has learnt hard through the National Petroleum Fund (NPF) scandal. The matter, which is now before the courts is regarded as the biggest money laundering scandal to have hit this country.
 

Early this year, when responding to the 2017/18 Budget Speech while still a back bencher Specially Elected Member of Parliament, Bogolo Kenewendo reiterated that The NPF case exposed cracks in the public finance management system. “Though these funds such as the NPF are by law, they remain subject to very little scrutiny,” she said.


The Public Accounts Committee (PAC) also recently scrutinized these special funds and reported that some appeared in the Auditor General’s report but were not in the government accounts, while some of the special funds did not appear in both books. The Vocational Training Levy was cited by PAC as one fund whose management and administration did not reconcile with governance and financial management principles.

Continue Reading

Business

Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020
Botswana-on-high-alert-as-AML-joins-Covid-19-to-plague-mankind-

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.

This content is locked

Login To Unlock The Content!

Continue Reading

Business

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.

This content is locked

Login To Unlock The Content!

Continue Reading

Business

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”

Continue Reading
Do NOT follow this link or you will be banned from the site!