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Jobs, sales to shrink as plastic ban looms

Hundreds of jobs will be lost this year as the plastic industry prepares for the total ban of plastic bags in just four months’ time – already plastic bag distributors and manufactures are counting their losses in advance.

A young man who preferred anonymity when being engaged by this publication on Thursday morning is not very certain if he will still be on the job and most importantly be able to go for Christmas a happy man as the ban will be effected in November this year, a month before the beginning of the festive season. He fears for his job and that of his eight colleagues in a giant plastic manufacturing company in Gaborone’s industrial area. This is despite their Indian bosses having told them that they will ensure that their jobs are safe.

“We do not trust them. They have long told us that government will be banning plastics and that will affect production and sales. We know we are doomed, we do not trust them,” said the young man who is in his early thirties, a resident of the Gaborone West township. Big players in the plastic industry did not want to comment on whether they will cut or retain jobs.

However some companies are reported to be planning on migrating to South Africa or other countries that allows plastic bag manufacturing. According to Botswana Exporters and Manufacturers Association (BEMA) in a recent radio interview, already one company closed shop due to the plastic ban and 150 of its employees are on the streets.

Indirect consequences are expected to be felt on those who do not manufacture plastics bags like distributors Starpak and the Francistown based Up North Pty Ltd. The two companies welcomes the plastic bag ban for the sake of the environment as plastics are not easy to recycle and are stubborn pollutants. Starpak director Rajaram Rangashamy admitted that the plastic ban is going to take a huge knock on their sales, but workers need not to worry as there are not planning on laying them off.

“Our sales are going to drop with this coming ban. We are going to be affected financially but we are not retrenching anyone,” said Rangashamy. Chris Hotton of Up North concurred with his competitor Rangashamy that sales will go down. The two men are both looking for an alternative to replace plastic bag manufacturing and it will not come cheap. According to Hotton his company is already working on any “natural product” that will replace plastics to make carrier bags. Rangashamy plans on making paper bags as a substitute and that means jobs will be saved.

Some pragmatic observers believe that plastic banning is harsh as it is not based on any empirical evidence research on the effects of plastics on the environment. BEMA believes government overlooked at the negative economic impact of banning plastics but overstated the environmental impact of the embargo. According to Somarelang Tikologo, an environmentalist NGO, government should not impose a ban hastily but rather work on building a recycling plant that will control the waste that comes with plastics.

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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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