President Mokgweetsi Masisi this week oiled his administrative machinery by boldly committing to make Botswana great again as far as ease of doing business and investment attraction is concerned.
Masisi assured a High Level Consultative gathering in Gaborone on Thursday that he will spearhead an undertaking that will make Botswana’s best investment attraction destination in Africa and the world as well as loosen regulations and the go how of setting up a business in Botswana. Botswana has in recent years shown to decline on international rankings by several global investment institutions and economic organizations.
The Africa Investment Index (AII) 2018 report by the Quantum Global Research Lab placed Botswana on fourth position as far as investment attraction is concerned, a three (3) spots decline compared to the 2017 Index which placed the landlocked middle income country on position 1. The latest report by the World Bank also ranked Botswana on position 81 out of 190 countries in the ease of doing business index compared to the 71st position in the previous report. This according to the first citizen is worrisome.
“You will agree with me that this is of great concern and we need to redouble our efforts to attract and make it easier for companies to set up and do business in Botswana. You will have noticed in the agenda that the World Bank Group will present an update on how we are progressing in the Doing Business rankings and principally what we need to do to improve the situation,” he said.
Masisi said this before high raking government officials, captains of industries, cabinet ministers, corporate and stakeholder leaders borrowing from his inauguration speech when he ascended to the highest office in the land last month. “In my inauguration address, I made a commitment to prioritise the fight against unemployment, particularly amongst young people.
I am determined to work very hard to facilitate the creation of as many jobs in this economy as I possibly can. Jobs are, and will continue to be created when Government positions itself to do what it ought to do and to not do that which it ought not to do,” he said, adding that his government will create a conducive environment for the private sector to flourish and it is the private sector which will create jobs on a sustainable basis. “In that context, Government should be seen as a facilitator and enabler in the creation of jobs.”
According to Masisi, his government will play this facilitator role through continued dialogue and commitment to support the private sector’s efforts through reforms that will improve the doing business climate to expand investment and create employment, among other things. In the past few years, Government has been engaged in a series of business friendly reforms across all sectors to improve the business climate. Cabinet has initiated a number of legislative amendments that support this agenda, including the approval of the Regulatory Impact Assessment Strategy, whose objective is to reduce the cost of doing business and improve the regulatory framework.â€¨
Masisi reiterated that this was done with broader objective of diversifying our economy adding that his administration has prioritized the implementation of the Cluster Development initiative across a number of sectors explaining that the three sectors that have been earmarked are beef, tourism and financial services. “The remaining sectors of mining and diamond beneficiation will be implemented as soon as possible,” he said. â€¨â€¨Furthermore the President explained that capacity building has started, with the focus on the Cluster teams, who are being trained to immediately roll out the methodology to private sector companies.
“This has been followed up by first level sector-wide consultations, with representation from all value chain players within the sectors, the engagements will be strengthened further, with the aim of fostering strategic action lines that will generate a change dynamic that will make companies and industry more competitive in the targeted sectors.” He further underscored that public-private partnerships will be crucial to propel this country to greater heights in terms of economic diversification, creation of employment and sustainable economic growth.
“Through this project, private sector companies will be assisted with the tools to enhance their competitiveness, accompanied by appropriate interventions from Government to address challenges in the doing business environment.”â€¨â€¨Masisi lamented that with existing initiatives such as Special Economic Zones, Botswana Ones Stop Service Centre, Online registration of business government is confident that Botswana will bounce back to be the number 1 investment attraction place in Africa “With this in mind and in the spirit of reforming ease of doing business in Botswana, Cabinet has therefore decided to make adjustments & reorientation to our immigration position. Investors who have been struggling with VISAs, permits etc will now be facilitated as expeditiously as possible.”â€¨
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”