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Stagnant Public Expenditure on Agriculture worrisome

Botswana’s agriculture is constantly becoming a sunset industry, considering the sector’s stagnant budget allocation and overall performance over the years.

Despite its significant role in food security, rural development and poverty eradication, agriculture continues to receive the smallest share of Botswana’s National Budget compared to Ministries such as Defence, Justice and Security, Communication and Technology and Presidential Affairs, Governance and Public Administration.

This year’s allocation of 3 % or P1.34 billion of the Recurrent Budget to the Ministry of Agricultural Development and Food Security flouts the strategic thrust of this year’s national budget which is to promote growth, enhance economic diversification and create job opportunities.

The agricultural sector if prioritized, has the potential to be a major economic growth driver. Amid the potential that the sector has, it is worrisome that real agricultural expenditure has increased by merely 0.2 % from P1.10 billion in 2017 to P1.34 billion in 2018 after P1.07 billion in 2016.

Thus, a stagnant trend of agriculture expenditure as a proportion of total government expenditure over the years. This is despite the increase of agriculture gross value added to GDP in the third quarter of 2017 after declining from 2.8% in 2009 to 2.1% in 2016. The decline and stagnancy in total agricultural expenditure are causal factors to the fluctuating and insignificant agriculture gross value added to GDP.

This frustrates the country’s attainment of Sustainable Development Goals and nullifies the country’s commitment to Maputo Declaration on raising spending on agriculture to 10 % from the year 2008. Moreover, it sabotages the National Development Plan 11 and the country’s Vision 2036 which emphasis on agriculture as an area of consideration for sustainable economic growth.

The limited public expenditure on the sector also constrains the country’s ability to manage food prices volatility, unpredictable markets, the impact of climate change and other production hazards that are a constant threaten the country’s national security.

Botswana endures years of negative balance of agricultural trade, exposing the country to inflation of basic commodity prices of grains, oils and fresh produce. Adverse climatic conditions related to climate change (droughts and heatwaves) have not spared the agricultural sector, leading to poor yields and increased spending in subsidies of drought relief and programmes such Integrated Support Programme for Arable Agriculture Development (ISPAAD) and Livestock Management and Infrastructure Development (LIMID). Much of the allocated developmental budget will be spent in these programmes.

However, because of their neo-patrimonial nature, these programmes are evidently inefficient and unsustainable. Relative to this challenge is the perennial poor performance of agricultural State-Owned Enterprises, particularly National Development Bank which recorded a net loss of P168,2 million and Botswana Meat Commission with P229.7 million losses in 2017.

These programmes and enterprises have derailed the government investment in critical areas such as agricultural research and development (R&D), biosecurity and human capital. The Ministry of Agricultural Development and Food Security’s current expenditure on R&D is less than 2% of the total agricultural budget which is low compared other countries in the region.

This is despite that R&D is critical for high agricultural productivity and high returns on investment that will increase economic output (GDP output) and sustain the future of the sector. Biosecurity, particularly the protection of our national and internal borders from the spread of contagions such as foot and mouth, fruitful fly and evasive weeds and pests is strategically important as national security.

Our biotic economy is critical for other industries such trade and tourism (hotels and restaurants). In terms of human capital, the Ministry of Agriculture has a larger number of well-trained scientific officers who are unproductive due to a stressful work environment, limited resources and promotion and remuneration complaints which could be fully resolved by an increased budget share for the sector.  

The stagnancy and declining of the recurrent and developmental budget allocation to agriculture limits the sector’s potential. Increased government spending in agriculture has proved elsewhere to have positive returns to economic growth, poverty reduction and sustainable development.

Therefore, the government needs to prioritize agricultural expenditure, closely monitor and ensure effective management of the allocated funds to improve the state of the sector.  This can only be achieved from evidence-based policy supported by R&D, lobbying and participation by farmers through their organized associations. If agriculture continues to be neglected, it can have adverse effects on food security, which has implications for national security. Kgolagano Mpejane is a graduate of agribusiness and international development with interest in the Political Economy of Agriculture.

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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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