Botswana Investment & Trade Centre (BITC), the country’s business and investment facilitation and promotion agency has amassed a total of 10 billion pula worth of foreign & domestic capital investment since its inception in 2012. This was highlighted by President Lt Gen Dr Seretse Khama Ian Khama in his State of The Nation Address (SONA) on Monday.
Khamas said these transactions have resulted in the creation of 8,831 additional jobs. “The total business expansion investment level stood at P618.6 million in 2016-17 compared to P377 million reported in 2015/16.” BITC was launched in 2012 as an organization established by an act of Parliament, to become an integrated Investment and Trade Promotion Authority (ITPA) with an encompassing mandate of investment promotion and attraction, export promotion, and development, including management of the Nation’s Brand.
BITC further encourages domestic investment and expansion, promotes locally manufactured goods to regional and international markets, contributes towards improvement of the investment climate through policy advocacy, increases citizen participation in the economy and creates sustainable job opportunities.
Khama also said government investment arm Botswana Development Corporation (BDC) has, despite two periods of recession, also experienced growth, with its total investment assets increasing from P1.2 billion to P2 billion over the past decade. This growth has supported over 5,000 jobs across various sectors of the economy. “Through its transformational programme the BDC has re-positioned itself for further growth, with over a thousand new jobs having been created since 2015 from new investments,” he said.
Meanwhile Leader of Opposition (LOO) Duma Boko says the figures are questionable, Boko quashed Khama’s speech saying it does not reflect the reality on the ground. “I don’t believe there is return of investment from these government agencies as our graduates still do not have jobs, which jobs, where?” he asked rhetorically.
According to Boko during Khama’s tenure, formal employment grew at a slouchy 1.5 per cent per annum, with the highest annual job growth rates registered by public enterprises (4.6%) and Ipelegeng (3.4%). “From 2011 to 2015, enrolment in Ipelegeng rose by 28 percent! Public enterprises and Ipelegeng cannot be the primary sources of job growth for a country with ambition for its young people.”
“In the private sector, which accounts for 56 per cent of formal employment, the rate of job growth averaged 1.2 per cent per annum between 2011 and 2015. Yet, over this period, the labour force grew at an annual rate of 3.5%. Juxtapose labour force growth and the rate of job growth and you arrive at the terrifying conclusion that we have an annual job growth deficit of two percentage points! The message behind these figures is unambiguous. There are no jobs for the unemployed and the youth who leave colleges with diplomas and degrees hoping for a job. Workers cannot expect wage growth! Our collective wellbeing is eroding,” Boko said in his response to the SONA on Wednesday.
Advocate Boko urged the government to challenge the country’s economists in government, academia and the private sector to develop an alternative model for this economy, re-examine economic policies and strategies, and inject a measure of creativity into policy design. “The current dispensation, in which we muddle along seeking to spend our way to success, and we throw money at problems, is not working and is not sustainable, because the days of rich mineral revenue yields belong to our past. Yet, this is exactly what successive BDP governments have been doing, all the while mouthing platitudes about economic diversification and transformation,” he said.
President Khama had also reported in his last SONA that the country’s balance of trade had positive trend for the past 12 months. He said according to Statistics Botswana, total imports for 2016 were valued at P66.9 billion, against P73.2 billion recorded in 2015, representing a decline of 8.6%. “Total exports for the same period were valued at P80.3 billion, an increase of 26.5%, compared to P63.5 billion recorded in 2015. As a result, our trade balance was in surplus of P13.5 billion in 2016, resulting in a balance of payments surplus of P2.8 billion, in contrast to the deficit of P0.57 billion that was recorded for 2015.”
Further, the president said that as of the end of August 2017, the country’s foreign exchange reserves were valued at P 76.6 billion, which is equivalent to 17 months of import cover. Of the total reserves, the Government Investment Account amounted to P32.1 billion. “Our exchange rate policy continues to support competitiveness of local industries in both domestic and international markets by maintaining the stability of the Pula against a basket of leading currencies,” he said.
BITC organizes the Global Expo which according to the president has generated over 500 million business transaction since inception 12 years ago. The centre recently launched an investment one stop shop which will shorten and simplify administrative procedures and guidelines for issuance of business approvals, permits and licenses, thereby removing bottlenecks faced by investors in establishing and running businesses in Botswana.
Officers from the Ministry of Nationality, Immigration and Gender Affairs, Minister of Employment, Labour Productivity and Skills Development and Ministry of Land Management, Water and Sanitation have been seconded to the centre offices whereas all other service providers will continue to facilitate investment from their respective offices. Amongst the services offered by the one stop shop are Company and Business Registration, Trade and Business license Applications, Entry visas, work and residence permits, Work Permit Exemptions among others.
Marcian Concepts have been contracted by Selibe Phikwe Economic Unit (SPEDU) in a P230 million project to raise the town from its ghost status. The project is in the design and building phase of building an industrial hub for Phikwe; putting together an infrastructure in Bolelanoto and Senwelo industrial sites.
This project comes as a life-raft for Selibe Phikwe, a town which was turned into a ghost town when the area’s economic mainstay, BCL mine, closed four years ago. In that catastrophe, 5000 people lost their livelihoods as the town’s life sunk into a gloomy horizon. Businesses were closed and some migrated to better places as industrial places and malls became almost empty.
However, SPEDU has now started plans to breathe life into the town. Information reaching this publication is that Marcian Concepts is now on the ground at Bolelanoto and Senwelo and works have commenced. Marcian as a contractor already promises to hire Phikwe locals only, even subcontract only companies from the area as a way to empower the place’s economy.
The procurement method for the tender is Open Domestic bidding which means Joint Ventures with foreign companies is not allowed. According to Marcian Concepts General Manager, Andre Strydom, in an interview with this publication, the project will come with 150 to 200 jobs. The project is expected to take 15 months at a tune of P230 531 402. 76. Marcian will put together construction of roadworks, storm-water drains, water reticulation, street lighting and telecommunication infrastructure. This tender was flouted last year August, but was awarded in June this year. This project is seen as the beginning of Phikwe’s revival and investors will be targeted to the area after the town has worn the ghost city status for almost half a decade.
The International Monetary Fund (IMF) has slashed its outlook the world economy projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.
On Wednesday when delivering its World Economic Outlook report titled “A long difficult Ascent” the Washington Based global lender said it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April. For 2021, IMF experts have projected growth of 5.4%, down from 5.8%. “We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” said Gita Gopinath Economic Counsellor and Director of Research.
The struggle of humanity is now how to dribble past the ‘Great Pandemic’ in order to salvage a lean economic score. Botswana is already working on dwindling fiscal accounts, budget deficit, threatened foreign reserves and the GDP data that is screaming recession.
Latest data by think tank and renowned rating agency, Moody’s Investor Service, is that Botswana’s fiscal status is on the red and it is mostly because of its mineral-dependency garment and tourism-related taxation. Botswana decided to close borders as one of the containment measures of Covid-19; trade and travellers have been locked out of the country. Moody’s also acknowledges that closing borders by countries like Botswana results in the collapse of tourism which will also indirectly weigh on revenue through lower import duties, VAT receipts and other taxes.
Latest economic data shows that Gross Domestic Product (GDP) for the second quarter of 2020 with a decrease of 27 percent. One of the factors that led to contraction of the local economy is the suspension of air travel occasioned by COVID-19 containment measures impacted on the number of tourists entering through the country’s borders and hence affecting the output of the hotels and restaurants industry. This will also be weighed down by, according to Moody’s, emerging markets which will see government losing average revenue worth 2.1 percentage points (pps) of GDP in 2020, exceeding the 1.0 pps loss in advanced economies (AEs).
“Fiscal revenue in emerging markets is particularly vulnerable to this current crisis because of concentrated revenue structures and less sophisticated tax administrations than those in AEs. Oil exporters will see the largest falls but revenue volatility is a common feature of their credit profiles historically,” says Moody’s. The domino effects of containment measures could be seen cracking all sectors of the local economy as taxes from outside were locked out by the closure of borders hence dwindling tax revenue.
Moody’s has placed Botswana among oil importers, small, tourism-reliant economies which will see the largest fall in revenue. Botswana is in the top 10 of that pecking order where Moody’s pointed out recently that other resource-rich countries like Botswana (A2 negative) will also face a large drop in fiscal revenue.
This situation of countries’ revenue on the red is going to stay stubborn for a long run. Moody’s predicts that the spending pressures faced by governments across the globe are unlikely to ease in the short term, particularly because this crisis has emphasized the social role governments perform in areas like healthcare and labour markets.
For countries like Botswana, these spending pressures are generally exacerbated by a range of other factors like a higher interest burden, infrastructure deficiencies, weaker broader public sector, higher subsidies, lower incomes and more precarious employment. As a result, most of the burden for any fiscal consolidation is likely to fall on the revenue side, says Moody’s.
Moody’s then moves to the revenue spin of taxation. The rating agency looked at the likelihood and probability of sovereigns to raise up revenue by increasing tax to offset what was lost in mineral revenue and tourism-related tax revenue. Moody’s said the capacity to raise tax revenue distinguishes governments from other debt issuers. “In theory, governments can change a given tax system as they wish, subject to the relevant legislative process and within the constraints of international law. In practice, however, there are material constraints,” says Moody’s.
‘‘The coronavirus crisis will lead to long-lasting revenue losses for emerging market sovereigns because their ability to implement and enforce effective revenue-raising measures in response will be an important credit driver over the next few years because of their sizeable spending pressures and the subdued recovery in the global economy we expect next year.’’
According to Moody’s, together with a rise in stimulus and healthcare spending related to the crisis, the think tank expects this drop in revenue will trigger a sizeable fiscal deterioration across emerging market sovereigns. Most countries, including Botswana, are under pressure of widening their tax bases, Moody’s says that this will be challenging. “Even if governments reversed or do not extend tax-easing measures implemented in 2020 to support the economy through the coronavirus shock, which would be politically challenging, this would only provide a modest boost to revenue, especially as these measures were relatively modest in most emerging markets,” says Moody’s.
Botswana has been seen internationally as a ‘tax ease’ country and its taxes are seen as lower when compared to its regional counterparts. This country’s name has also been mentioned in various international investigative journalism tax evasion reports. In recent years there was a division of opinions over whether this country can stretch its tax base. But like other sovereigns who have tried but struggled to increase or even maintain their tax intake before the crisis, Botswana will face additional challenges, according to Moody’s.
“Additional measures to reduce tax evasion and cutting tax expenditure should support the recovery in government revenue, albeit from low levels,” advised Moody’s. Botswana’s tax revenue to the percentage of the GDP was 27 percent in 2008, dropped to 23 percent in 2010 to 23 percent before rising to 27 percent again in 2012. In years 2013 and 2014 the percentage went to 25 percent before it took a slip to decline in respective years of 2015 up to now where it is at 19.8 percent.