Matambo decries misuse and reckless spending by Government
The Minister of Finance and Economic Development Kenneth Matambo has warned that the 2018/19 budget will carry a deficit of around 8 billion pula primarily due to continued slow growth in revenues and increased expenditure pressures.
Minister Matambo revealed the development to stakeholders at a Budget Pitso on Tuesday. Government had also expected the first three financial years of National Development Plan 11 to run on budget deficit.
According to the minister, growth in total revenue had been restrained by relatively weak commodity prices.
Reading from the Budget Strategy Paper, a blueprint for the budget produced annually at least three months before the Budget Speech, Matambo noted clearly the need to apply strict fiscal discipline throughout the public sector if government is to contain the expected budget deficits in the medium term, given the constrained resources envelope.
Minister Matambo further advised against misuse of resources and reckless spending by government arms and department encouraging the citizenry and civil service to efficiently and effectively deploy government limited resources to provide the necessary economic infrastructure needed for growth and basic social services.
The Finance Minister told attendants that government will closely monitor expenditure and exit funds during the 2018/2019 financial year to ensure that the limited resources and funds are put to good use.
“The projected global growth rates for 2017 and 2018 although higher than 2016 are below the pre-crisis averages, especially for most advanced economies and for commodity-exporting emerging and developing economies,” he said.
It also emerged at the meeting that to avoid being caught up in the vicious circle of deficits and debt, there was need for continued focus on prudent management of expenditure in order to achieve goals envisioned under national priority areas identified in the National Development Plan (NDP) 11.
Government emphasized its acting plan as stated in NDP 11 which clearly states the need to tackle the problem of reducing or eliminating abject poverty, creating sustainable employment opportunities and improving income inequality. Botswana’s income inequality is ranked amongst the worst in the world indicating a concerning difference between the rich and the poor.
Matambo also highlighted that the domestic economy had rebounded to register a positive growth rate of 4.3 per cent in 2016, after experiencing mild recession in 2015. He noted that the national economic growth momentum was anticipated to continue in 2017 and 2018 as the economy is expected to register a growth rate of 4.7 per cent and 5.3 per cent respectively.
“The growth rate will largely be supported by the services sector,” he said. The inflation rate was said to have been stable and projected to remain as such in the medium term, within the Bank of Botswana objective range of three to six per cent. Notwithstanding the inflation rate stability it was cautioned that the rebound in commodity prices and food prices posed upside risks to the inflation outlook.
Economic and Financial Policy Secretary in the Ministry of Finance Dr Taufila Nyamadzabo said that Botswana’s economy was stable and impressively recovering from the recent economic meltdown.
Dr Nyamadzabo reiterated Matambo’s sentiments that after recording a decline of -1.7 per cent in 2015, the domestic economy recovered strongly to register a positive growth of 4.3 per cent in 2016.
He observed that the positive rebound in the domestic economy was largely due to the improvement in the trade, Hotels and restaurants as well as transport and communications sectors, which recorded positive growth rates of 13.5 per cent and 5.6 per cent respectively.
The growth in the trade, hotels and restaurants sector was mainly driven by the downstream diamond industries, which contributed significantly to the wholesale sub-sector.
The Financial Policy think tank reiterated that the water and electricity sector, which supported other sectors, registered a higher growth of 123.0 per cent in 2016, but its contribution to the Gross Domestic Product was insignificant. Other sectors, which recorded positive growth rates in 2016, were construction with 4.2 per cent and finance and banking services with 3.8 per cent.
The agriculture and mining sectors, however recorded negative growth rates in 2016 with the latter mainly due to the decline in the copper production as well as the provisional liquidation of the BCL Mine in October last year.
The mining sector was expected to recover in line with the positive global economic prospects, while the other sectors would continue to benefit from the implementation of the Economic Stimulus Programme (ESP) adopted by government to boost economic growth and create employment opportunities.
In terms of domestic economic outlook, Dr Nyamadzabo noted that the GDP was projected to grow by 4.7 per cent, 5.3 per cent and 5.0 per cent in 2017, 2018 and 2019 receptively.
Stakeholders were told that the average economic growth during the National Development Plan 10 was 3.9% per annum, which was slightly above the 3.3 per cent target, but below the 7.5 per cent Vision 2016 target.
Experts have noted that some downside risks that come with positive global economic outlook, which among others include structural problems such as low productivity growth and high income inequality would negatively impact Botswana’s economic growth is not accommodated for by budgets and fiscal projections.
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This shift towards self-service banking was catalyzed by various factors but it became easily accessible and accepted during the COVID-19 pandemic. People of all ages found themselves turning to digital channels out of necessity, and they discovered the freedom and flexibility it offers.
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Duduetsang Chappelle-Molloy is Head: Marketing and Corporate Communication Services
Botswana has recently recorded a significant trade deficit of over P6 billion. This trade deficit, which occurred in November 2023, follows another deficit of P4.7 billion recorded in October of the same year. These figures, released by Statistics Botswana, highlight a decline in export revenues as the main cause of the trade deficit.
In November 2023, Botswana’s total export revenues amounted to P2.9 billion, a decrease of 24.3 percent from the previous month. Diamonds, a major contributor to Botswana’s exports, experienced a significant decline of 44.1 percent during this period. This decline in diamond exports played a significant role in the overall decrease in export revenues. However, diamonds still remained the leading export commodity group, contributing 44.2 percent to export revenues. Copper and Machinery & Electrical Equipment followed, contributing 25.8 percent and 10.1 percent, respectively.
Asia emerged as the leading export market for Botswana, receiving exports worth P1.18 billion in November 2023. The United Arab Emirates, China, and Hong Kong were the top destinations within Asia, receiving 18.6 percent, 14.2 percent, and 3.8 percent of total exports, respectively. Diamonds and Copper were the major commodity groups exported to Asia.
The Southern African Customs Union (SACU) received Botswana’s exports worth P685.7 million, with South Africa being the main recipient within SACU. The European Union (EU) received exports worth P463.2 million, primarily through Belgium. Australia received exports worth P290 million, while the United States received exports valued at P69.6 million, mostly composed of diamonds.
On the import side, Botswana imported goods worth P9.5 billion in November 2023, representing an increase of 11.2 percent from the previous month. The increase in imports was mainly driven by a rise in Diamonds and Chemicals & Rubber Products imports. Diamonds contributed 23.3 percent to total imports, followed by Fuel and Food, Beverages & Tobacco at 19.4 percent and 15.0 percent, respectively.
The SACU region was the top supplier of imports to Botswana, accounting for 77.7 percent of total imports. South Africa contributed the largest share at 57.2 percent, followed by Namibia at 20.0 percent. Imports from Asia accounted for 9.8 percent of total imports, with Diamonds, Machinery & Electrical Equipment, and Chemicals & Rubber Products being the major commodity groups imported. The EU supplied Botswana with imports worth 3.2 percent of total imports, primarily in the form of Machinery & Electrical Equipment, Diamonds, and Chemicals & Rubber Products.
Botswana’s recent trade deficit of over P6 billion highlights a decline in export revenues, particularly in the diamond sector. While Asia remains the leading export market for Botswana, the country heavily relies on imports from the SACU region, particularly South Africa. Addressing the trade deficit will require diversification of export markets and sectors, as well as efforts to promote domestic industries and reduce reliance on imports.
The business sector in Botswana is optimistic about the year 2024, according to a recent survey conducted by the Bank of Botswana (BoB). The survey collected information from businesses in various sectors, including agriculture, mining, manufacturing, construction, and finance, among others. The results of the survey indicate that businesses expect trading conditions to improve in the first quarter of 2024 and remain favorable throughout the year.
The researchers found that firms anticipate improvements in investment, profitability, and goods and services exported in the fourth quarter of 2023 compared to the previous quarter. These expectations, combined with anticipated growth in all sectors except construction and real estate, contribute to the overall confidence in business conditions. Furthermore, businesses expect further improvements in the first quarter of 2024 and throughout the entire year.
Confidence among domestic market-oriented firms may decline slightly in the first quarter of 2024, but overall optimism is expected to improve throughout the year, consistent with the anticipated domestic economic recovery. Firms in sectors such as mining, retail, accommodation, transport, manufacturing, agriculture, and finance are driving this confidence. Export-oriented firms also show increased optimism in the first quarter of 2024 and for the entire year.
All sectors, except agriculture, which remains neutral, are optimistic about the first quarter of 2024 and the year ending in December 2024. This optimism is likely supported by government interventions to support economic activity, including the two-year Transitional National Development Plan (TNDP) and reforms aimed at improving the business environment. The anticipated improvement in profitability, goods and services exported, and business investment further contributes to the positive outlook.
Firms expect lending rates and borrowing volumes to increase in the 12-month period ending in December 2024. This increase in borrowing is consistent with the expected rise in investment, inventories, and goods and services exported. Firms anticipate that domestic economic performance will improve during this period. Domestic-oriented firms perceive access to credit from commercial banks in Botswana to be relaxed, while export-oriented firms prefer to borrow from South Africa.
During the fourth quarter of 2023, firms faced high cost pressures due to increased input costs, such as materials, utilities, and transport, resulting from supply constraints related to conflicts in Ukraine-Russia and Israel-Hamas. According to the survey report, the firms noted that cost pressures during the fourth quarter of 2023 were high, mainly attributable to increase in some input costs, such as materials, utilities, and transport arising from supply constraints related to the Ukraine-Russia and Israel-Hamas wars. “However, firms’ expectations about domestic inflation decreased, compared to the previous survey, and have remained within the Bank’s 3 – 6 percent objective range, averaging 5.4 percent for 2023 and 5.4 percent for 2024. This suggests that inflation expectations are well anchored, which is good for maintenance of price stability,” reads the survey report in part.
However, firms’ expectations about domestic inflation decreased compared to the previous survey, and inflation expectations remained within the Bank’s objective range of 3-6 percent. This suggests that inflation expectations are well anchored, which is beneficial for maintaining price stability.
In terms of challenges, most firms in the retail, accommodation, transport, manufacturing, construction, and finance sectors considered the exchange rate of the Pula to be unfavorable to their business operations. This is mainly because these firms import raw materials from South Africa and would prefer a stronger Pula against the South African rand. Additionally, firms in the retail, accommodation, transport, and mining sectors cited other challenges, including supply constraints from conflicts in Russia-Ukraine and Israel-Hamas, as well as new citizen economic empowerment policies that some firms considered unfavorable to foreign direct investment.
On the positive side, firms highlighted factors such as adequate water and electricity supply, a favorable political climate, an effective regulatory framework, the availability of skilled labor, and domestic and international demand as supportive to doing business in Botswana during the fourth quarter of 2023.
Overall, the business sector in Botswana is optimistic about the year 2024. The anticipated improvements in trading conditions, supported by government interventions and reforms, are expected to drive growth and profitability in various sectors. While challenges exist, businesses remain confident in the potential for economic recovery and expansion.