Botswana Development Corporation (BDC) has on the 5th of October launched operations of one of its investments, Nampak DivFood Botswana in Lobatse. Officiating at the launch was Minister of Investment, Trade and Industry, Vincent. T. Seretse. Nampak DivFood Botswana is a Joint Venture between Nampak and BDC with 74% and 26% shareholding respectively.
The operation is a Lobatse based manufacturing plant specialising in the production of can ends or lids. Nampak is Africa’s largest packaging company which operates from 28 sites in South Africa, 15 sites in the Rest of Africa, as well as 8 sites in the United Kingdom. The group participates in extensive collection and recycling initiatives and continues to invest significant time and resources into the development of sustainable products.
In his welcome note address, Mr Bashi Gaetsaloe highlighted that the partnership between BDC and Nampak DivFood came to being after the review of Can Manufacturers Botswana business model. He mentioned that due to significant and prolonged challenges faced by the business, there was need for a turnaround strategy which was achieved by introducing Nampak as a technical partner.
“BDC identified Nampak as the best technical partner for this project for various reasons including: their technical expertise, experience; regional reach with a strong market as well as business ethos including commitment to green technology.” Gaetsaloe stated. He further added that Nampak DivFoods Botswana will be exporting 100% of their production thereby contributing to diversification of exports and foreign earnings for the country. During his keynote address the Minister reiterated that BDC’s mandate which remains crucial and relevant to date, is to promote and facilitate economic development of Botswana through funding of commercially viable enterprises in the country by partnering with both local and foreign investors.
The minister cited that the Corporation’s joint-venture operation with Nampak is therefore at thevery core of the principle of their foundation and the development of the country’s manufacturing base. “In delivering its mandate, BDC contributes towards Government’s broad objective of diversifying the economy, growing exports, and generating returns for the shareholder.” The Minister underscored this last point by highlighting that: “as the Government’s investment arm – BDC must create meaningful returns for its shareholders.”
The honourable Minister further stated that the Government of Botswana is passionate about industrialising Botswana and growing the economy. “We will continue to seek such partnerships, attract foreign direct investment and actively pursue a diversified and private sector led economy. “He confirmed. He continued to assure the business community that his Ministry will continue to create a conducive environment for local and foreign investors that seek to do business in the country. Seretse stated that in order for Botswana to be competitive in the world economy, the private and public sectors must be able to engage in trade, and offer high quality products and services, and gain market share locally, regionally and internationally.
Speaking to this point Mr Gaetsaloe mentioned that in delivering their mandate it is crucial that solid partnerships be fostered between the public sectors and the private sector. He further stated that at BDC, commercial viability and sustainability are key tenets that they pursue in any venture undertaken. “BDC will continue on an aggressive path of developing partnerships with the private sector as it is our mutual interest to strive to expand our businesses and achieve economic growth and sustainability for the country. We have developed an ambitious strategy premised on among others partnerships and regional reach which we believe will attract more giants of Nampak capacity going forward,” Gaetsaloe emphasised.
In closing Mr Gaetsaloe stated that in light of the strong forces reshaping the global and regional economies, multi-national and national corporations, new challenges continue to emerge which require continual repositioning. “At BDC we believe that the future of Botswana lies in our ability to create sustainable and globally competitive industries. Businesses should be ready to adopt smart processes and the latest technologies to ensure that they can compete regionally and internationally.
Not only does this abode well for the enterprise, but it also cements Botswana’s position as a destination for FDI.” Concluded Gaetsaloe, “We are proud that this JV between BDC and Nampak is shining example of a locally-based firm with the competitiveness and efficiencies to penetrate regional markets. In conclusion, the Minister extended his appreciation to Nampak for having the appetite to bring their business into Botswana. He further commended BDC for delivering on its mandate, and encouraged the Corporation to invest in more sustainable ventures that will develop the country’s economic landscape.
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”