Botswana still has a lot of catching up ton when it comes to global competitiveness, this is despite moving one notch up in the latest Global Competitiveness Report – 2017-2018.
According to the 2017-2018 Global Competitiveness Index’ released by the World Economic Forum (WEF), Botswana ranks number 63 out of 137 countries with a score of 4.30. This is a slight improvement from the previous ranking of 64th, further reflecting the upward trend since 2012 when Botswana was ranked 80th in the world.
The Global Competitiveness Index (GCI) tracks the performance of close to 140 countries on 12 pillars of competitiveness. It assesses the factors and institutions identified by empirical and theoretical research as determining improvements in productivity, which in turn is the main determinant of long-term growth and an essential factor in economic growth and prosperity.
The WEF defines it as “the set of institutions, policies and factors that determine the level of productivity of a country”. Others are subtly different but all generally use the word “productivity”. Mauritius remains Africa’s most competitive economy, followed by Rwanda ranked 58th globally with a score of 4.35, South Africa is ranked 61st globally with a score of 4.32. Botswana has done better than the likes of Morocco which is ranked 71st globally with a score of 4.24. On the global scale, Switzerland, United States, Singapore, Netherlands and Germany completed the top 5 economies with scores of 5.86, 5.85, 5.71, 5.66 and 5.65 respectively.
Botswana as a middle income state intends to improve its economic environment to improve Foreign Direct Investment, the ease of doing business, innovative culture in a quest to industrialize the economy, diversify national revenue and create much needed employment, among other things. Stakeholders observe that government still has a major role to play in making sure that Botswana is an attractive place for investment, economic growth and business development. According to Specially Elected Member of Parliament, Bogolo Kenewendo, government has a significant and direct role in ensuring that jobs are created.
Kwenewendo, who is a renowned economist, a trade & investment specialist has observed in previous interviews that government lacked a clear strategic path facilitation of jobs creation. “We cannot continue saying the government is not responsible for creating jobs, while we know the government does not have a clear framework on how we are going to create a conducive environment for somebody else to do so,” she said.
“We need to devise and craft clear strategies with timeframes on how we want to combat this issue of unemployment which affects most of our youth and continues to be on the rise. People want to hear job creation; we need to have clearer business reforms that can position Botswana among the top investments and business environments in the continents and the world,” she said. Kwenewendo, a former Ghanaian government trade & investment advisor says the Botswana government has a huge task of evaluating its immigration laws, trade regulations and its investment wooing approach.
The former Ecosult Economist appealed to the government to fast track moving into the techno-based economic strategies adding that globally there is a transition to move from physical human resource to information technology, digital and machinery personnel. “If we don’t tap into global changes we will be left behind and that will make it difficult for us to do business or trade with other countries, or even export labor,” she said. Renowned Economic and Finance Specialist at First National Bank Botswana (FNBB) Moathudi Sebabole observes that Botswana‘s Foreign Direct Investment is still untapped.
Sebabole compared Botswana to countries such as Mozambique, Democratic Republic of Congo whom according to him are doing well when it comes to attracting foreign investors to set up business and create employment for natives. “If you look at our FDI figures, they are very low compared to countries I have mentioned, that raises a concern that there might be something we not doing right,” he said.
He further explained that compared to those countries Botswana has better political stability with no civil unrest. “It suggests that there was somewhere we failing as far as attracting investors to Botswana is concerned.” Emphasizing on Sebabole‘s views another youthful business person, Health Education guru, Dr Tiro Mampane of Boitekanelo Group of Companies which includes Boitekanelo College told this publication that Botswana needed to look deeper and introspect its trade and business laws. He indicated that the ease of doing business locally needed to be improved by eliminating cumbersome procedures which might end up discouraging investors.
According to Dr Mampane, Small Medium Enterprises need to be empowered to create wealth and economic survival for the rural and low income people. “If you look into other businesses you will realize that they don’t necessarily require, for example, a physical office to operate, thus they should be exempted from some trade licenses requirement,” he said. The Global Competitiveness Report 2017–2018 comes out at a time when the global economy has started to show signs of recovery and yet policymakers and business leaders are concerned about the prospects for future economic growth.
Governments, businesses, and individuals are experiencing high levels of uncertainty as technology and geopolitical forces reshape the economic and political order that has underpinned international relations and economic policy for the past 25 years. At the same time, the perception that current economic approaches do not serve people and societies well enough is gaining ground, prompting calls for new models of human-centric economic progress.
The Report states that in many advanced economies the value of economic growth for society has come into question as a result of increasing inequality, the challenges of technological change, and the complex impacts of globalization—including those related to trade in goods, services, and data, and to the movement of people and capital. In emerging economies, record decreases in poverty and a growing middle class have fueled higher aspirations and demands for better public goods; these demands are now clashing with slower growth and tightening government budgets.
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”