Since the collapse of BCL acquisition talks between government and Emirate Investment House, disheartened Selebi Phikwe residents who had their hoped for the possible reopening of the mine now pin their hopes on the revitalization strategy. Residents want their town to be saved from becoming Botswana’s Detroit, they are demanding the promised jobs.
The Selebi Phikwe Revitalization Strategy, launched last year November was supposed to have created over 2000 jobs by the 1st quarter of 2017 according to authorities heard at a number of occasions post the mine’s sudden closure. However, we are already in the third quarter and thousands of Phikwe residents especially youth still roam the streets unemployed. As things stand the Botswana Development Corporation factory shells in Selibe Phikwe industrial sites are still as empty as they were following the 2008 pseudo investors’ relocation to Lesotho after enjoying tax holidays.
Earlier this year Minister of Infrastructure and Housing, Nonofo Molefhi who is also Member of Parliament for Selibe Phikwe East told residents in his Kgotla meetings that Phikwe locals especially the youth should prepare their C.Vs for over 2000 jobs geared up for the first payout in end of March 2017. Molefhi had announced then that an Indian tractor, machinery and equipments company was already allocated land to setup a significant employment creation firm, as well a complete plans to resurrect the textile industry.
As a shock absorbing measure and incentive for the over 5 000 miners who were axed from the mine, they were to remain in the mine houses rent free and their children’s school fees were to be paid for a year by government. In less than two months, the one year period lapses. According to the Ward Development Committees, residents have since turned to government’s Ipelegeng scheme, resulting in over flocking of the program. Since the mine’s closure, WeekendPost has discovered that Ipelegeng employees have quadrupled since the mine closure last year. This reporter has witnessed people queuing overnight in the hope of being enrolled the following morning.
The Selibe Phikwe Town Council also revealed to this publication that ever since the mine shut down requests for trading licenses per month have tripled and this also resulted in high numbers of bidders for low value tenders especially in the supplies and procurement section. According to the Business Botswana BCL Closure Impact intensive assessment Report released 2 months back this and other trends with the socio-economic space are a result of diminishing source of income within Phikwe. The taxi rank is also over crowded with influx of former BCL employees who from the observation have adopted the famous Honda Fit car for rescue and quick money from transporting people around town. “As you can see there is no business, we spend hours without a single load, we had hoped the mine will open and things back to normal,” narrated Philip Malema a taxi operator in Selibe Phikwe.
SPEDU is on top of things
After officially commissioning electrification of Motloutse river basin farms, the construction of over 100 million Platjan Bridge which is expected to open a corridor of trade, travel and tourism as well as resurrecting the Selebi Phikwe trade and exhibition show, SPEDU believes it’s on the right track.
SPEDU has been criticized for spending taxpayers’ money over the last eight years without tangible economic diversification output. However SPEDU argues that it has just been transformed into a limited and autonomous company, independent to take strategic and investment decisions. SPEDU launched their new logo last year and transformed into a more corporate entity. They have since invested in sports tourism by sponsoring a Golf tournament and the soft ball extravaganza this year. Last week SPEDU together with Selebi Phikwe Town Council delivered a trade and exhibition show which was last hosted in 2003. This was a seen a major mile stone in the transformation and revitalization quest of the Phikwe economy.
SPEDU Chief Executive Officer, Dr Mokubung Ndala Mokubung noted that revitalization was a long process that would take time to bare fruits. He said it requires collective, support and patience from residents. Mokubung reiterated that SPEDU was on top of things to get the town back to its glory years.
This past week SPEDU and Selibe Phikwe Town Council (SPTC ) signed a memorandum of understanding to launch a service delivery based 5 year agreement that will facilitate documented and monitored partnership between the two critical stakeholders. SPTC as the administration body of the town is tasked with day to day running of the town affairs from services, utilities, sanitation and so forth. SPTC Council Secretary Godimo Garemore is of the view that it was a noble resolution by the council administration to delegate investment land allocation to SPEDU because they have the acumen to do so.
“SPEDU is strategically and technically equipped to undertake this, we want all prospective investors to go through SPEDU so as they (SPEDU) assess and screen the credibility and seriousness of those investors,” he said. Deputy Council Secretary Shadrack Selelo added that it was integral for SPEDU and SPTC as complementing partners to define and officially outline the parameters of their areas of cooperation. “We have a number of projects that we will be implementing and undertaking together thus this is a blue print defining our collective journey that is just beginning, because we have a long way to go,” he said.
Mokubung observed that an uphill task lay ahead, he said the town and region needs sound investors that can setup enterprises and hire people. “This penning down of our partnership is the beginning of a long journey of economic transformation, revitalization is not an overnight event is a process and we are in the right track,” he said.
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.