The Minister of Finance & Economic Development Kenneth Matambo has finally met his match in Special Elected Member of Parliament, Ms Bogolo Kenewendo. The legislator has of late been calling Minister Matambo to duty with an array of piercing and relevant questions.
In one of her latest question Kenewendo has demanded easy access to information relating to Botswana’s national funds and investment accounts. Posing a question in Parliament to Minister Matambo this week, the youthful Kenewendo had said it was paramount for every Motswana who demands information on the investment and management strategy of the Government Investment Account (GIA) to access such without difficult. Specifically, Kenewendo’s question probed Minister Mathambo to categorically inform Members of Parliament on guidelines for depositing and withdrawing from the GIA.
The Specially Elected MP said it was important to have “transparency on those accounts so as to inform Batswana how we deposit and withdraw from our accounts to fund our budgets. That is important so that we can also adequately plan and save for future generations,” she said. When responding to Kenewendo Minister Matambo indicated that 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. Matambo further shared that the 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.
The Minister also revealed that as of June 30, 2017, the total assets in the Pula Fund were valued at P56.818 billion, of which the balance in the GIA was P30.832 billion. “There are three primary considerations that underpin investment policies of the Pula Fund, namely, and in order of priority; safety, liquidity and return,” he said. â€¨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 Matambo. According to the Minister the processes was guided by adherence to Government’s fiscal rules, in particular, the need to maintain an overall budget balance over the medium term more specifically, the principle that revenues from exploitation of non-renewable mineral resources should only be used to fund productive public investments. “Thus, although no explicit guidelines relate to deposits and withdrawals from the GIA, the current fiscal rules ensure that withdrawals from the GIA are limited, and restricted to funding productive Government spending priorities, that benefit t the country’s economic and social development in the long-term,” Matambo explained.
In addition, Kenewendo also wanted to know if there were any plans to turn this account into a sovereign wealth fund mirroring investments of the Norwegians and the United Arab Emirates. When responding to that Matambo reiterated that the Government has no plans of changing the current legal, governance and institutional framework for the management of the Government Investment Account. He said the current set up served the country fiscal interests better. “We have no intention of changing our investments country frameworks to be the same as the Norwegian or United Arab Emirates model of a sovereign wealth fund, however, as part of the Pula Fund, the GIA is already managed according to many of the principles that are applied to Sovereign Wealth Funds,” he said.
The Finance Minister also explained that through the Pula Fund, the Bank of Botswana is a founder member of the International Forum of Sovereign Wealth Funds, and abides by the Santiago Principles, a globally recognized framework of investment and operational principles and practices that emphasize appropriate governance, accountability arrangements and prudent investment activity. Further clarifying on Kenwendo’s questions Matambo said supplementary budgets are funded on consolidated fund.
He said the Pula Fund was administered according to the principles which are followed by those who have Sovereign Funds. Matambo assured members of parliament that Botswana observes international guidelines and that transparency was one of those “I can guarantee you that the way we account for and administer these accounts, or the Pula Funding, we demonstrate total transparency. I personally have got no doubt that there is any lack of transparency, in the manner that we administer these funds,” he noted.
Kenewendo expressed displeasure at the manner in which these national accounts were being administered. She said in terms of transparency the public was unable to access the interest that has been gained from our investments. “Even as we search, it is not possible to access this kind of data. So, I therefore say that there is no transparency in how the investment account is managed and if you say it is so, kindly point to where I can find such information,” she boldly requested.
Kenewendo said it was unclear whether the Consolidated Fund that resources the supplementary budgets was funded through the Government Investment Account and how that was done. She observes that information on national funds and the manner in which budgets are drawn and resourced should be of public accessibility and easily understood by ordinary Batswana who demand to know how their resources are administered and managed.
Botswana has made improvements on preventing and ending arbitrary deprivation of liberty, but significant challenges remain in further developing and implementing a legal framework, the UN Working Group on Arbitrary Detention said at the end of a visit recently.
Head of the delegation, Elina Steinerte, appreciated the transparency of Botswana for opening her doors to them. Having had full and unimpeded access and visited 19 places of deprivation of liberty and confidentiality interviewing over 100 persons deprived of their liberty.
She mentioned “We commend Botswana for its openness in inviting the Working Group to conduct this visit which is the first visit of the Working Group to the Southern African region in over a decade. This is a further extension of the commitment to uphold international human rights obligations undertaken by Botswana through its ratification of international human rights treaties.”
Another good act Botswana has been praised for is the remission of sentences. Steinerte echoed that the Prisons Act grants remission of one third of the sentence to anyone who has been imprisoned for more than one month unless the person has been sentenced to life imprisonment or detained at the President’s Pleasure or if the remission would result in the discharge of any prisoner before serving a term of imprisonment of one month.
On the other side; The Group received testimonies about the police using excessive force, including beatings, electrocution, and suffocation of suspects to extract confessions. Of which when the suspects raised the matter with the magistrates, medical examinations would be ordered but often not carried out and the consideration of cases would proceed.
“The Group recall that any such treatment may amount to torture and ill-treatment absolutely prohibited in international law and also lead to arbitrary detention. Judicial authorities must ensure that the Government has met its obligation of demonstrating that confessions were given without coercion, including through any direct or indirect physical or undue psychological pressure. Judges should consider inadmissible any statement obtained through torture or ill-treatment and should order prompt and effective investigations into such allegations,” said Steinerte.
One of the group’s main concern was the DIS held suspects for over 48 hours for interviews. Established under the Intelligence and Security Service Act, the Directorate of Intelligence and Security (DIS) has powers to arrest with or without a warrant.
The group said the “DIS usually requests individuals to come in for an interview and has no powers to detain anyone beyond 48 hours; any overnight detention would take place in regular police stations.”
The Group was able to visit the DIS facilities in Sebele and received numerous testimonies from persons who have been taken there for interviewing, making it evident that individuals can be detained in the facility even if the detention does not last more than few hours.
Moreover, while arrest without a warrant is permissible only when there is a reasonable suspicion of a crime being committed, the evidence received indicates that arrests without a warrant are a rule rather than an exception, in contravention to article 9 of the Covenant.
Even short periods of detention constitute deprivation of liberty when a person is not free to leave at will and in all those instances when safeguards against arbitrary detention are violated, also such short periods may amount to arbitrary deprivation of liberty.
The group also learned of instances when persons were taken to DIS for interviewing without being given the possibility to notify their next of kin and that while individuals are allowed to consult their lawyers prior to being interviewed, lawyers are not allowed to be present during the interviews.
The UN Working Group on Arbitrary Detention mentioned they will continue engaging in the constructive dialogue with the Government of Botswana over the following months while they determine their final conclusions in relation to the country visit.
Standard Chartered Bank Botswana (SCBB) has informed the government that it will not be accepting new loan applications for the Government Employees Motor Vehicle and Residential Property Advance Scheme (GEMVAS and LAMVAS) facility.
This emerges in a correspondence between Acting Permanent Secretary in the Ministry of Finance Boniface Mphetlhe and some government departments. In a letter he wrote recently to government departments informing them of the decision, Mphetlhe indicated that the Ministry received a request from the Bank to consider reviewing GEMVAS and LAMVAS agreement.
He said: “In summary SCBB requested the following; Government should consider reviewing GEMVAS and LAMVAS interest rate from prime plus 0.5% to prime plus 2%.” The Bank indicated that the review should be both for existing GEMVAS and LAMVAS clients and potential customers going forward.
Mphetlhe said the Bank informed the Ministry that the current GEMVAS and LAMVAS interest rate structure results into them making losses, “as the cost of loa disbursements is higher that their end collections.”
He said it also requested that the loan tenure for the residential property loans to be increased from 20 to 25 years and the loan tenure for new motor vehicles loans to be increased from 60 months to 72 months.
Mphetlhe indicated that the Bank’s request has been duly forwarded to the Directorate of Public Service Management for consideration, since GEMVAS and LAMVAS is a Condition of Service Scheme. He saidthe Bank did also inform the Ministry that if the matter is not resolved by the 6th June, 2022, they would cease receipt of new GEMVAS and LAMVAS loan applications.
“A follow up virtual meeting was held to discuss their resolution and SCB did confirm that they will not be accepting any new loans from GEMVAS and LAMVAS. The decision includes top-up advances,” said Mphetlhe. He advised civil servants to consider applying for loans from other banks.
In a letter addressed to the Ministry, SCBB Chief Executive Officer Mpho Masupe informed theministry that, “Reference is made to your letter dated 18th March 2022 wherein the Ministry had indicated that feedback to our proposal on the above subject is being sought.”
In thesame letter dated 10 May 2022, Masupe stated that the Bank was requesting for an update on the Ministry’s engagements with the relevant stakeholder (Directorate of Public Service Management) and provide an indicative timeline for conclusion.
He said the “SCBB informs the Ministry of its intention to cease issuance of new loans to applicants from 6th June 2022 in absence of any feedback on the matter and closure of the discussions between the two parties.” Previously, Masupe had also had requested the Ministry to consider a review of clause 3 of the agreement which speaks to the interest rate charged on the facilities.
Masupe indicated in the letter dated 21 December 2021 that although all the Banks in the market had signed a similar agreement, subject to amendments that each may have requested. “We would like to suggest that our review be considered individually as opposed to being an industry position as we are cognisant of the requirements of section 25 of the Competition Act of 2018 which discourages fixing of pricing set for consumers,” he said.
He added that,“In this way,clients would still have the opportunity to shop around for more favourable pricing and the other Banks, may if they wish to, similarly, individually approach your office for a review of their pricing to the extent that they deem suitable for their respective organisations.”
Masupe also stated that: “On the issue of our request for the revision of the Interest Rate, we kindly request for an increase from the current rate of prime plus 0.5% to prime plus 2%, with no other increases during the loan period.” The Bank CEO said the rationale for the request to review pricing is due to the current construct of the GEMVAS scheme which is currently structured in a way that is resulting in the Bank making a loss.
“The greater part of the GEMVAS portfolio is the mortgage boo which constitutes 40% of the Bank’s total mortgage portfolio,” said Masupe. He saidthe losses that the Bank is incurring are as a result of the legacy pricing of prime plus 0% as the 1995 agreement which a slight increase in the August 2018 agreement to prime plus 0.5%.
“With this pricing, the GEMVAS portfolio has not been profitable to the Bank, causing distress and impeding its ability to continue to support government employees to buy houses and cars. The portfolio is currently priced at 5.25%,” he said. Masupe said the performance of both the GEMVAS home loan and auto loan portfolios in terms of profitability have become unsustainable for the Bank.
Healso said, when the agreement was signed in August 2018, the prime lending rate was 6.75% which made the pricing in effect at the time sufficient from a profitable perspective. “It has since dropped by a total 1.5%. The funds that are loaned to customers are sourced at a high rate, which now leaves the Bank with marginal profits on the portfolio before factoring in other operational expenses associated with administration of the scheme and after sales care of the portfolio,” said the CEO.