Efforts to develop entrepreneurship and facilitate the ease of doing business in Botswana are evidently bearing fruits as different stakeholder, Gov’t s continue to come on board to complement government programs.
This past week Anglo American, Debswana, De Beers Global Sightholder Sales and Ministry of Investment Trade and Industry (MITI), partners of Botswana Government in the lucrative diamond mining industry went an extra mile in giving back to the economy of Botswana beyond mineral sector profit making partnership. The companies signed a Memorandum of Agreement (MoU) to underpin the continued expansion of Tokafala Enterprise Development programme.
On the other hand Botswana’s company registration body, Companies and Intellectual Property Authority (CIPA) and tender awarding institution, the Public Procurement and Asset Disposal Board (PPADB) joined hands to enhance and promote the ease of doing Business in Botswana. All these undertakings are viewed as watershed milestone achievements that will fast track economic development in Botswana and deliver much needed diversification and job creation through Foreign Direct Investment and Domestic entrepreneurship development.
The P40 million Tokafala initiative
Small Micro, Medium Enterprises (SMMES) are regarded as new economic language for developing countries. Encompassing small scale business, community cooperatives, hawkers, roadside traders and medium scale businesses SMMEs give over 30% of Botswana’s workforce the breadwinner status. Currently contributing over 20% to Botswana‘s economy the SMME sector is viewed as an integral role player in Botswana‘s economic path. However this sectors faces challenges that hinders it to flourish, from financial limitations, lack of technical ability amongst others.
In response to these challenges the Government of Botswana and the De Beers Group of Companies established a partnership to implement a 3-year Enterprise Development Programme, called Tokafala. Designed as a collaborative effort, Tokafala aims at promoting economic diversification and job creation in Botswana by catalyzing the growth of micro, small and medium companies (SMMEs) through personalized business mentoring, advisory support tailored to specific needs of enterprise and facilitating access to finance and markets for clients.
The program builds on Anglo American’s extensive experience and successes in enterprise development, tailored to the specific Botswana context. It is aligned with the Ministry of Trade and Industry’s EDD strategy of economic diversification in Botswana and the poverty eradication undertakings in the office of the president. Established as a pilot project in 2014 the initiative is said to have already output tangible results of revenue growth amongst assisted enterprises. The program targeted 600 micro enterprises, 445 small enterprises and 9 to 15 medium enterprises, with the ultimate objective of sustaining up to 6 000 jobs and creating 400 new jobs.
So far the program has recorded impressive growth in terms of increased revenues and jobs, as per the rate of success recorded by the enterprises that had been enrolled in the mentorship and advisory services. This included strong revenue growth, with enrolled enterprise growing revenues by an average of 39 % . Micro-sized businesses were the biggest beneficiaries, growing by an average of 260 % during this period. In addition, the program has supported more than 1,500 jobs, including the direct creation of more than 280 jobs. Participants have also received significantly improved access to finance, with more than BWP11 million being accessed from commercial sources.
Giving a keynote address at the signing of the MoU, Permanent Secretary in the Ministry of Investment trade & Investment (MITI), Ms Peggy Serame said the signing of the new MoU establishes principles of cooperation under which partners will work together to continue expanding the programme to support the growth of (SMMEs) in Botswana. She said that it will also extend to capacity building of select government enterprise development institutions. Serame said this would reinforce cooperation among participating partners and lead to further possibilities to achieve common goals of creating globally competitive enterprises for economic diversification.
The collaboration between Government and the Group of Companies started in November 2012. The basis for this engagement according to Serame was “the Economic Diversification Drive Strategy, whose main objective is to develop globally competitive and sustainable enterprises”. She shared that the programme for the past 3 years since its inception was implemented under the financial support of partners, revealing that it has now been accommodated for in the country‘s National Development Plan (NDP) 11. “Financial provision has been made in NDP 11 to continue with the implementation of the programme.”
Along with continued contribution from the partners the program will now run at a budget of over P40 million. It was also explained that the program assists various types of businesses across all sectors including enterprises from retail and hospitality, information and communication, services and consultancies and industrial goods and services sub-sectors. “More than 70 per cent are small enterprises, 20 per cent are micro, while 10 per cent are medium enterprises,” said Serame.
According to De Beers Botswana chairman and De Beers’s global sightholder sales Residence Director, Mr Neo Moroka, the Tokafala programme has delivered significant success for a number of emerging businesses in Botswana since its commencement. Moroka observed that the memorandum of understanding was also aligned to the country’s Vision 2036 for sustainable economic growth.
Chief Executive Officer of Anglo American, Mark Cutifani noted that a strong and vibrant business community benefits the whole of Botswana. “Through the Tokafala programme, and our strong partnership with government, we are providing a pathway to enable motivated small and medium-sized businesses realize their growth potential and contribute to a strong and diversified economic future for Botswana,” he said. Bruce Cleaver, CEO of De Beers Group added that as longstanding partners, Botswana’s interests were also De Beers’s interests. Cleaver noted that through this MoU, the partnership will be able to support even more Botswana enterprises to achieve commercial success through improved market access, supply chains and access to finance.
The Managing Director of Debswana Balisi Bonyongo said that his company was pleased with the success of the Tokafala programme to date. “We are looking forward to the next phase of the program, part of which will focus on Debswana mining sites. We believe this is critical as it adds enterprise and business development to the legacy that we would like to leave in the areas around our mines and across Botswana in general,” said Bonyongo. The Permanent Secretary in the Ministry of Investment, Trade & Industry also added that the signing of the Memorandum of Understanding was a testimony of the importance of Public Private Partnership in the economic development of any country.
PPADB and CIPA join hands
The Public Procurement and Asset Disposal Authority (PPADB) and Companies & Intellectual Property Authority (CIPA) have also signed a memorandum of understanding to facilitate and enhance the ease of doing Business in Botswana. CIPA and PPADB are both integral role players in the entrepreneurship and business space. CIPA registers companies and businesses allowing them to operate in Botswana while PPADB facilitates and conducts and awards all purchasing tenders and procurements of government and parastatals.
Speaking at the MoU signing, the PPADB Executive Chairman, Bridget John said the cooperation between PPADB and CIPA was crucial to ensure dialogue and exchange of views geared at serving businesses better. She said in order to do business with government companies must be registered and compliant with CIPA thus cooperation was imperative and mandatory. John explained that in order to ensure that provisions of the MoU are put to practice a joint committee of PPADB and CIPA executives would be set up to enhance ease of agreement implementation.
Conductor Masena, who is the CIPA Registrar General observed that the signing of the MoU was a milestone of achievement for the cooperation of the two entities. Masena said there were certain business areas and opportunities that were deliberately reserved for Batswana to empower their entrepreneurial endeavours and improve their socio-economic wellbeing. “Our cooperation with PPADB will ensure that we adequately implement and monitor this initiative and also make sure that Batswana fully benefit from this dispensation.
Elijah Motshepi PPADB Executive Director said there was an uphill task to ensure that the provisions of the MoU are put to practice, he urged members of the two organizations to work together towards achieving one goal of a more diversified Botswana with improved economy led by Private sector.
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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”