The African Caucus of Governors of the World Bank Group & International Monetary Fund conference has identified commercial agriculture and agribusiness as key potential sector to transform African economies which are highly dependent on oil and mineral revenues.
The conference which is ongoing in Gaborone is attended by high level delegates from key financial and economic global institution and Central bank governors, Finance and Trade ministers as well as policy and economic think tanks from all the 54 African countries. Officially opening the caucus, Vice President Mokgweetsi Masisi said collaborative efforts were crucial in Africa’s economic transformation quest.
Masisi said a key challenge common across the African continent was how to generate more and better employment opportunities. He said the high economic growth rate witnessed in some part of African continents was still not significantly translated into improvement and wellbeing of majority their citizens. “To address this twin challenges it is critical that inclusive growth be made an integral part of all our development strategies and economic pathways,” he said.
Masisi further indicated that all stakeholders including government; donor agencies and the private sector must target and underline their investment plans towards a shared goal of sustainable and inclusive growth. “To facilitate this, public sector investment must be targeted towards reducing real and perceived business risk in enabling financing and improvement in infrastructure thus attracting private sector investment,” he said.
At the top of economic sector agendas, the caucus placed the agricultural potential as the next African turning point. The Chairman of African Caucus, Botswana Minister of Finance & Economic Development, Kenneth Matambo told attendants that it was time for Africa to rip off from development agendas and strategies adopted at different economic and governance forums. He said Africa needed to collaborate in realizing their full agricultural potential.
“Collective efforts in indentifying the best solutions to archive high levels of production and increased export market share will ensure that Africa emerges victorious in attaining food security and significant employment creation and consequently building Africa’s economic sustainability,’’ said Matambo.
Matambo said African governments made a commitment under the African Union agenda 2063 to work towards a modern and productive agriculture by using science and technology, innovation and indigenous knowledge to create a profitable and attractive Africa. “It is now time to work hard together in order to realize this aspirations,” he said.
The two-day forum held under the theme: "Economic Transformation and Jobs Creation: A focus on Agriculture and Agribusiness."At the conference over 200 delegates discuss issues of mutual interest and take common position to present to the Heads of the Bretton Woods Institutions.
The caucus provides a platform on which African countries can articulate their positions jointly and guide their development partners on Africa's key priority areas in their development agenda. Also under the discussion is Agricultural Policy Foundations, financing, land Tenure and Markets, Technologies for Agricultural Development and Climate Smart Agriculture , the role of private sector, Agricultural value chains and sustainable jobs creation for youth and women, fiscal policy to support agricultural transformation in Africa, and financial deepening and Inclusion to support Agricultural Development in Africa.
The findings of the deliberations will inform the 2017 Memorandum of African Governors to the Heads of the Bretton Woods Institutions, being the president of the World Bank Group ,Dr Jim Yong Kim and the Managing Director of the international Monetary Fund ,Ms Christine Lagarde. Matambo concluded by reminding fellow African governors that agriculture is recognized as the single largest employer in the world, providing livelihoods to about 30 percent of the world population.
He is of the view that their governments can create sustainable jobs especially for women and youth, and guarantee food security along with knowledge and entrepreneurship, and by responding to and creating innovative ways to meet the needs of the agriculture sector. The African Caucus was established in 1963, as the "African Group," with the objective of strengthening the voice of African Governors in the Bretton Woods Institutions (BWIs), i.e. the International Monetary Fund (IMF) and the World Bank Group (WBG), on development issues of particular interest to Africa.
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”