Business Botswana (BB) formally known as BOCCIM has issued a damning report on the shutdown of the BCL mine and its subsidiaries by government in late 2016.
The report compiled by Business Botswana’s 6 man task force, states that the total associated with unemployment in the region is likely to hit staggering highs of more than 50%. BB, led by its president, Lekwalo Mosienyane, states in the report that, like many other stakeholders in both the public and private sectors it was equally astounded by the closure of the BCL mine.
The reason it was astounded, according to the report was not only because it has many corporate members in the region but because of the likely socio-economic implications of the terminal exit of BCL from Selibe Phikwe, which is the region’s sole prime economic anchor. Further, BB notes that, while other initiatives such as the ongoing Selibe Phikwe Development Unit (SPEDU) and horticulture plant activities could provide some new life for Selibe Phikwe, the town is not as yet ready to operate without BCL as an anchor, therefore making the total closure of the mine non-viable.
According to the report, it was apparent to the task team that SPEDU played a suboptimal role in discharging the mandate of developing a Marshall Plan for the economic survival of the Selibe Phikwe region using a broad-based diversification approach. Therefore, for the institution to achieve its objectives, it would be necessary for SPEDU to be remodelled and properly capacitated, with an effective multi-sectoral monitoring process put in place.
Moreover, Business Botswana indicates that there are many answers that remain unanswered chief among which is whether it was appropriate to have shut down the mine in the manner it was done; and whether a gradual and predetermined closure process could have been designed beforehand and implemented in such a way that would ease impact or give room for execution of alternative options.
The task force noted that throughout the meetings with various stakeholders, most of whom had direct relations with BCL, there was a strong and consistent prevailing opinion that the closure of BCL could have been conducted in a better way than what has happened. It further elaborates stating that: even with a seal of urgency by which government evoked its decision, the overwhelming strength of such opinions, most of which were supported by logical and reasonable facts should serve as a learning point to government in terms of the need for rigorous stakeholder engagement on such matters bordering on national crisis.”
It also noted that stakeholders were concerned that a socio-economic impact study was not carried out which ideally could have been carried out before the decision to close the operations was made. It further states that the environmental impact assessment of a fossilised mine should have also been conducted
In the scathing report Business Botswana further ponders: “bearing in mind government’s acute knowledge of the impending closure of the mine, which led to the establishment of the SPEDU, a natural question arose as to whether a strategy had been developed by SPEDU and if such had been considered by government prior to the liquidation decision to avoid its abrupt closure?”
The report further notes that unemployment in Selibe Phikwe and Francistown which are affected by the mine closures were already as far back as 2013, estimated at highs of 19.2 and 18 %.It further states that the towns therefore already have challenges with poverty, estimated at 14.2 and 7.9 % and the closure has therefore left the economy in a worse off situation than the already suboptimal and undesirable positions that have many negative socio economic consequences.
In a statement capturing the economic hopelessness of the region, Business Botswana notes: “What makes matters worse is that there are no new economic opportunities emerging in the region to absorb those who lost their jobs especially in an economy that also has challenges with employment creation.”
Business Botswana also issued a grim advice, asserting that: “the state of crisis which Selibe Phikwe is experiencing also calls for the concurrent implementation of short term measures to revitalise the town in order to avoid fast implosion.” it said, further opining :“the devolution and relocation of certain government parastatal services such as provision of agricultural or agro based services together with mining services to Selibe Phikwe should be considered as this would provide a critical mass and create a demand that would support a certain level of economic activity.
The Mosienyane led organisation further noted that the strategic location of certain industries such as rail and road transport would also be beneficial. The report also states that the task team felt that the liquidation of BCL ought to have been treated as a national crisis warranting the establishment of a multidisciplinary, multi-stakeholder committee under the coordination of the newly appointed Coordinator for the Economic Revitalisation Programme for Selibe Phikwe (Linah Mohohlo) to chart an economic revival strategy for BCL and or Selibe Phikwe.
The business advocacy association also advocated that government should incentivise companies setting up in Selibe Phikwe with tax holidays, tax rebates, preferential utility rates as well as a government guaranteed market. Other incentives advocated for by BB include facilitation of timely land allocation, accelerated approvals of design plans, accelerated work and residence permits approvals among others.
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”