Contrary to the belief that 2016 was the worst year in Botswana’s history as far as employment creation is concerned, considering that the economy bled thousands of jobs – with some notable cases of mining closures and parastatal retrenchments – figures from the Ministry of Investment Trade & Industry (MITI) show positive spin between April 2016 and December 2016. A total of over 6000 jobs were created, according to Minister Vincent Seretse.
Early last year Botswana Meat Commission (BMC) which owns one of the largest beef abattoirs in Africa t retrenched hundreds at the Francistown branch, followed by liquidation of Khemakhau, Toteng mines and notably the crush of Copper-nickel giant, BCL in October 2016 just to name but a few.
Liquidations and retrenchments saw over 10 000 celebrate Botswana’s Golden Jubilee year jobless. These causalities, MITI suggests, were countered by 6 275 job opportunities. “From April 2016 to December 2016, cumulative employment created by my Ministry stands at a total of 6 275 jobs, compared to 4 375 around the same time in the last financial year,” said Minister Seretse when delivering his Ministry’s 2017/18 budget last week.
Minister Seretse also told parliament that government business facilitation and investment arms have carried out their mandate significantly well in the past financial year soliciting over a billion pula worth of business for Botswana economy. “Total investment realized through business facilitation provided by Citizen Entrepreneurial Development Agency (CEDA), Botswana Development Corporation (BDC) and Botswana Investment and Trade Centre (BITC), across different business sectors accounted for P1.529billion,” said Seretse.
Botswana Development Corporation (BDC)’s half year, mid 5 year strategy report indicates doubled profits before tax for the investment entity. Government lender CEDA has also significantly invested on new agriculture, hotel and hospitality property businesses which are currently doing well.
Botswana Investment & Trade Center (BITI) which parted ways with its Chief Executive Officer, Letsebe Sejoe last week registered P377 million of investment expansions resulting from their investor aftercare program, which encourages companies to reinvest locally. FDI attracted through BITC in 2015 amounted to P1.493 billion compared to P1.489 billion the previous year, while domestic investment amounted to P1.253 billion compared to P238.4 million the previous year. In 2015, BITC further facilitated exports valued at P2.2 billion.
According to Seretse, Botswana property and manufacturing industries also realized growth in the past financial year. “The country is generally doing well in the Property and Manufacturing Sector, which pertains to production of goods as well as development of infrastructure targeted towards promoting manufacturing,” the minister said.
Seretse cited the state of the art infrastructural developments at the new Central Business Department (CBD) Gaborone which houses some of the best properties in the continent, form elite hotels, business offices and world class bourgeois residence. Furthermore, Seretse observed that Botswana’s ease of doing business has improved and significantly the country’s international rankings have also gone up.
“I wish to highlight that we are doing relatively well towards achieving our set targets in areas such as value of investment attraction and performing well in areas such as value of Exports and Business Start-ups. We also continue work on improving the ease of doing business environment and global competitiveness, “The Global Competitiveness Report that was released on the 28th September 2016 ranked Botswana 64 out of 138 countries and in the 2017 Ease of Doing Business Report, Botswana improved one place, from position 72 in 2016 to 71 in the 2017 Report. In the Global Enabling Trade Report that was released on 1st December 2016, Botswana made significant strides on the efficiency front as indicated by the country leading the region at Position one (1) followed by Rwanda and South Africa, respectively,” he added.
To promote and enhance ease of doing business in Botswana, Minister Seretse further told parliament that the Government of Botswana has partnered with the government of New Zealand and the World Bank to implement online registration of companies and business in a bid to fast track start up enterprises locally. He also told parliament that the World Bank will technically support the entire doing business reforms roadmap to place Botswana as a business & investment preferred place.
“The implementation of the Companies and Business Names Online Registration System Project funded by the New Zealand Government is ongoing. To facilitate the implementation of the project, the partnership arrangement between the New Zealand Ministry of Foreign Affairs and Trade (MFAT) and the Ministry of Investment, Trade and Industry (MITI) was signed on 16th July, 2016,” he said.
He also highlighted that CIPA was currently undertaking the Modernization of the Intellectual Property Office project, which aims to establish an efficient and effective operational and technical framework for the business processes related to the intellectual property applications and registration processes.
“The project which is funded by World Intellectual Property will allow the Companies and Intellectual Property Authority to offer online registration of intellectual property rights to improve service delivery. Currently the World Bank is providing technical assistance towards implementation of the “Doing Business Reforms” road map which include the tax reforms, trade facilitation, Information and Communication Technology (ICT), among others,” said Seretse.
To further create jobs the minister responsible for wooing investors into Botswana revealed that through initiatives such as the Economic Diversification Drive (EDD), Cooperative Society support programs, LEA entrepreneurship awareness initiative s the government intends to promote more citizen participation in businesses and job creation undertakings. Vincent Seretse also announced the Milk Afric Project in Lobatse was finally taking shape. The Project is expected to create jobs and reduce Botswana’s import bill in milk and milk by products commodities.
However experts and business analysts still cry foul of Botswana’s commitment to promoting ease of doing business and creating jobs for locals. Last year during the deliberations of the Parliamentary Committee on Public Enterprises & Statutory Bodies, former Botswana Investment & Trade Center Chief Executive Officer, Letsebe Sejoe told the committee led by Samson Guma Moyo that Botswana’s immigration laws were currently a nightmare to investors.
BITC, which is mandated with wooing investors to Botswana and promoting local exports grieved to lawmakers that investors were getting discouraged and moving to other countries because Botswana work permits , visa and business trade licenses procedures were cumbersome.
Specially Elected legislator Bogolo Kenewendo who is also a Specialist in Investment, Trade and Financial Economic issues noted in her response to 2017/16 Budget speech that as government moves to diversify the economy, facilitating and enhancing ease of doing business was key to achieving an industrial economy that created employment for its people and the youth.
Upcoming Shrewd economist, Moatlhodi Sebabole who is head of Economic Research at First National Bank Botswana also pleaded with the government to relax trade and immigration regulations. In his words, the youthful analyst said: Botswana’s Foreign Direct Investment was still untapped.
Speaking at the FNBB Budget Speech Review recently, Sebabole compared Botswana to countries such as Mozambique and the Democratic Republic of Congo which were doing well in attracting foreign investors to set up business and create employment for their natives. “If you look at our FDI figures, they are very low compared to countries I have mentioned, that raises a concern that there might be something we are not doing right,” he said.
He further explained that compared to those countries Botswana has better political stability with no civil unrest. “It suggests that possible there was somewhere we failing as far as attracting investors to Botswana noting that cumbersome and delayed processes and requirements with work permits and immigration go how was not an exception.”
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”