Chairman of Parliamentary Committee on Statutory Bodies and Enterprises, Samson Guma has said that lack of respect for rule of law and parliament threatens the country’s prudent fiscal policy.
Guma said as a legislator, he feels disrespected by ministries who have the impression that parliament will approve every financial request from government departments even when it is clear that careless financial decisions were made.
This comes in the wake of among others, a decision by Minister of Environment, Natural Resources Conservation and Tourism Tshekedi Khama’s directive to BTO CEO, Brian Dithebe, to implement a new organisational structure which will cost government an additional P22 million in the current financial year. The minister has reportedly informed BTO that the shortfall in the BTO budget will be financed through a supplementary budget request.
“You do not implement a structure which you have not budgeted for without getting approval first,” Guma said this week.
Guma’s concerns corroborate concerns by members of the opposition that parliament has been rubber stamping supplementary budget requests for various ministries without making its own assessment on whether such spending is necessary or not.
It has become a norm recently that a large sum of money is appropriated outside the normal budgeting process mainly because of poor planning or unnecessary spending by a ministry.
In November 2014, at the first meeting of parliament, eyebrows were raised when a total of P2.4 billion was wholly approved by parliament despite questionable requests being brought forth by ministries before parliament.
Ndaba Gaolathe, who is a member of Finance and Estimates committee, argued in a fierce debate in parliament then, that no country in the world could appropriate such amount of money without careful considerations.
Gaolathe then submitted a proposal on the framework of analysis of supplementary funding of Government ministries, and its departments.
The frame work identified five key criteria, considered to be pertinent in any national supplementary budgeting process. This categories are; unforeseen, high systematic risk, cost-benefit, sustainability and Management of Risk.
Gaolathe contended that supplementary funding should only be for those expenses that meet the requirements as prescribed by the constitution or that were foreseen but not budget for due to planning lapse or sudden changes in government revenue out-turn.
Not only is the Tati East legislator worried by such lack of respect for the authority of parliament in making its own assessment, he also mentioned degeneration in respect for rule of law and disregard for the country’s public procurement system.
During the current committee sitting, it has been established that incidences for undermining public procurement laws and procedures are on the rise, with ministers and boards engaging on contracts with their preferred companies contrary to Public Procurement and Assets Disposal Board (PPADB) procedures.
The primary mandate of PPADB is to adjudicate and award tenders for central Government and other quasi- government institutions specified under the Act for the delivery of works, services and supplies related services.The PPADB mandate is also to ensure that projects are prudentially managed to ensure value for money in the procurement and disposal of assets.
However, few weeks ago, Minister Khama was forced to cancel a planned opening of an office in Dubai because it was not budgeted for, and a proper process relating to use of public money was not followed.
Guma’s committee was informed by Air Botswana Acting General Manager, Agnes Khunwane that a tender worth P81 million was awarded to a European company, a few days after the dismissal of the board. The tender was authorised by Neil Fitt, Permanent Secretary at the Ministry of Transport and Communications. The committee ruled that Fitt did not have the power to approve such an amount of money in the absence of the board.
The committee also heard this week that Minister Khama insisted that a company called ASUIA be directly appointed to provide what was initially agreed upon as insurance for tourists visiting the country. The company was to be entitled to 12 percent of the total collections, with the rest going to government.
However, the committee has been told that Ministry of Finance and Economic Development, throughNon-Bank Financial Institutions Regulatory Authority (NBFRA) has raised their own concerns with regards to the proposed idea, resulting with the proposal be amended to now make it a levy.
Under the new proposal, ASUIA will be entitled to one third (33.3 percent) of the total collection every month. This translate to about P2.5 million monthly and P30 million annually. The committee has questioned Khama’s insistence that ASUIA be given the tender even after the initial idea changed.
In a letter dated 8th February 2016, addressed to BTO CEO, Dithebe by Khama stated that: “In the absence of a quorate board to consider ASUIA proposal, you are accordingly instructed to implement the instruction, inclusive of directly appointing ASUIA as a service provider for inbound insurance under the terms and conditions stipulated in the existing contract, save for any reference to BTO Board approval.”
Mowana Copper Mine in Dukwi will finally pay its former employees a total amount of P23, 789, 984.00 end of this month. For over three years Mowana Copper Mine has been under judicial management. Updating members, Botswana Mine Workers Union (BMWU) Executive Secretary Kitso Phiri this week said the High Court issued an order for the implementation of the compromise scheme of December 9, 2021 and this was to be done within 30 days after court order.
“Therefore payment of benefits under the scheme including those owed to Messina Copper Botswana employees should be effected sometime in January latest end of January 2022,” Kitso said. Kitso also explained that cash settlement will be 30 percent of the total Messina Copper Botswana estate and negotiated estate is $3,233,000 (about P35, 563,000).
Messina Copper was placed under liquidation and was thereafter acquired by Leboam Holdings to operate Mowana Mine. Leboam Holdings struck a deal with the Messina Copper’s liquidator who became a shareholder of Leboam Holdings. Leboam Holdings could not service its debts and its creditors placed it under provisional judicial management on December 18, 2018 and in judicial management on February 28, 2019.
A new company Max Power expressed interest to acquire the mining operations. It offered to take over the Mowana Mine from Leboam Holdings, however, the company had to pay the debts of Leboam including monies owed to Messina Copper, being employees benefits and other debts owed to other creditors.
The monies, were agreed to be paid through a scheme of compromise proposed by Max Power, being a negotiated payment schedule, which was subject to the financial ability of the new owners. “On December 9, 2021, Messina Copper liquidator, called a meeting of creditors, which the BMWU on behalf of its members (former Messina Copper employees) attended, to seek mandate from creditors to proceed with a proposed settlement for Messina Copper on the scheme of compromise. It is important to note that employee benefits are regarded as preferential credit, meaning once a scheme is approved they are paid first.”
A savingram the Ministry of Local Government and Rural Development sent to Town Clerks and Council Secretaries explaining why councilors across the country should not have access to their terminal benefits before end of their term has been revealed.
The contents of the savingram came out in the wake of a war of words between counselors and the Ministry of Local Government and Rural Development. The councilors through the Botswana Association of Local Authorities (BALA) accuse the Ministry of refusing to allow them to have access to their terminal benefits before end of their term.
This has since been denied by the Ministry. In the savingram to town councils and council secretaries across the country, Permanent Secretary in the Ministry of Local Government and Rural Development Molefi Keaja states that, “Kindly be advised that the terminal benefits budget is made during the final year of term of office for Honorable Councilors.” Keaja reminded town clerks and council secretaries that, “The nominal budget Councils make each and every financial year is to cater for events where a Councilor’s term of office ends before the statutory time due to death, resignation or any other reason.”
The savingram also goes into detail about why the government had in the past allowed councilors to have access to their terminal benefits before the end of their term. “Regarding the special dispensation made in the 2014-2019, it should be noted that the advance was granted because at that time there was an approved budget for terminal benefits during the financial year,” explained Keaja. He added that, “Town Clerks/Council Secretaries made discretions depending on the liquidity position of Councils which attracted a lot of audit queries.”
Keaja also revealed that councils across the country were struggling financially and therefore if they were to grant councilors access to their terminal benefits, this could leave their in a dire financial situation. Given the fact that Local Authorities currently have cash flow problems and budgetary constraints, it is not advisable to grant terminal benefits advance as it would only serve to compound the liquidity problems of councils.
It is understood that the Ministry was inundated with calls from some Councils as they sought clarification regarding access to their terminal benefits. The Ministry fears that should councils pay out the terminal benefits this would affect their coffers as the government spends a lot on councilors salaries.
Reports show that apart from elected councilors, the government spends at least P6, 577, 746, 00 on nominated councilors across the country as their monthly salaries. Former Assistant Minister of Local Government and Rural Development, Botlogile Tshireletso once told Parliament that in total there are 113 nominated councilors and their salaries per a year add up to P78, 933,16.00. She added that their projected gratuity is P9, 866,646.00.
A surge in consumer spending is expected to be a key driver of Botswana’s economic recovery, according to recent projections by Fitch Solutions. Fitch Solutions said it forecasts household spending in Botswana to grow by a real rate of 5.9% in 2022.
The bullish Fitch Solutions noted that “This is a considerable deceleration from 9.4% growth estimated in 2021, it comes mainly from the base effects of the contraction of 2.5% recorded in 2020,” adding that, “We project total household spending (in real terms) to reach BWP59.9bn (USD8.8bn) in 2022, increasing from BWP56.5bn (USD8.3bn) in 2021.” According to Fitch Solutions, this is higher than the pre-Covid-19 total household spending (in real terms) of P53.0 billion (USD7.8bn) in 2019 and it indicates a full recovery in consumer spending.
“We forecast real household spending to grow by 5.9% in 2022, decelerating from the estimated growth of 9.4% in 2021. We note that the Covid-19 pandemic and the related restrictions on economic activity resulted in real household spending contracting by 2.5% in 2020, creating a lower base for spending to grow from in 2021 and 2022,” Fitch Solutions says.
Total household spending (in real terms), the agency says, will increase in 2022 when compared to 2021. In 2021 and 2022, total household spending (in real terms) will be above the pre-Covid-19 levels in 2019, indicating a full recovery in consumer spending, says Fitch Solutions. It says as of December 6 2021 (latest data available), 38.4% of people in Botswana have received at least one vaccine dose, while this is relatively low it is higher than Africa average of 11.3%.
“The emergence of new Covid-19 variants such as Omicron, which was first detected in the country in November 2021, poses a downside risk to our outlook for consumer spending, particularly as a large proportion of the country’s population is unvaccinated and this could result in stricter measures being implemented once again,” says Fitch Solutions.
Growth will ease in 2022, Fitch Solution says. “Our forecast for an improvement in consumer spending in Botswana in 2022 is in line with our Country Risk team’s forecast that the economy will grow by a real rate of 5.3% over 2022, from an estimated 12.5% growth in 2021 as the low base effects from 2020 dissipate,” it says.
Fitch Solutions notes that “Our Country Risk team expects private consumption to be the main driver of Botswana’s economic growth in 2022, as disposable incomes and the labour market continue to recover from the impacts of the Covid-19 pandemic.” It says Botswana’s tourism sector has been negatively impacted by the Covid-19 pandemic and the related travel restrictions.
According to Fitch Solutions, “The emergence of the Omicron variant, which was first detected in November 2021, has resulted in travel bans being implemented on Southern African countries such as South Africa, Botswana, Lesotho, Namibia, Zimbabwe and Eswatini. This will further delay the recovery of Botswana’s tourism sector in 2021 and early 2022.” Fitch Solutions, therefore, forecasts Botswana’s tourist arrivals to grow by 81.2% in 2022, from an estimated contraction of 40.3% in 2021.
It notes that the 72.4% contraction in 2020 has created a low base for tourist arrivals to grow from. “The rollout of vaccines in South Africa and its key source markets will aid the recovery of the tourism sector over the coming months and this bodes well for the employment and incomes of people employed in the hospitality industry, particularly restaurants and hotels as well as recreation and culture businesses,” the report says.
Fitch Solutions further notes that with economies reopening, consumers are demanding products that they had little access to over the previous year. However, manufacturers are facing several problems. It says supply chain issues and bottlenecks are resulting in consumer goods shortages, feeding through into supply-side inflation. Fitch Solutions believes the global semiconductor shortage will continue into 2022, putting the pressure on the supply of several consumer goods.
It says the spread of the Delta variant is upending factory production in Asia, disrupting shipping and posing more shocks to the world economy. Similarly, manufacturers are facing shortages of key components and higher raw materials costs, the report says adding that while this is somewhat restricted to consumer goods, there is a high risk that this feeds through into more consumer services over the 2022 year.
“Our global view for a notable recovery in consumer spending relies on the ability of authorities to vaccinate a large enough proportion of their populations and thereby experience a notable drop in Covid-19 infections and a decline in hospitalisation rates,” says Fitch Solutions. Both these factors, it says, will lead to governments gradually lifting restrictions, which will boost consumer confidence and retail sales.
“As of December 6 2021, 38.4% of people in Botswana have received at least one vaccine dose. While this is low, it is higher than the Africa average of 11.3%. The vaccines being administered in Botswana include Pfizer-BioNTech, Sinovac and Johnson & Johnson. We believe that a successful vaccine rollout will aid the country’s consumer spending recovery,” says Fitch Solutions. Therefore, the agency says, “Our forecasts account for risks that are highly likely to play out in 2022, including the easing of government support. However, if other risks start to play out, this may lead to forecast revisions.”