The Citizen Entrepreneurial Development Agency (CEDA) will on the 2nd of November host a joint forum of Chief Executive Officers (Joint CEO’s Forum) of the World Federation of Development Finance Institutions (WFDFI). This comes after the financing and advisory institution was awarded the rights to host the Joint CEO’s Forum ahead of other development finance institutions (DFIs) from Nigeria, Morocco and South Africa at a Joint CEO’s Forum of the Association of African Development Finance Institutions (AADFI) in Kampala, Uganda.
The WFDFI comprises of the Association of African Development Finance Institutions (AADFI), the Association of Development Finance Institutions in member-countries of the Islamic Development Bank (ADFIMI), the Association of Development Finance Institutions in Latin America (ALIDE) and the Association of Development Financing Institutions in Asia and Pacific (ADFIAP).
The Joint CEO’s Forum which happens every two years was first held in 2012 in South Africa, followed by another forum in Malaysia in 2014.The event brings together participants from WFDFI member Associations in over 100 countries, CEO’s, Government Officials, representatives from Central Banks and private financial institutions as well as Ministers of Trade and Finance. The two day conference will be held under the theme “DFIs Sustaining Relevance in the Age of Disruption.” This year’s Joint CEO’s Forum will discuss current trends in the global DFI environment, foster closer working relationship among CEOs and Senior Executives of DFIs, share and learn best practices in development financing operations and develop and strengthen partnership for cross-border investment promotion and financing.
“The theme is considered apt as it challenges the relevance of DFIs in today’s rapidly changing financial system and economic structure. While it is widely accepted that DFIs play a major role in facilitating development, their role, institutional structure, funding sources and success measures are largely dependent on the enabling financial system and economic structure within which they operate. The theme therefore compels DFIs to adapt and innovate so as to deliver services that speak to the needs and challenges faced by the people today,” said CEDA in a press release.
The financing agency further said that the term ‘disruption’ talks about innovation, shifts in demographics, societal behavior and needs, economic and market conditions as well as political, legal and regulatory regimes. “Therefore DFIs are challenged to tackle disruption by refining their objectives, optimizing board and government systems, improving efficiency in operations and accelerating progress and sustainability. Against this backdrop, it is no longer business as usual for DFIs.”
Mr. Thabo Thamane, the chief executive officer of CEDA, said that the forum comes at an apt time given the challenges that the global economy has faced in the recent past, and presents an opportunity to share experiences on how development finance institutions are facing these challenges. “For CEDA and Botswana this opportunity is even more pronounced given our commitment to entrepreneurship and empowerment; achieving economic diversification, encouraging competitive and sustainable citizen enterprises and creating sustainable long-term employment opportunities. The recent disruptions have therefore affected the Botswana economy and presented a challenging opportunity to effectively execute on our mandate,” He said.
He further explained that with rapid advances in technology such as e-banking and mobile banking, it is imperative for DFIs to adopt new technologies that will improve operational efficiency, risk management and service delivery, also adding that the forum will also discuss how DFIs can explore innovative sources of revenue to achieve sustainable development. There will also be a panel discussion aimed at getting thoughts and insights on sustaining the relevance of DFIs going forward
“However, this is not to say that DFIs have become irrelevant as special policy institutions through which governments can mobilize and deploy financial resources to citizens for rapid development. Our aim is to discuss ways in which we can innovate and face these challenges head on so that DFI’s can remain relevant going forward,” said Thamane.
Mr. Thamane, who has been at the helm of the agency for the past 5 years, believes that forum will unlock opportunities in Botswana, emphasising that the country provides an exceptional location for hosting the event given its reputation as one of the world’s most outstanding places to do business. He said this has been made possible by zero tolerance to corruption, sound legal system and adherence to the rule of law, political stability and sustained periods of economic growth.
“Gaborone in itself as a city offers a wide array of activities to suit both the corporate and the tourist. The sights and sounds of the city will keep you entertained throughout the days of the Forum. I hope you will find the Forum very valuable and your stay in Gaborone enjoyable and memorable. Let me also invite you to use your visit to Botswana as an opportunity to explore other parts of the country. Botswana is a host to a World Heritage Site, the pristine Okavango Delta. We will be happy to assist you plan a memorable and a once in a life time trip,” Mr. Thamane said in a message to participants.
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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”