Ministry of Finance and Development Planning (MoFDP) has hinted this week that the 2017/18 budget will likely be unfavourable. The budget for the next financial year will be the first since the adoption of NDP 11 and Vision 2036.
According to the 2017/2018 Strategy Paper presented by MoFDP on Thursday in Gaborone, the major downside risks to the budget outlook includes the “continued slow recovery in the global economy, undiversified revenue base, and unforeseen emergency expenditures to address water and electricity supply challenges, and natural disasters like drought and outbreak of animal diseases.”
In addition it states that among the risk to the budget outlook include the continued and sluggish global economic developments which impact on the domestic economy through low commodity prices translating into decreased diamond export earnings and lower revenues for government as well as continued reliance on diamond earnings.
According to the strategy paper, the other risks include “water and electricity shortages which pose a threat to value addition of other economic sectors, public expenditure pressures, especially personnel emoluments under recurrent expenditure.”
It also says that the expansion of guarantees issued to back up parastatals’ loans and weak monitoring, evaluation and implementation of development programmes and projects as well as natural disasters such as recurring drought and animal disease outbreak are other notable risks highlighted in the strategy.
Health costs arising from test and treat initiatives and increased provision of drugs to HIV/AIDS; and Increase in Tertiary Education Funding, were also pointed out as contributing to high risk in the anticipated budget.
In terms of the budget outlook, it was said the financial year is projected to result in among others a “budget deficit of P6.8 billion” or -4.1 percent of GDP.
The paper goes on to explain that this is attributable to the projected “modest growth” in revenues, and “continued pressures” arising from the implementation of the much talked about Economic Stimulus package (ESP).
It further states that: “the expected growth in the real GDP of 4.0 percent in 2017/2018 is insufficient in addressing the development challenges of unemployment, poverty, and income inequality.”
“Despite this projected unfavourable 2017/2018 budget outlook, the Budget strategy paper posits that government remains committed to maintaining fiscal sustainability in the medium term. Thus, additional measures to raise domestic revenues or trim the planned expenditure during the implementation of the NDP 11 will be considered, if necessary, to restore fiscal sustainability.”
Moreover it says there is a need to use the impending financial year budget, which will be first financial year subsequent to the adoption of the crucial NDP 11 and Vision 2036, to align the implementation of the two documents, with a view to promoting growth, economic diversification, and employment creation.
It is understood that the preparation of the 2017/2018 Budget Strategy Paper drew from the national priorities identified in the draft NDP 11, while taking into account the country`s fiscal policy parameters.
The strategy paper maintained that: “however, there was also need to ensure that the implementation of the ongoing ESP is continued during 2017/2018 financial year, despite the budgetary pressures.”
The Budget Strategy Paper was prepared under continued difficult domestic economic conditions, with moderate growth expected due to weak recovery in the global economy.
2015/2016 Budget Outturn
The 2015/2016 budget outturn indicates that a total of P48.29 billion was collected as revenues and grants during the year; of which P35.76 billion was tax revenue, while P12.39 billion was non-tax revenue and P0.14 billion was grants. Figure 4 shows the share of tax revenue by major items. Of the amount collected as tax revenue, Customs & Excise accounted for the largest share of 44.0 percent, while non-mineral income tax contributed 26.0 percent.
Tax revenue collected in 2015/2016 was 2.0 percent above the estimate of P35.05 billion in the revised budget. Non-tax revenue, on the other hand, was 24.0 percent lower than the revised budget estimate of P16.38 billion. This was mainly due to low mineral royalties and dividends payments, which make up over 90.0 percent of non-tax revenue. Seventy-two percent or P9.98 billion was paid as royalties and dividends during the fiscal year, compared to the revised budget estimate of P13.84 billion, due to the operational difficulties faced by several mines in the country. Grants received were also low, amounting to P0.14 billion against estimated grants of P0.34 billion, due to a decline in recurrent grants.
Expenditure performance during 2015/2016, on the other hand, was satisfactory, with total expenditure and net lending amounting to P54.92 billion, or 98 percent of the revised budget estimate. This comprised: P40.93 billion recurrent expenditure; P12.77 billion development expenditure; P0.76 billion lending from the Public Debt Service Fund to state owned enterprises; P0.55 billion equity injections into state owned enterprises; and P0.07 billion of loans repayment. A further analysis of the two major components of expenditures shows that, Recurrent Expenditure stood at 98.0 percent of the revised budget estimate of P41.72 billion, while Development Expenditure was 89.0 percent of the revised estimate of P14.32 billion.
As a result of the revenue and expenditure performance, the overall fiscal balance for the 2015/2016 financial year was a deficit of P6.63 billion, or -4.5 percent of GDP. Whereas total expenditure remained within the projected threshold in the revised budget estimates, then deficit was mainly occasioned by the revenue shortfall, which underperformed by P3.47 billion or 6 percent, compared to the revised budget estimate of P51.8 billion.
The state of the art jewellery manufacturing plant that has been set up by international diamond and cutting company, KGK Diamonds Botswana will create over 100 jobs, of which 89 percent will be localized.
Local diamond and metal exploration company Tsodilo Resources Limited has negotiated a non-brokered private placement of 2,200, 914 units of the company at a price per unit of 0.20 US Dollars, which will provide gross proceeds to the company in the amount of C$440, 188. 20.
According to a statement from the group, proceeds from the private placement will be used for the betterment of the Xaudum iron formation project in Botswana and general corporate purposes.
The statement says every unit of the company will consist of a common share in the capital of the company and one Common Share purchase warrant of the company.
Each warrant will enable a holder to make a single purchase for the period of 24 months at an amount of $0.20. As per regularity requirements, the group indicates that the common shares and warrants will be subject to a four month plus a day hold period from date of closure.
Tsodilo is exempt from the formal valuation and minority shareholder approval requirements. This is for the reason that the fair market value of the private placement, insofar as it involves the director, is not more than 25% of the company’s market capitalization.
Tsodilo Resources Limited is an international diamond and metals exploration company engaged in the search for economic diamond and metal deposits at its Bosoto Limited and Gcwihaba Resources projects in Botswana. The company has a 100% stake in Bosoto which holds the BK16 kimberlite project in the Orapa Kimberlite Field (OKF) in Botswana.
African heads of state and global CEOs at the World Economic Forum Annual Meeting backed the launch of the first of its kind report on how public-private partnerships can support the implementation of the African Continental Free Trade Area (AfCFTA).
AfCFTA: A New Era for Global Business and Investment in Africa outlines high-potential sectors, initiatives to support business and investment, operational tools to facilitate the AfCFTA, and illustrative examples from successful businesses in Africa to guide businesses in entering and expanding in this area.
The report aims to provide a pathway for global businesses and investors to understand the biggest trends, opportunities and strategies to successfully invest and achieve high returns in Africa, developing local, sub-regional and continental value chains and accelerating industrialization, all of which go hand in hand with the success of the AfCFTA.
The AfCFTA is the largest free trade area in the world, by area and number of participating countries. Once fully implemented, it will be the fifth-largest economy in the world, with the potential to have a combined GDP of more than $3.4 trillion. Conceived in 2018, it now has 54 national economies in Africa, could attract billions in foreign investment, and boost overseas exports by a third, double intra-continental trade, raise incomes by 8% and lift 50 million people out of poverty.
To ease the pain of transition to its new single market, Africa has learned from trade liberalization in North America and Europe. “Our wide range of partners and experience can help anticipate and mitigate potential disruptions in business and production dynamics,” said Børge Brende, President, and World Economic Forum. “The Forum’s initiatives will help to ease physical, capital and digital flows in Africa through stakeholder collaboration, private-public collaboration and information-sharing.”
Given the continent’s historically low foreign direct investment relative to other regions, the report highlights the sense of excitement as the AfCFTA lowers or removes barriers to trade and competitiveness. “The promising gains from an integrated African market should be a signal to investors around the world that the continent is ripe for business creation, integration and expansion,” said Chido Munyati, Head of Regional Agenda, Africa, World Economic Forum.
The report focuses on four key sectors that have a combined worth of $130 billion and represent high-potential opportunities for companies looking to invest in Africa: automotive; agriculture and agroprocessing; pharmaceuticals; and transport and logistics.
“Macro trends in the four key sectors and across Africa’s growth potential reveal tremendous opportunities for business expansion as population, income and connectivity are on the rise,” said Wamkele Mene, Secretary-General, AfCFTA Secretariat.
“These projections reveal an unprecedented opportunity for local and global businesses to invest in African countries and play a vital role in the development of crucial local and regional value chains on the continent,” said Landry Signé, Executive Director and Professor, Thunderbird School of Global Management and Co-Chair, World Economic Forum Regional Action Group for Africa.
The Forum is actively working towards implementing trade and investment tools through initiatives, such as Friends of the Africa Continental Free Trade Area, to align with the negotiation process of the AfCFTA. It identifies areas where public-private collaboration can help reduce barriers and facilitate investment from international firms.
About the World Economic Forum Annual Meeting 2023
The World Economic Forum Annual Meeting 2023 convenes the world’s foremost leaders under the theme, Cooperation in a Fragmented World. It calls on world leaders to address immediate economic, energy and food crises while laying the groundwork for a more sustainable, resilient world. For further information,