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Unfavourable 2016/17 budget outlook

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.

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Matsheka seeks raise bond program ceiling to P30 billion

14th September 2020
Dr Matsheka

This week Minister of Finance & Economic Development, Dr Thapelo Matsheka approached parliament seeking lawmakers approval of Government’s intention to increase bond program ceiling from the current P15 Billion to P30 billion.

“I stand to request this honorable house to authorize increase in bond issuance program from the current P15 billion to P30 billion,” Dr Matsheka said. He explained that due to the halt in economic growth occasioned by COVID-19 pandemic government had to revisit options for funding the national budget, particularly for the second half of the National Development Plan (NDP) 11.

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Lucara sits clutching onto its gigantic stones with bear claws in a dark pit

14th September 2020
Lesedi La Rona

Botswana Stock Exchange (BSE) has this week revealed a gloomy picture of diamond mining newcomer, Lucara, with its stock devaluated and its entire business affected by the COVID-19 pandemic.

A BSE survey for a period between 1st January to 31st August 2020 — recording the second half of the year, the third quarter of the year and five months of coronavirus in Botswana — shows that the Domestic Company Index (DCI) depreciated by 5.9 percent.

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Botswana Diamonds issues 50 000 000 shares to raise capital

14th September 2020
Diamonds

Botswana Diamond PLC, a diamond exploration company trading on both London Stock Exchange Alternative Investment Market (AIM) and Botswana Stock Exchange (BSE) on Monday unlocked value from its shares to raise capital for its ongoing exploration works in Botswana and South Africa.

A statement from the company this week reveals that the placing was with existing and new investors to raise £300,000 via the issue of 50,000,000 new ordinary shares at a placing price of 0.6p per Placing Share.

Each Placing Share, according to Botswana Diamond Executives has one warrant attached with the right to subscribe for one new ordinary share at 0.6p per new ordinary share for a period of two years from, 7th September 2020, being the date of the Placing Warrants issue.

In a statement Chairman of Botswana Diamonds, John Teeling explained that the funds raised will be used to fund ongoing exploration activities during the current year in Botswana and South Africa, and to provide additional working capital for the Company.

The company is currently drilling kimberlite M8 on the Marsfontein licence in South Africa and has generated further kimberlite targets which will be drilled on the adjacent Thorny River concession.

In Botswana, the funds will be focused on commercializing the KX36 project following the recent acquisition of Sekaka Diamonds from Petra Diamonds. This will include finalizing a work programme to upgrade the grades and diamond value of the kimberlite pipe as well as investigating innovative mining options.

Drilling is planned for the adjacent Sunland Minerals property and following further assessment of the comprehensive Sekaka database more drilling targets are likely. “This is a very active and exciting time for Botswana Diamonds. We are drilling the very promising M8 kimberlite at Marsfontein and further drilling is likely on targets identified on the adjacent Thorny River ground,” he said.

The company Board Chair further noted, “We have a number of active projects. The recently acquired KX36 diamond resource in the Kalahari offers great potential. While awaiting final approvals from the Botswana authorities some of the funds raised will be used to detail the works we will do to refine grade, size distribution and value per carat.”

In addition BOD said the Placing Shares will rank pari passu with the Company’s existing ordinary shares. Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that such admission will become effective on or around 23 September 2020.

Last month Botswana Diamond announced that it has entered into agreement with global miner Petra Diamonds to acquire the latter’s exploration assets in Botswana. Key to these assets, housed under Sekaka Diamonds, 100 % subsidiary of Petra is the KX36 Diamond discovery, a high grade ore Kimberlite pipe located in the CKGR, considered Botswana’s next diamond glory after the magnificent Orapa and prolific Jwaneng Mines.

The acquisition entailed two adjacent Prospecting Licences and a diamond processing plant. Sekaka has been Petra’s exploration vehicle in Botswana for year and holds three Prospecting Licenses in the Central Kalahari Game Reserve (Kalahari) PL169/2019, PL058/2007 and PL224/2007, which includes the high grade KX36 kimberlite pipe.

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