Consumers should brace for a further price hike on the most basic food as poor rains have dragged down this year’s yield on the country’s maize crop and even regionally.
Consumers who are already paying a lot for maize meal will in the next few months pay even more as a drought continues to starve maize producers of rain for their crops.
A shortage of white maize looms after South Africa experienced its driest year on record in 2015. Botswana depends on South Africa for 95 percent of its maize imports.
In South Africa maize prices have soared to record highs with the price of maize raw material increased with more than 60 percent over the past 4 months due to the drought in SA. In Botswana prices for maize products have gone up by 60 percent since November 2015 to date.
The Chairman of the Botswana Millers Association, Nkosi Mwaba had this to say, “There won’t be any maize shortage in the country however prices will rise even further. This is due to the shortage of white maize in South Africa, which has prompted the country to import from the global markets like USA, Mexico which comes at cost.”
He says there is enough white maize for human consumption this year in the global market, we won’t run out of maize but consumers should brace for price hike South Africa needs R20bn to import the 5 to 6 million tons of maize needed to mitigate the effects the drought has had on crop production.
“From November 2015 prices have gone up by 60 percent and we should experience a slight increase again however we can’t predict what will happen with the Rand.” “Consumers should know that it will get worse before it gets better,” said Mwaba.
Along the same line, Piet Van Wyk CEO of Bokomo Botswana noted that Bokomo has already secured maize for the new season (May 16 to April 17) and will be able to produce to capacity (7000 tons per month).
There should be sufficient product available to meet the demand however with the price hike in South Africa Maize product prizes will follow suite despite that Bokomo will do everything within its power to make White Star and Bokomo maize meal as affordable as possible.
Botswana needs about 180 000 tons of maize to meet the demand.
Meanwhile, the Southern Africa Development Community (SADC) Food security Agromet update has stated that the January rainfall distribution was generally too late to save the early planted crops and has led to permanently wilted crops beyond recovery in parts of Botswana.
The update highlighted that the very high temperatures being experienced in the southern half of the region have also increased heat and moisture stress affecting crops, vegetation and livestock. Satellite-based vegetation indices suggest that vegetation is at its poorest since 2001 for this time of year in most parts of Botswana, Lesotho, South Africa,
The report noted that the net impact of the low rainfall and resultant poor pasture conditions is that pasture will fail to fully regenerate this season, and pasture availability is likely to continue to be a challenge into at least the early parts of the 2016/2017 season.
In early February, Zimbabwe was added to the list of countries in the region that have declared a drought disaster, after Lesotho and South Africa. Mozambique also declared a national Orange Alert, which is the country’s second-highest state of disaster readiness. Several countries in the region are being negatively impacted by the dry conditions in the region in the last 2 seasons
In Botswana a national drought assessment tour is currently being undertaken, earlier than usual this year, due to the severity of the current drought.
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”