Botswana could create more jobs by changing its mindset and unlocking opportunities. This was revealed at the first annual Job Summit held in Gaborone. The panellists, made up of experts across various industries, told participants that Botswana should use its access to cheaper capital as a tool for improving the country’s prosperity. Furthermore, Botswana should align itself with the global world’s thinking.
“Botswana has been caught on the wrong side of global thinking. While the USA is talking about inclusive growth, this has not been the case here,” said Obuseng Sennye, CEO of Preston Executive. Sennye explained that part of global thinking involves seeing opportunities while others see crisis, he gave an example of immigration reforms as a tool for attracting the best brains and fostering competition. “Creativity and competiveness attracts talent that could be used for creating jobs.”
In his presentation, Sennye said that the country is facing serious problems in project management and implementation. He said that the country’s problems are deeply structural, and that the country’s problems with job creation predates the 2008 recession.
Sennye expressed concerns that policies have not delivered intended objectives, he argued for a change in focus. “The focus should be on quality growth that doesn’t leave the majority out,” he stressed, adding that quality jobs and social inclusion matter a great deal in the development of any country.
Sennye underlined the importance of strategic forecasting in dealing with the country’s problems, challenging the leadership to change their mindset in the fight against corruption. He said that the government should strive to be efficient and accountable.
“Rwanda thrives through efficiency. They achieved this through good planning and efficient execution,” he said. On the issue of reforms, Sennye holds that regulatory reforms which will align the country with global thinking are needed, giving an example of investor protection reforms that will guard against arbitrary deportation.
Thapelo Tsheole, Deputy Chief Executive Officer, Botswana Stock Exchange (BSE), said the country needs to look beyond borders to leverage on the relationships it has with other countries. He explained that Botswana has a strong balance sheet, comprising of pension and foreign reserves, which could be used to help local companies expand into new markets.
“Expanding companies bring money in the country because they will have their headquarters here.”
He added that Africa has a rising middle class, therefore opportunities are in abundance in other countries.
Tsheole said the financial service sector offers room for growth, furthermore other countries continue to show confidence in the local bourse. “The average daily trading in our stock exchange is around P12 million, half of that comes from outside,” he remarked. According to Tsheole, Botswana’s high credit ratings and no exchange controls makes it attractive to investors.
When commenting on Botswana’s foreign reserves that stand at P88 billion, Tsheole said that not all the money belongs to the government, some belong to the pension funds. He took issue with the foreign reserves that are managed outside the country, saying that investing offshore creates jobs there and not here.
“We should exploit our capital before it’s exploited, they develop at our expense,” he said, adding that sending money outside results in no skills transfer. He called for affirmative action in managing the funds.
Tsheole warned that “individualist pursuits” have distorted the functions of institutions. He said some institutions in Botswana function as if they are working for a different country or economies. This has led to complexity in project management, in the process creating fragmentation. “We need coordination and to have some form of linkage,” he concluded.
Tsheole’s message will struck a chord with those who have been calling for pension funds to invest the bulk of their money locally. Pension funds are allowed to invest 30% of the money locally and 70% offshore. Botswana Public Officers Pension Fund, with assets valued above P50 billion, is one of the largest pension funds in Southern Africa.
It has invested 35% in Botswana while the rest is offshore. Of recent they have been investing more in the country through their P800 million infrastructure fund, so far they have committed P300 million from the fund in bringing the first Hilton hotel to Botswana.
Marcian Concepts have been contracted by Selibe Phikwe Economic Unit (SPEDU) in a P230 million project to raise the town from its ghost status. The project is in the design and building phase of building an industrial hub for Phikwe; putting together an infrastructure in Bolelanoto and Senwelo industrial sites.
This project comes as a life-raft for Selibe Phikwe, a town which was turned into a ghost town when the area’s economic mainstay, BCL mine, closed four years ago. In that catastrophe, 5000 people lost their livelihoods as the town’s life sunk into a gloomy horizon. Businesses were closed and some migrated to better places as industrial places and malls became almost empty.
However, SPEDU has now started plans to breathe life into the town. Information reaching this publication is that Marcian Concepts is now on the ground at Bolelanoto and Senwelo and works have commenced. Marcian as a contractor already promises to hire Phikwe locals only, even subcontract only companies from the area as a way to empower the place’s economy.
The procurement method for the tender is Open Domestic bidding which means Joint Ventures with foreign companies is not allowed. According to Marcian Concepts General Manager, Andre Strydom, in an interview with this publication, the project will come with 150 to 200 jobs. The project is expected to take 15 months at a tune of P230 531 402. 76. Marcian will put together construction of roadworks, storm-water drains, water reticulation, street lighting and telecommunication infrastructure. This tender was flouted last year August, but was awarded in June this year. This project is seen as the beginning of Phikwe’s revival and investors will be targeted to the area after the town has worn the ghost city status for almost half a decade.
The International Monetary Fund (IMF) has slashed its outlook the world economy projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.
On Wednesday when delivering its World Economic Outlook report titled “A long difficult Ascent” the Washington Based global lender said it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April. For 2021, IMF experts have projected growth of 5.4%, down from 5.8%. “We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” said Gita Gopinath Economic Counsellor and Director of Research.
The struggle of humanity is now how to dribble past the ‘Great Pandemic’ in order to salvage a lean economic score. Botswana is already working on dwindling fiscal accounts, budget deficit, threatened foreign reserves and the GDP data that is screaming recession.
Latest data by think tank and renowned rating agency, Moody’s Investor Service, is that Botswana’s fiscal status is on the red and it is mostly because of its mineral-dependency garment and tourism-related taxation. Botswana decided to close borders as one of the containment measures of Covid-19; trade and travellers have been locked out of the country. Moody’s also acknowledges that closing borders by countries like Botswana results in the collapse of tourism which will also indirectly weigh on revenue through lower import duties, VAT receipts and other taxes.
Latest economic data shows that Gross Domestic Product (GDP) for the second quarter of 2020 with a decrease of 27 percent. One of the factors that led to contraction of the local economy is the suspension of air travel occasioned by COVID-19 containment measures impacted on the number of tourists entering through the country’s borders and hence affecting the output of the hotels and restaurants industry. This will also be weighed down by, according to Moody’s, emerging markets which will see government losing average revenue worth 2.1 percentage points (pps) of GDP in 2020, exceeding the 1.0 pps loss in advanced economies (AEs).
“Fiscal revenue in emerging markets is particularly vulnerable to this current crisis because of concentrated revenue structures and less sophisticated tax administrations than those in AEs. Oil exporters will see the largest falls but revenue volatility is a common feature of their credit profiles historically,” says Moody’s. The domino effects of containment measures could be seen cracking all sectors of the local economy as taxes from outside were locked out by the closure of borders hence dwindling tax revenue.
Moody’s has placed Botswana among oil importers, small, tourism-reliant economies which will see the largest fall in revenue. Botswana is in the top 10 of that pecking order where Moody’s pointed out recently that other resource-rich countries like Botswana (A2 negative) will also face a large drop in fiscal revenue.
This situation of countries’ revenue on the red is going to stay stubborn for a long run. Moody’s predicts that the spending pressures faced by governments across the globe are unlikely to ease in the short term, particularly because this crisis has emphasized the social role governments perform in areas like healthcare and labour markets.
For countries like Botswana, these spending pressures are generally exacerbated by a range of other factors like a higher interest burden, infrastructure deficiencies, weaker broader public sector, higher subsidies, lower incomes and more precarious employment. As a result, most of the burden for any fiscal consolidation is likely to fall on the revenue side, says Moody’s.
Moody’s then moves to the revenue spin of taxation. The rating agency looked at the likelihood and probability of sovereigns to raise up revenue by increasing tax to offset what was lost in mineral revenue and tourism-related tax revenue. Moody’s said the capacity to raise tax revenue distinguishes governments from other debt issuers. “In theory, governments can change a given tax system as they wish, subject to the relevant legislative process and within the constraints of international law. In practice, however, there are material constraints,” says Moody’s.
‘‘The coronavirus crisis will lead to long-lasting revenue losses for emerging market sovereigns because their ability to implement and enforce effective revenue-raising measures in response will be an important credit driver over the next few years because of their sizeable spending pressures and the subdued recovery in the global economy we expect next year.’’
According to Moody’s, together with a rise in stimulus and healthcare spending related to the crisis, the think tank expects this drop in revenue will trigger a sizeable fiscal deterioration across emerging market sovereigns. Most countries, including Botswana, are under pressure of widening their tax bases, Moody’s says that this will be challenging. “Even if governments reversed or do not extend tax-easing measures implemented in 2020 to support the economy through the coronavirus shock, which would be politically challenging, this would only provide a modest boost to revenue, especially as these measures were relatively modest in most emerging markets,” says Moody’s.
Botswana has been seen internationally as a ‘tax ease’ country and its taxes are seen as lower when compared to its regional counterparts. This country’s name has also been mentioned in various international investigative journalism tax evasion reports. In recent years there was a division of opinions over whether this country can stretch its tax base. But like other sovereigns who have tried but struggled to increase or even maintain their tax intake before the crisis, Botswana will face additional challenges, according to Moody’s.
“Additional measures to reduce tax evasion and cutting tax expenditure should support the recovery in government revenue, albeit from low levels,” advised Moody’s. Botswana’s tax revenue to the percentage of the GDP was 27 percent in 2008, dropped to 23 percent in 2010 to 23 percent before rising to 27 percent again in 2012. In years 2013 and 2014 the percentage went to 25 percent before it took a slip to decline in respective years of 2015 up to now where it is at 19.8 percent.