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Trade Minister’s stance on exemptions rile industry

Minister Vincent Seretse

The annual general meeting of the private sector apex body, Business Botswana, held this week on Tuesday, revealed a clash between larger business interests against citizen economic empowerment.

The retail property space will yet feel the heat of the reservation of some business categories for Batswana if indications remain true to the eventual realities.

Giving background to the saga, Turnie Morolong from Time Projects, told BusinessPost that although the legislation is not new, former ministers of Trade had been giving exemptions for clothing retail chain stores, with the understanding that they are in business and they stimulate the local economy.

However, Minister Vincent Seretse, since ascending to the helm of the Ministry after general elections in October 2014, has put his foot down and refused to give exemptions in for the business lines listed in the reserved list.

Even a provision in the Trade and Liquor Act that states that foreign business employers who have a staff complement of more than 25, can have a waiver to the rule, industry observers say that it is a tough call for the clothing retail chains to follow as they would be overstaffed and crowded for a usual 300 square metres shop space hence not helping the situation for the retailers.

“Previously what would happen is we would put up a shopping malls and they would apply for trading licenses and get exemptions from the Minister; but Minister Seretse is declining to give these waivers,” said Morolong.

Minister Seretse, on the floor of the AGM, during question time, responded to Morolong with a sharp retort, saying: “We are not stopping anybody from going into business; we are only saying these businesses are reserved for Batswana.” The annual general meeting was held at the Pavilion, Fairgrounds in Gaborone.

“Right now we are building a P100 million shopping mall in Pilane and the businesses we are targeting to occupy the shop spaces are the same brands that are already operating in the country,” said Morolong.

“It is the multinationals that can occupy these shop spaces as they have been in business for a long time,” said Morolong.

“We now have a situation where they are now not able to get trading licenses to open more stores,” adding that “it is a given that the economy needs business activity for it to grow.”

The past decade has seen an explosion of shopping malls around Gaborone such as Riverwalk Shopping Mall, Game City, Molapo Crossing, South Ring Mall, Sebele Centre and Airport Junction, just to name some of them, causing saturation in the Gaborone area and prompting developers to look outside Gaborone for prospects.  

Another major property developer told BusinessPost that the challenge is facing the local property developers as a whole, saying that it is turning into “a catch 22 situation.”

“We are in agreement that citizen empowerment is a must and the Government’s intentions are good; however it is the implementation that needs to be looked at and only further engagement can help,” said the developer.

Apex Properties chief executive, Umesh Loona explained to this publication that in the retail property space, there exists destination malls such as the bigger Gamecity in Gaborone, and convenience malls such as the Bodiba Mall that will officially open in a few weeks, in Mogoditshane. “For Convenience malls, it is not expected that we will experience this problem because these are small businesses that are owned by citizens of this country.”   

Other observers felt that Government is under pressure to show that it is serious about citizen empowerment, in the process coming up with knee jerk reactions to the dire status of citizens involved in any form of business activity.

Alongside the General Clothing category, the Act has reserved other businesses trading licenses for citizens of Botswana, including: auctioneers; cleaning services ; curio shops ; fresh produce; funeral parlours; General dealers; hairdressers; hire services; laundromats; petrol filling stations and takeaway food outlets.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020

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.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

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.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

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”

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