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Trade integration key to reduce poverty and support growth in Africa

Making Africa’s most remote regions accessible for trade will not only promote prosperity in those regions, but also elevate the continent’s continued growth path.

Africa continues to remain vastly unexplored, and making Africa’s most remote regions accessible for trade will not only promote prosperity in those regions, but also elevate the continent’s continued growth path.

This is according to Charles Brewer, Managing Director of DHL Express Sub-Saharan Africa, commenting on The Role of Trade in Ending Poverty report recently released by the World Bank Group and World Trade Organisation.

Explaining the role that international trade plays in development and poverty reduction in Africa, the report states that the value of trade is measured by the extent to which it delivers better livelihoods, measured through higher incomes, greater variety of choice and a more sustainable future, among others.

“While countries need to continue to establish better trade relations with international partners, enabling trade routes within the continent can yield numerous benefits for the region and its people,” adds Brewer.

Having entered the African market in 1978, when the continent was still relatively ‘unknown’, Brewer says that DHL has explored the remotest of regions in Africa and witnessed these areas transform; both economically and socially, simply due to access to new services. He points to Cape Verde, situated off the northwest coast of Africa, as a good example of this. “Cape Verde is a small country consisting of 10 islands, and as a result, the quickest and most reliable way of transporting goods to and from the country is by air.

“Currently, there are three commercial airlines operating in the area and given that commercial airlines offer priority to passenger baggage, offloading of cargo from these planes was a regular occurrence. In order to better service the area, we introduced a DHL flight which operates between Senegal and Cape Verde weekly. This dedicated flight route provides various trade opportunities and greatly improves connectivity in the region.”

To effectively reduce poverty, growth needs to be inclusive, and poor people aren’t often located where growth takes place. The World Bank and The World Trade Organization estimate that one billion (15%) of the world’s population remain in extreme poverty, and that of this number, 415 million are concentrated in Sub-Saharan Africa. The report states that extreme poverty in many countries is predominately a rural phenomenon, and that an estimated 75% of the extreme poor in Africa live in rural areas.

Dr Jim Yong Kim, World Bank Group President, says that beyond expanding trade, more must be done, such as building roads that connect farmers to markets: “We must always connect the poorest to trade opportunities.” 2
Brewer says that connecting rural areas to trade opportunities is a key focus for DHL Express in Sub-Saharan Africa. “We have made great progress in making the global market and the world at large more accessible and connected by increasing the number of points where customers can access DHL and our global network. We now have over 4,500 retail outlets across Sub-Saharan Africa offering DHL services. This allows anyone – from a student to a small business –access over 220 countries and destinations that we serve.”

The report paints trade as a key enabler of facilitating growth in developing countries and highlights that lower trade costs and fewer barriers between countries is vital to eliminating extreme poverty.

“Trade plays an essential role in driving private sector-led growth and job creation and can be a powerful force in reducing poverty and increasing incomes,” says Dr Kim (World Trade Organization. The World Bank has already implemented measures to facilitate trade by approving a US$100 million Development Policy credit to help the governments of Burkina Faso and Cote d’Ivoire reduce trade and transport transaction costs.

“There needs to be a collaborative effort between the public and private sector to work together to ease doing business across borders. We work very closely with the government and custom authorities in each country on solutions to make doing business easier. There is ongoing progress with a number of successful trade blocs in place focusing on better connecting the region, and we look forward to seeing Africa continue on its growth path in years to come,” concludes Brewer.
 

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

21st September 2020
Botswana-on-high-alert-as-AML-joins-Covid-19-to-plague-mankind-

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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