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Budget ignores Agric 10 percent spending protocols


An African Union pledge by Botswana to dedicate 10 percent of its national budget for agriculture, continues to be ignored by Botswana’s budgeting.

The protocol was initiated by the African union in recognition of the fact that globally, very few countries have achieved rapid economic growth without prior or accompanying growth in agriculture. Thus, improvements in agriculture can be a powerful engine for economic development and poverty reduction.

Finance Minister Kenneth Matambo, when presenting the National Assembly budget proposals for the 2015/16 financial year, on Monday this week, stated that: “The sixth largest share (of recurrent budget) goes to the Ministry of Agriculture at P1,07 billion or 2,9 percent,” while the  portion of the development budget is P1.1 billion representing 8.5 percent,  which will go towards agriculture support schemes, Zambezi water development and Pandamatenga Infrastructure development project.

The total budget allocated to agriculture comes to P2,207 billion – 4,45 percent of the total budget – falling short of the 10 percent that is aimed at achieving agricultural growth of 6 percent annually.  

In July 2003, at the African Union (AU) summit in Maputo, Mozambique, African leaders made a bold commitment to reverse the underinvestment that had held the agriculture sector back for so long. Through the Maputo Declaration, African heads of state made the promises to their people: to allocate at least 10 percent of national budgets to agriculture in order to achieve at least 6 percent annual agricultural growth.

However, Botswana remains among 80 percent of countries that remain below the threshold.

 Spokesperson for the Botswana Young Farmers Association Mr. Leatile Mokgware, said: “I believe the allocated P1,007,000,000 is still not adequate enough to push the agenda’s of the agri-sector because of the current red-tape farmers have with regards to growing local production.”

“Our government like other governments in Africa, met in Maputo in 2003 under African Union mission to sign towards the declaration of the 10 percent allocation towards agriculture as a national budget to reap a growth of 6 percent annually. Unfortunately the allocated P1,007 billion only represents 2.9 percent of the national budget. Malawi and Zambia have become pioneers in this Maputo declaration as they allocate over 10 percent towards their agriculture budget and the annual growth is tremendous, allowing the two aforementioned parties to reduce on imports and grow on exports for an improvement on GDP.

“As lobbyists for youth farmers in Botswana through the registered body, Botswana Young Farmers Association, we hope to see more youth benefiting from initiatives such as LIMID and ISPAAD (Integrated Support Programme for Arable Agriculture Development) but it remains doubtful as the bulk of our budget seems to be channeled towards the transformation of (BCA) Botswana College of Agriculture and acquisition of vehicles.”

“It is still too early to declare a national drought as per the books but from an on the ground point of view this year Botswana's food basket will remain empty as maize estimates are diminishing gradually due to insufficient rains and excessive heat waves. This drop in local maize production will mean farmers may need subsidies yet again for the supplementation of their animal feeds because as you know, yellow maize is the key ingredient to manufacturing feed. In closing, this will be a tough year and as farmers we'll keep working with what we have and just soldier on as always.”

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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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