Once again, Botswana’s political climate emerged as the trump card as multinational company, the Hungarian National Trading House (HNTC) chose the country as a business hub for the region. Under a franchise agreement with local company, Hungbots Limited, the Hungarian National Trading will run from Botswana as a business hub for ten countries in the region.
Hungbots Limited, under the tutelage of HNTC, will facilitate business activity between Botswana and Hungary, with Botswana as a hub for the Southern African region.
Officially opening the franchise, Assistant Minister of Trade and Industry, Sadique Kebonang, said that Botswana boasts political stability as well as a Southern African Customs Union market that has a population of 53 million people, as well as a SADC population of 250 million, countering the assertion that being landlord is a disadvantage for trade.
Kebonang said that Botswana has comparative advantage in some sectors, due to raw materials and technologies such as: Information Communications Technologies; Agro-processing in dairy, horticulture, mineral beneficiation; recycling; art and crafts; textiles and clothing; leather and products; renewable energy; banking, insurance and finance; and services.
Kebonang also recognised that there is more to be gained from multinational corporations in the form of skills and technology transfers, foreign exchange and opening up of foreign markets.
The Hungarian National Trading House (MNKH) was established in 2013 by the Hungarian Government and the Hungarian Chamber of Commerce and Industry. As part of the new foreign trade strategy "Opening towards the East", the Hungarian National Trading House seeks new markets and new opportunities for Hungarian companies.
The chief executive of Hungary National Trading House (HNTC) told BusinessPost that the local chapter of the organisation is operated by local partners Hungbots which is owned by Duma Boko and Hungarian national Gabor Imre and it will facilitate trade and business synergies that will see Botswana goods and services permeating Europe, with Hungary as the gateway.
“We need to capacitate local businesses with skills transfers with those who are more advanced and to open up Botswana products to different markets,” said Boko, also acknowledging that the Hungarians are noted for being good with leather products.
While the Group aims to make investments into various sectors, Gabor Imre also told this publication that the in the short term, the goal will be to create relationships with existing businesses, especially in technology, engineering, water purification and other solutions.
Gaborone Bonnington North legislator and leader of opposition in Parliament, Duma Gideon Boko, who is also the Executive Chairman of Hungbots Limited, told BusinessPost on the sidelines of the opening ceremony that he convinced the Hungarian National Trading House to set up in Botswana after meetings in Harare, Zimbabwe where he echoed the virtues of Botswana as a good trading environment, hinging on its political stability. Boko said that the potential for Foreign Direct Investment to Botswana is immense and that networks can be exploited to assist Government to attract investment, at minimal cost.
Boko said the connection with the Hungary National Trading House was established when he addressed a conference facilitated by Centre for Global Dialogue and cooperation (CGDC), an organisation founded by, among others, former Bulgarian President Petar Stoyanov.
The Hungarian National Trading House answers the needs of the Hungarian Small and Medium Enterprises (SMEs) regarding export potentials necessary for their expansion and thereby the economic growth of Hungary. The activities are built up by two main pillars: filtering the markets and searching for Hungarian companies whose products and services could be competitive on foreign markets while measuring market requirements through Local Trading Houses.
The Hungarian National Trading House offers its partners complex services and supports them in exploring, ensuring and advertising from initial offers to the contracting stages as well as helping its clients in channeling international development projects. To achieve full commercial visibility and reliability for our Hungarian and foreign trade partners, HNTH offers a range of contracting forms ranging from simple legal and financial consultation, through deal negotiation to final trade transactions. The Hungarian National Trading House also signed a political dialogue protocol on Tuesday this week and availed 30 scholarships to Botswana nationals, to study in Hungary.
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”