Botswana Confederation of Commerce Industry and Manpower (BOCCIM) President Lekwalo Mosienyane says a swifter expansion of the private sector is essential to achieving the level of economic growth that Botswana aspires for.
An open, export-oriented economy with a flourishing private sector would give the country the best chance of increasing prosperity and upgrading people’s living standards.
Mosienyane says an export-oriented economy in China has resulted in rapid and unparalleled reduction in poverty and a rapid rise in living standards.
For this to happen here, Mosienyane says the country would need to make a major shift in its posture toward the Botswana private sector, recognising that pronouncements made about it feed and inspire mindsets or confidence positively or negatively.
“The mindset that created the various regulatory and administrative bottlenecks that make doing business in Botswana difficult must be addressed to pave way for meaningful partnership between Government and the private sector, that can best serve the very communities which help sustain businesses,” he said.
Mosienyane explained that BOCCIM recognises the important role that the private sector has to play in the sustainable development of the economy. Hence pursuance of their mandate of advocacy and representation, BOCCIM has been at the forefront of ensuring that the various policies and regulatory reforms are carried out to give way for the private sectors.
He stated that out of concern about the general slow-down and confidence in the economy, BOCCIM has engaged the Government in fruitful deliberations that gave birth to the Business and Economic Advisory Council (BEAC). He explained that (BEAC) would develop strategies to accelerate the diversification of the economy and to address job creation.
The BOCCIM president explained that emerging trends in the global economy indicate that international trade performance and investment drive the growth of individual economies.
Global competitiveness is a function of the country’s individual firms’ competitiveness, which in turn depends on their ability to leverage on cutting edge technology, to access foreign markets and to offer quality competitive products. He underscored that it is firms that compete not the governments.
In 2008, the Private Sector Development Strategy (PSDS) was launched, anchored on three major interventions of:
creating an enabling business climate;
generating business opportunities; and
catalyzing private investment through foreign direct investment, credit enhancement and risk management instruments.
Mosienyane explained that this was born out of the need for a systematic approach to strengthening the private sector and addressing impediments to trade and business.
“The majority of Batswana are very small businesses, which while having tremendous potential for vitality, do not yet have a voice. It is the small businesses which will create sustainable employment and if adequately facilitated, will mature into sources of a desirable middle class wealth creation. It is also today the giants of industry in Botswana started as SMMEs,” he recalls.
This publication understands that BOCCIM made a funding proposal to the European Union (EU) that resulted in a programme through the ministries of Trade and Industry and Finance and Development Planning at P28 million.
It is said that the Centre for the Development of Enterprises (CDE) is currently working with MTI and BOCCIM to deliver the programme of Private Sector Development Programme (PSDP).
The specific objectives of the PSDP are twofold: to stimulate and sustain growth and diversification in private sector investments, trade and regional integration and also to build the capacities of institution and human resources that support the private sector. These target small and medium-seized enterprises (SMMEs) or community-based organisations (CBOs) to benefit from the programme.
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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”