Over the past few months the Competition Authority has intervened in a number of anti-competitive conducts. Through the Competition Authority interventions, the market place in the supply of physiotherapy equipment and electrical hardware has been made more accessible for players that were hitherto denied entry.
In the first instance, the Competition Authority (CA) received a complaint about an alleged anti-competitive conduct by a certain local enterprise in the business of physiotherapy and massage that utilises the Ceragem equipment/technology. According to the complainant, the sole distributor of Ceragem equipment in Botswana had refused to supply the complainant with the equipment. The distributor was appointed by the principal supplier in South Africa.
The complainant had also desired to start a Cerahouse business for physiotherapy and massage using the modern technology of Ceragem. Unfortunately, its business intention was frustrated by the appointed distributor who refused to supply the complainant with Ceragem technology and equipment (Refusal to deal). When the complainant’s efforts were spurned, they approached the Authority for assistance.
The intervention by the Competition Authority led to the relaxation of supply rules whereupon principal supplier in South Africa decided to directly supply the complainant with the Ceragem equipment and not through the agent in Botswana. The supply line is expected to be extended to other potential entrepreneurs as well.
After the Authority’s intervention, the complainant provided feedback that the complainant’s enterprise was able to buy the equipment at a competitive price and this allowed them to compete on equal footing (fair competition) with other service providers. Subject to the remedial action on the anti-competitive practice of ‘refusal to deal’ the complainant appreciated the correction of the market structure.
In light of the free entry into the physiotherapy and massaging market by a potential entrepreneur (and other future entrants), the Competition Authority decided to stop the inquiry and monitor the market going forward to ensure that structural barriers to entry are lifted to allow for free and fair competition.
On another separate matter of ‘refusal to deal’ or ‘refusal to supply’, a citizen owned electrical hardware company reported that a South African supplier refused to supply it with electrical hardware. The South African supplier had instructed the complainant to procure equipment through a local agent, apparently at higher prices.
After receiving the complaint, the Authority approached the supplier in South Africa to understand the basis of that supply decision. It was during that period of inquiry that the South African supplier withdrew its decision not to directly supply the complainant. The South African conglomerate has now agreed to supply this local electrical hardware outlet, which will enable it to competitively price its products; and this will come as a benefit to the consumers.
This is indeed another huge success for the Competition Authority to have favourably intervened in the market place to ensure that there is fairness and removal of market strictures.
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”