The last few months have been dominated by the election campaign leading up to the general election on October 24th. Amongst the few economic issues that were prominent in the campaigns of the different parties, the problems of unemployment, poverty and inequality had perhaps the highest profile. There is no real disagreement that these are amongst the most pressing socioeconomic issues facing Botswana; however, there is much less agreement on how to successfully address them.
While these issues are crucial and need to be addressed, this must be done in the context of other pressing issues, including dealing with fiscal pressures as government revenues gradually decline in the medium to long term, and the need to restrain fiscal expenditure in order to keep the budget on a sustainable track. None of the parties really came up with a coherent plan for dealing with this, and indeed many of the election promises included unrealistic commitments for ever-greater spending.
Over the past few years, politicians have often stated that certain development projects could not proceed because of recession and adverse economic circumstances affecting the government budget, sometimes with a commitment that said project would proceed once economic circumstances improved. This may be a good way of deflecting pressure for excessive project spending, but it may also generate expectations that cannot be fulfilled.
A second pressing issue is the need to diversify exports and attract more FDI. Again, this was not really addressed in the election campaigns, and indeed all of the parties seemed more concerned with import substitution than promoting exports. In fact, none of the parties took time to adequately address pertinent economic issues, which is most disappointing, especially during the highly publicized pre-election debates.
Now that the election campaign is over, attention will turn to the development and finalisation of two key, closely related strategy and planning documents: the 11th National Development Plan, to run from 2016 to 2022, and the post-Vision 2016 document, which will cover the period of the next two-three NDPs. With the election out of the way, the government will have to ensure that these are completed quickly, but in a way that coherently addresses the key economic and social issues.
It will be important to recognise that there are many trade-offs in policymaking. Making rational decisions requires both clarification of objectives and a good understanding of the likely impact of competing policies and projects. Evidence-based policy making is essential if good use is to be made of limited resources, and if sensible decisions are to be made about which projects and programmes are to be financed.
However, this is difficult on the basis of Botswana’s current capacity to generate and analyse data and statistics. Significantly increased resources need to be provided for statistical and analytical capacity if appropriate policies and projects are to be implemented in NDP11, and subjected to proper monitoring and evaluation. Of more immediate interest is the forthcoming 2015/16 Budget next February. We have been given a flavour of what the 2015 Budget will say, in the Budget Strategy Paper released in September.
The BSP is a good initiative, which helps to keep stakeholders informed and encourage debate. It also helps to put information in the public domain at an earlier stage in the budgeting process, which in turn helps to improve understanding of economic conditions. From the 2015 BSP, we have learned that the preliminary outturn of the 2013/14 budget was more favourable than originally anticipated, with a fiscal surplus of P3.5 billion (2.8% of GDP). This was mainly due to underspending on the development budget. Clearly there still remains a major problem of implementation capacity and project management – given that many on-going projects are behind schedule, over budget, and only three-quarters of allocated funds for development projects were spent in 2013/14.
One of the most important elements of the BSP is the introduction of a new Fiscal Rule that commits government, for the first time, to allocate a fixed proportion – 40% is proposed – of mineral revenues to financial savings. In the past, there has been a commitment to invest mineral revenues in various forms of assets, but financial savings have always been a residual. Partly as a result of this, the financial assets accumulated by government over many years were relatively small and quickly depleted during and after the global financial crisis.
The Fiscal Rule is good, in principle, and in many respects is long overdue. However the implications need to be fully understood, in particular that the government will need to run large budget surpluses to finance the proposed savings. There also need to be hard and fast rules regarding drawdowns – the circumstances and conditions under which the accumulated savings be accessed.
Furthermore, government has repeatedly stated its intention to improve the screening and selection of development projects, such that only those yielding positive economic returns will be financed; if this commitment is adhered to – as it should be – some of the projects that are being called for in NDP11 will not pass the test. With the new Fiscal Rule in place, the focus will shift towards saving rather than spending, and as a result there will be less money rather than more for development projects.
Commentary adopted from Econsult ECONOMIC REVIEW – third quarter July – sept 2014
Government is currently sitting on 4 400 vacant posts that remain unfilled in the civil service. This is notwithstanding the high unemployment rate in Botswana which has been exacerbated by the recent outbreak of the deadly COVID-19 pandemic.
Just before the burst of COVID-19, official data released by Statistics Botswana in January 2020, indicate that unemployment in Botswana has increased from 17.6 percent three years ago to 20.7 percent. “Unemployment rate went up by 3.1 percentage between the two periods, from 17.6 to 20.7 percent,” statistics point out.
Leading commercial bank, First National Bank Botswana (FNBB), expects the central bank to sharpen its monetary policy knife and cut the Bank Rate twice in the last quarter of 2020.
The bank expects a 25 basis point (bps) in the beginning of the last quarter, which is next month, and another shed by the same bps in December, making a total of 50 bps cut in the last quarter. According to the bank’s researchers, the central bank is now holding on to 4.25 percent for the time being pending for more informed data on the economic climate.
An audit of the accounts and records for the supply of food rations to the institutions in the Northern Region for the financial year-ended 31 March 2019 was carried out. According to Auditor General’s report and observations, there are weaknesses and shortcomings that were somehow addressed to the Accounting Officer for comments.
Auditor General, Pulane Letebele indicated on the report that, across all depots in the region that there had been instances where food items were short for periods ranging from 1 to 7 months in the institutions for a variety of reasons, including absence of regular contracts and supplier failures. The success of this programme is dependent on regular and reliable availability of the supplies to achieve its objective, the report said.
There would be instances where food items were returned from the feeding centers to the depots for reasons of spoilage or any other cause. In these cases, instances had been noted where these returns were not supported by any documentation, which could lead to these items being lost without trace.
The report further stressed that large quantities of various food items valued at over P772 thousand from different depots were damaged by rodents, and written off.Included in the write off were 13 538 (340ml) cartons of milk valued at P75 745. In this connection, the Auditor General says it is important that the warehouses be maintained to a standard where they would not be infested by rodents and other pests.
Still in the Northern region, the report noted that there is an outstanding matter relating to the supply of stewed steak (283×3.1kg cans) to the Maun depot which was allegedly defective. The steak had been supplied by Botswana Meat Commission to the depot in November 2016.
In March 2017 part of the consignment was reported to the supplier as defective, and was to be replaced. Even as there was no agreement reached between the parties regarding replacement, in 51 October 2018 the items in question were disposed of by destruction. This disposal represented a loss as the whole consignment had been paid for, according to the report.
“In my view, the loss resulted directly from failure by the depot managers to deal with the matter immediately upon receipt of the consignment and detection of the defects. Audit inspections during visits to Selibe Phikwe, Maun, Shakawe, Ghanzi and Francistown depots had raised a number of observations on points of detail related to the maintenance of records, reconciliations of stocks and related matters, which I drew to the attention of the Accounting Officer for comments,” Letebele said in her report.
In the Southern region, a scrutiny of the records for the control of stocks of food items in the Southern Region had indicated intermittent shortages of the various items, principally Tsabana, Malutu, Sunflower Oil and Milk which was mainly due to absence of subsisting contracts for the supply of these items.
“The contract for the supply of Tsabana to all depots expired in September 2018 and was not replaced by a substantive contract. The supplier contracts for these stocks should be so managed that the expiry of one contract is immediately followed by the commencement of the next.”
Suppliers who had been contracted to supply foodstuffs had failed to do so and no timely action had been taken to redress the situation to ensure continuity of supply of the food items, the report noted.
In one case, the report highlighted that the supplier was to manufacture and supply 1 136 metric tonnes of Malutu for a 4-months period from March 2019 to June 2019, but had been unable to honour the obligation. The situation was relieved by inter-depot transfers, at additional cost in transportation and subsistence expenses.
In another case, the contract was for the supply of Sunflower Oil to Mabutsane, where the supplier had also failed to deliver. Examination of the Molepolole depot Food Issues Register had indicated a number of instances where food items consigned to the various feeding centres had been returned for a variety of reasons, including food item available; no storage space; and in other cases the whole consignments were returned, and reasons not stated.
This is an indication of lack of proper management and monitoring of the affairs of the depot, which could result in losses from frequent movements of the food items concerned.The maintenance of accounting records in the region, typically in Letlhakeng, Tsabong, and Mabutsane was less than satisfactory, according to Auditor General’s report.
In these depots a number of instances had been noted where receipts and issues had not been recorded over long periods, resulting in incorrect balances reflected in the accounting records. This is a serious weakness which could lead to or result in losses without trace or detection, and is a contravention of Supplies Regulations and Procedures, Letebele said.
Similarly, consignments of a total of 892 bags of Malutu and 3 bags of beans from Tsabong depot to different feeding centres had not been received in those centres, and are considered lost. These are also not reflected in the Statement of Losses in the Annual Statements of Accounts for the same periods.