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Matsheka maiden Briefcase Affair packed with fiscal consolidation headache

When many take their thoughts off this weekend, the next thing that should come in mind is an iconic black briefcase which is synonymous with the biggest annual national event in this country, where it seems fashion meets serious fiscal business action, slated after the next 48 hours -the Budget Speech.

Thoughts right now move to the legendary Parliament building corridors with a lot of anticipations to see the Oscar Awards-esque figure of a black-suited Dr Thapelo Matsheka, strutting on a much photographed red carpet while clenching onto the symbolic black briefcase. The next step will be for Matsheka to take on the altar inside the Parliament chambers where he will give audience to political figures inside the building, which might also include President Mokgweetsi Masisi.

For legislators across the political divide, it will be business as usual inside, but for the business community it will be the most attentive affair, economists will be listening  in coming with a lot of burden of expertise on their shoulders. As for the nation; those at vendor markets, some at drinking spots, others holding slashers clearing out long summer grass along the roadsides, and folks who will be inside their cars as radio sound systems broadcast the Budget Speech.

Some will be sitting under shades with pulled out radio antennas at some village corner while others will have their eyes fixated on Matsheka through their television sets or some viewing livestream broadcast pop ups on their mobile phones trying to make sense out of the thick fiscal language which will come out of the minister’s debut fiscal speech.

The political figure with the briefcase and his audience

More than 95 percent interacted with Matsheka on his personal Facebook page this week, of those more than 50 commentators, were all positive on that he will deliver their promises through the Speech. In an announcement where he stated that he will tour all the five national radio stations before and after the Budget Speech is read, he received more than 300 positive reactions from followers with some “hoping for more enlightenment, considering your past as a lecture”, some reminding him that “public servants and Vocational Training Colleges and brigades are waiting patiently.”

Some were fixated at an apparent democratic or a political gesture of having a Minister addressing the public on the national budge. While one advised the Minister to “be careful of negative voices….this is your first as Minister.” Some, a minority of the interactors, “don’t want to hear politicians talk…we want to see tangible developments….you probably want to lie to us”, someone expects “talk talk but no action, an all-time song put on repeat always”.

Speaking from legislators’ Budget Speech retreat this week at Selibe Phikwe, Matsheka said he would not mind any economic or fiscal issues discussion with the media, but this publication could not engage him further since he was held up at a cabinet retreat.

But Matsheka’s suitcase could be containing a negative budget


During one of Matsheka’s first task in the treasury, the draft mid-term review of National Development Plan (NDP) 11, which covers government’s planned project expenditure for the years running from 2017 to 2023, the Minister painted a gloomy picture of this country’s purse, something which might also reflect on his briefcase this coming Monday.

This year is the halfway year bridging government plans towards the end of NDP 11, to 2023, but according to Matsheka last year, government continues to tackle simmering and growing budget deficits which needs to be tackled amid diamond revenue failing to square up with the ever increasing government revenue.

It was like a good dream when the government foresaw a minor six year budget surplus of just over P1 billion for NDP 11. But a contradicting projection shows that this country will have a budget deficit of over P18 billion over the six year period, which is now on its fourth year. A disturbing trend of budget deficits has been traced back to NDP 10 or the budget of 2013/14, where a shortfall of P7.2 billion was recorded, crossing over to the next financial year where it fell down but only at P -4.8 billion. 

Towards the current NDP, in the 2016 financial period, government had a budget surplus of P8.3 billion before a meagre surplus of P27 million during the beginning period of NDP 11, then a promising P2.7 billion in 2017/2018. After that, government budget has been appearing on a negative, P7.3 billion in 2018/19 and P7.79 billion in 2019/20.

It is not over until the fat lady sings with government budget deficits as they are expected to run over the whole of NDP 11. A notable deficit is expected to record P6.94 billion in 2020/21 financial year, but a revival by a surplus in the year before the end of NDP 11 is projected at P4 billion 2021/22.  

Public wages hike to also weigh in on Matsheka‘s briefcase

In a brief interview with BusinessPost this week, economist Othata Batsetswe said an expected budget deficit will come mostly as a result of planned salary increment which was made by President Masisi last year to run for two financial years. Government should now feel the pinch of public service salary hike, according to Batsetswe.

The economist explained that the last 10 percent salary increase on public service Grades A to B and a 6 percent increment for Grades C and D which would eat away P2 billion from the national bill will be felt even in this financial year. Government has further increased disciplined forces’ special allowance by 20 percent.

Government revenues failing to go up against the ever stubborn expenditure

Diamonds revenue continue to fall with the unreliable rough diamond sales always going down and the production being restricted by the slowing of demands.  The downward revision of P24.1 billion for extension of the lives of mines dubbed Cut 9 and 3 projects will also hold down Botswana’s dividends.

Latest released statistics from Statistics Botswana, shows Botswana choking at a trade deficit of more than P3 billion. And this current drift is contributed mostly by the dwindling diamond exports, a red flag for the diamond dependent economy. Latest released International Merchandise Trade Statistics which covers the last quarter of 2019 until now for a period running from October 2019, shows Botswana registered a trade deficit of P3, 425.1 million.

Matsheka’s gamble on fiscal consolidation and increase of revenue

Last year Matsheka revealed before Parliament that government plans to increase revenue by increasing taxes. This country‘s tax to GDP is at 22.3 percent and remains below the benchmark of emerging economies. Botswana’s tax to Gross Domestic Product ratio is still below the benchmark for emerging market economies such as South Africa, whose ratio currently sits at 26 per cent compared to Botswana’s 22.3percent for the 2017/18 financial year. Botswana Unified Revenue Service (BURS) in its recent Strategic Plan 2019 to 2024, requires the improvement in the tax to GDP ratio to reach by March 2024.


Increase on taxes in the coming Budget Speech

In the 2017 Budget Presentation, former Finance Minister Kenneth Matambo, hinted that government should increase its revenue base by hiking taxes. Matsheka echoed his predecessor’s words suggesting that government is not ruling out the possibility of increasing tax anytime soon. He is quoted by newspapers saying that Botswana has one of the lowest VAT rates in the world and that government is mulling at extending its tax base to informal or cash-based activities or considering new taxes, increasing tax rates or reducing exemptions.

Tax consultant Jonathan Hore told this publication that it is apparent from the above quotes that there is pressure on government to find ways of increasing tax revenues. He contrasted this country’s VAT with its SADC counterparts and said it is lower and should be from the current 12 percent to 14 percent or 15 percent.

“Economists have pointed out that the Botswana VAT rate is too low and this would be unsustainable in the long run. It is a well-known fact that Botswana has the lowest VAT rate in SADC (12 percent), whilst the average VAT rate in the region is 15.3 percent,” Hore said. The Tax consultant said considering that an increase in the VAT rate automatically increases the prices of goods and services, such a move will be technically correct but it will cut everyone’s purchasing power and significantly hurt the lowly paid and the poor.

“Inflation shot up in 2010 after the VAT rate was increased effective 1 April 2010 from 10 percent to 12 percent and this is expected to also happen should the authorities up the VAT rate. As an alternative, the authorities could consider introducing a Financial Transactions Tax (FTT) at a minimal amount on financial transactions such as bank deposits and withdrawals (both electronic, physical and at ATMs), swiping for purchases with a bank card, the purchase of shares (listed and unlisted), conversion of currencies, international money transfers through designated agents and money transactions facilitated by telecommunications giants, among others,” said the tax consultant.

He said the magnitude of these transactions is so huge and a minimal tax of say P3.50/transaction could raise around P1bn/annum, based on the author’s assumed transactions of 700 000/day. A 3 percent increase in VAT, according to Hore will only yield around P180m/annum, based on BURS records that it collected about P6bn in 2016/2017 year. He further said: “The beauty about FTTs is that they only target the ‘haves’ and they are not inflationary. Other countries which have introduced FTTs or some form/s of FTTs are South Africa, Egypt, UK, Colombia, Zimbabwe and USA.”

Hore also expects the Budget Speech to come with corporate tax hike. It will not be surprising to get a corporate tax hike from the current 22 percent to +/-25 percent, based on previous indications by authorities for the need to increase revenue. Botswana has the second lowest corporate tax rate in SADC as the average corporate tax rate in the region is 28.03 percent.


PAYE is also lower, with South Africa PAYE rate said to be higher at 45 percent. While Botswana’s PAYE is at 25 percent the average PAYE rate in SADC at the highest bracket is 32.6 percent. Hore expects both PAYE and VAT to be increased on Monday, but that will result reduced purchasing power for the public, as increased PAYE takes away part of disposable income and so does a VAT increase. The tax consultant said this may further contract the economy due to reduced disposable income.
Hore also expects government to also introduce presumptive taxes for the first time and this will mean taxing even the informal sector.

But tax experts believe there will rather be reduction of tax exemptions than increase of tax rates by government. This is because some see increment of taxes to be an economic impediment while minimizing exemptions would be more efficient.
Economist Batsetswe is of a strong view that government should rather maximize its collection of taxes than to jump at the decision of increasing tax rates. He believes when government increases taxes they will have far reaching consequences on the working population and the poor. He also said minimizing exemptions and increase of taxes may also scare away investors.  

Advice

Batsetswe expects Matsheka to mention reinforcement of moratorium on new parastatals; rationalization of parastatals and some being privatized. He also advised that government should refrain on building new offices or buildings and give the task to the private sector or a PPP arrangement takes over, something which should start with the Monday Speech. As it was said in last year budget planning paper and the State of the Nation Address, Batsetswe also agrees the public service should be rationalized and a freeze of new jobs is needed as Botswana wage bill is high.

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No end in sight for Nam, Botswana borderline feud

27th July 2021
Namibian-report

Despite the President Dr Mokgweetsi Masisi and his Namibian counterpart, Hage Geingob giving an impression that the borderline security disputes are a thing of the past and that diplomatic ties remain tight, fresh developments from Namibia suggest otherwise, following Geingod’s close confidante’s attack on Botswana and its army.

Giving a Zambezi region state of the affairs last week, a Geingob-appointed governor of Zambezi region, Colonel Lawrence Ampofu, a retired Colonel in the Namibian Defence Force, former plan combatant during the liberation struggle of Namibia, in a written speech, charged at the BDF and condemned their killings of the Namibians as unacceptable.

“The security situation within our borders remains calm. The incidence of the Botswana Defence Force shootings and wanton killings on the Nchindo Brothers on 05 November 2020 and other 37 Namibian lives lost since independence remain a serious challenge with our neighbor, Botswana.

Our residents living along the Chobe, Linyanti and Kwandu rivers are living under constant threats, harassment, fear, intimidation and killings and such activities are condemned and not acceptable,” he said under the safety and security title.

The attack suggests that Namibia has not bought Botswana’s story. Ampofu was part of the entourage that accompanied Geingob to the three Nchindo brothers and their cousin who were gunned down by the BDF, and is reported to be privy to the details of the unpublished Botswana-Namibia joint investigations report about the killings as a governor or political head of the region which has eight electoral constituencies.

The report contains the sensitive details of how the three Namibians referred as poachers by the BDF – and Fisherman by the Namibian government were gunned down on 5 November last year along the Chobe River.  They were Tommy (48), Martin (40) and Wamunyima Nchindo (36), and their cousin Sinvula Muyeme (44).

His views are not really in contrast to his President’s views who also described the BDF as trigger happy in a scripted report to his cabinet.

The Zambezi region is located in the extreme north east part of Namibia and covers a total of 14,667.6 square kilometres. “We share borders with Angola, Zambia to the north, Zimbabwe to the east and Botswana to the South,” he said.

Sampofu was first appointed governor of the former Caprive Region in 2010 by the former Namibian president, Hifikepunye Pohamba and was reappointed as Zambezi governor by President Dr.Hage Geingob in 2015, a term running to 2025.

37 Namibia residents killed by Botswana army so far

Sampofu is a man who continues to insist that Botswana has killed 37 residents of his region. A video posted by the Namibian Broadcasting Corporation (NBC) shows him alleging that at least 37 Namibians were killed by the BDF, after he met with the community at Impalila.

“It is true, the BDF started long ago. As we speak 37 lives have been lost here in Impalila along the Chobe river going to Linyanti and Kwado rivers up to Lizauli. All those families lost their loved ones,” Ampofu said in the video posted by NBC.

It is not known how the BDF, which has maintained their position that the Namibians were engaging in illegal activities of poaching, treats the constant attacks by the Namibian authorities, but they have repeatedly vowed to continue protecting the country’s sovereignty and natural resources.

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Masisi gives KBL the “middle finger”

27th July 2021
President Masisi

Botswana’s premier brewer and leading distributor of beer, Kgalagadi Breweries Limited (KBL), this month dragged the government of Botswana to court after President Mokgweetsi Masisi imposed an alcohol ban with immediate effect. KBL labelled the decision as unjustifiable, irrational and that it overrides the rights that are enshrined in the constitution.

This week, Masisi through attorneys representing the government disparaged the case in his written affidavit of KBL’s application, referring to it as frivolous and that it ought to be dismissed with costs on a punitive scale.

In his court papers, Masisi reminded KBL that Botswana is a Republic whose laws find validity from the constitution, and in terms of Section 17 of the constitution the President is empowered to declare a State of Emergency and that it is a common cause that Botswana is under such state.

“It is common course that there is in existence emergency powers (Covid-19) Regulations 2020 as amended from time to time which is solely designed to regulate the Covid-19 pandemic,” he said.

Masisi pointed out that he denies that the application before Court is proper such as to challenge the lawfulness and validity of a regulation made and a notice published in the exercise of a legislative function in accordance with the Emergency Powers Act which empowers the President to make regulations as appear to him to be necessary and expedient for securing public safety.

Furthermore, the President revealed that the decision to ban alcohol sales was not arrived at willy-nilly, but rather that there had been careful considerations that the risks posed by Covid-19 had increased and therefore it was expedient and necessary to suspend all liquor licenses.

Moreover, Masisi denied that the decision to reinstate the ban should be made by the Director of Health Services as indicated by KBL in their nature of the application, “the Director is to cause the notice to be published in the Gazette after consultation with the President.”

Masisi indicated that the role of the Director of Health Services is to publish a regulation made by the President.

He further, reminded KBL that the power to make regulations in a State of Public Emergency in accordance with the EPA lies with the President, “such power includes the amendment of any enactment, suspending the operation of any enactment or modification of an enactment.”

According to Masisi, his decision to ban alcohol sales was based on evidence provided by the Director of Health Services who indicated to him that there was a sudden spike in the transmission of the Covid-19 virus following the reinstatement of liquor licenses.

Another piece of advice tendered by the Director of Health to Masisi was that bars and other liquor outlets were some of the major hotspots in the sense of such being high-risk areas at which the virus spread rapidly.

“Alcohol was one of the major causes of non-compliance with the health protocols that were put in place to control the spread of the Covid-19 virus. Further, there was an indication that more arrests were made on people failing to adhere to Covid-19 protocols more particularly at places where there were gatherings,” he contended.

He pointed out that therefore, it was expedient and or necessary to preserve lives and to reduce the risks of transmissions of the virus to reinstate the suspension of liquor licenses.

Moreover, the President says that it must be noted that he avers that the Director of Health Services is a credible source on matters of public health of which he also accordingly gave due weight to the Director’s advice on deciding to reinstate the ban through the impugned notice.

“I am aware and was always aware at the time of promulgating the regulation complained of that it shall negatively affect some sectors of the economy. However, after due consideration and receipt of advice, I decided to give priority to the safety and health of the nation,” Masisi said.

He presaged KBL that it would not be prudent and in the best interest of the nation to ignore a health emergency such as Covid-19 and gave preference to trading and making of profits by the applicant. “The results would only be catastrophic to the extent that when we emerge from the scourge we would be left with a depleted and ailing nation from Covid-19 and its side effects.”

Furthermore, his written affidavit further pointed out that the decision to reinstate the ban on alcohol was taken notwithstanding understanding and appreciation of the economic hardships that would befall the country.

However, he said he deliberately made the decision based on the evidence provided to him by the Director of Health, whose evidence he believes to be credible to give public/safety and health priority over economic considerations in some sectors.

In making the decision, Masisi states that he was and considered different options including allowing for sale of alcohol consumption off premises, however the evidence he had been provided with suggested that such other alternatives would not achieve the overall objective of securing public safety and health by reducing the risk of the spread of the virus.

“By the time I imposed the ban, alcohol was already being sold for consumption off-premises. This did not work. The information provided to me by the Director and the Presidential Task-Force team demonstrated that consumers purchased alcohol and then loitered and consumed it within the peripheries of bars and other liquor outlets,” he said.

Attached to the affidavit as emphasis, were photographs and videos of Gaborone West, Phase 4 in mid-June 2021, which he explains circulated on social media and was brought to his attention.

“I need not say much about the photos as they depict a crowd exceeding 50 gathered at the parking area of a bar. There is little or no regard to Covid-19 protocols. It was clear to me and my advisors, including the Director of Health Services and members of the Presidential Task-Force team that the total ban of alcohol was necessary to manage the risk of increase in infections, to understand what seems to have led to an increase in the risk of infection when alcohol is present I was advised by the Presidential Task-Force team that scientifically there has been evidence that alcohol narrows physical distance,” he argued.

Masisi says that allegations made by KBL are serious allegations of infringement of fundamental rights yet they fail to state how imposition and reinstatement of the suspension of liquor licenses out of necessity and expediency of the health of the nation infringes on the rights as alleged.

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Gov’t gives parallel statements on COVAX

27th July 2021
COVAX---lelatisitswe

In  an embarrassing turn of events that depicts disintegration in government communication on the fight against COVID-19, President Mokgweetsi Masisi and Assistant Minister of Health & Wellness, Sethomo Lelatisitswe gave two conflicting statements on the same matter, same day, just minutes apart.

The Commander-in-Chef told health practitioners and residents in Ramotswa that the COVAX facility has scammed African countries after billions were paid in a crowd funding effort to procure COVID-19 vaccines in bulk.

“We have pumped money as developing countries of the African continent into the COVAX Facility but the returns were not satisfactory, they cheated us,” the President said in Ramotswa.

According to President Masisi, the COVAX facility Vaccine only came in bits and pieces, frustrating the continent ‘s head immunity targets amid rapidly spreading Delta Variant which is currently reversing all progress made by Africa in containing the contagious virus.

“What we are getting is very small portions of the vaccine, they keep telling us that there is shortage of supply, this is not fair, but we have paid in advance, however what can we do, we have no choice but to spend more  money and look for other avenues of securing other available vaccines,” he said.

Meanwhile in Gaborone, Assistant Minister of Health and Wellness told Parliament that vaccine from COVAX facility is anchoring Botswana’s vaccination program.

“I am not aware of such information that COVAX facility is not delivering as expected, we are actually bolstered by COVAX facility in this country,” he said responding to a question from Mahalapye West Member of Parliament David Tshere who is also Chairman of Parliament Committee On Health and HIV/AIDS.

“We have received doses as ordered from the COVAX facility, and we are still receiving more, I have not seen that information which is purported to have been revealed by the President, unless its new information, we as the Ministry we are not aware of any frustrations by the COVAX facility,” he said.

COVAX is co-led by the Coalition for Epidemic Preparedness Innovations (CEPI), Gavi and the World Health Organization (WHO), alongside key delivery partner UNICEF.

Its aim is to accelerate the development and manufacture of COVID-19 vaccines, and to guarantee fair and equitable access for every country in the world.

The facility is a global coalition that works to ensure fair and equitable access of COVID-19 vaccines around the world. So far, 190 countries have joined the COVAX initiative, including all 22 countries in the Eastern Mediterranean Region.

The COVAX Facility aims to have 2 billion doses of COVID-19 vaccines available for distribution across the globe by the end of 2021, targeting those most at risk (e.g. frontline health workers) and most vulnerable severe diseases and death (e.g. elderly and people with co-morbidities).

On other vaccination issues President Masisi revealed, still in Greater Gaborone vaccination centre visits, that Botswana has placed orders with Pfizer, a United States vaccine producer noting that they have promised to deliver next year.

Meanwhile, government kick-started phase two of the Covid-19 vaccination program this week, opening up for ages between 30 and 54.

President Masisi revealed that this was done because some elderly were reluctant to be inculcated.

“We can’t take forever trying to convince people to take vaccine, we moved to the next age segments because we cannot afford to have vaccines-which are already in shortage supply to just lie there,” he said.

On Friday, Ministry of Health revealed that it was receiving large numbers of people below the age of 55 lining up to be vaccinated.

In a statement the Ministry of Health said it, “acknowledges the huge turnout that marked the commencement of the Phase two COVID-19 vaccination program”.

Given this high turnout, especially in the Greater Gaborone region, the ministry announced an extension of operation hours in order to serve the huge crowds that had come for vaccination.

Of the nearly 85 000 doses that were being doled across the country as first doses, the majority of the Greater Gaborone vaccination sites were already getting depleted by 1800hrs on 22 July 2021.

As a result of this development, the ministry took a decision to discontinue the extended hours of operation announced yesterday for vaccination sites in Gaborone.

This means that vaccination sites in Gaborone and elsewhere in the country which still have some vaccines, will offer them in the normal working hours and days of the week.

The Ministry says it appreciates the great desire to be vaccinated shown by thousands of citizens and residents of this country and wishes to assure them that it will continue to expedite their vaccination every time vaccines become available. As has been communicated in various fora, more vaccines are expected in August 2021.

As at July 2021, Botswana has so far received 62, 400 doses of AstraZeneca/COVISHIELD bought through the Covax facility, 30,000 doses of AstraZeneca vaccine donated by the Republic of India, 19, 890 doses of the Pfizer vaccine bought through the COVAX facility, 200, 000 doses of the Sinovac vaccine, donated by the Peoples Republic of China and another 200, 000 doses of the Sinovac vaccine bought through bilateral negotiations with Sinovac company in China.

“We encourage Batswana to remain hopeful that although it’s taking longer than anticipated, enough COVID-19 vaccines will eventually arrive in our country. We urge them to always strictly abide by all COVID-19 protocols so that they protect themselves and others from this deadly virus,” the ministry said.

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