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COVID-19 sparks serious conversation on AGRICULTURE

Dr Thapelo Matsheka

The catastrophic impact of COVID-19 on global economies has sent Botswana back to the drawing boards. The country is currently on a serious conversation with itself to come up with ways of forging ahead post corona, the current economic configuration is in question.

Concerns around over reliance on diamond revenue as the country’s economic nucleus while neglecting agricultural sector have once again resurfaced. Prior to discovery of diamonds in 1969 Botswana pre independence and during early years of sovereignty relied purely on agriculture as the country‘s source of livelihood.

Leading the country export earnings was during the years beef industry under the hospices of once mighty Botswana Meat Commission (BMC). The rapid infrastructural development and accelerated urbanization resulted in mass migration from rural settlements to towns and cities thus abandoning pastoral and arable farming practices.

To date Botswana still doesn’t produce enough maize, sorghum and wheat for itself, let alone processed and canned beef. The common denominator in various submissions during these discussions is the fact that Agriculture has demonstrated before; as well as per gathered information from numerous scientific studies and economic research findings that the sector is a potential remedy to Botswana’s economic diversification headache.

Around independence  Agriculture contributed over 30 % to the country‘s Gross Domestic Product (GDP) today the sector has been relegated to a mere 2 % replaced by  the lucrative Diamond and  Tourism industries.

Before Independence, Batswana lived out of subsistence pastoral and arable farming. Though today the sector is still source of livelihood to many ordinary Batswana especially those in the furfural  and rural settlements, the major concern is that on a national scale Botswana cannot feed its small population of just over 2 million people. The country still import over 50 % of almost every food commodity predominately from neighboring South Africa.

The anticipated decline in diamond and tourism revenue due to COVID19 pandemic has sparked conversation around a total reconfiguration of Botswana economy. Both Mining and tourism will decline by 33 % and 32 % respectively.

Various dialogue and engagements have identified and underscored Agricultural sector as Botswana’s economic precinct which can lead the country‘s economic revolution and birth an export led, industrialized, diversified that can generate sustainable jobs.

The emphasis around Agriculture is that deliberate action has to be taken, at policy level as well as national, community and individual level to put in place the right legislative frameworks, financial instruments and infrastructure to drive the nation into massive investments in the sector.

It was reiterated during  various lockdown discussions that if  well developed under large scale and techno based production the agricultural sector  had the potential of absorbing idle graduates from engineers, economists, crop and animal health scientist just to name but a few.

Lack of funding by from government budget has taken centre stage as a serious cause of concern and major impediment to transformation of Agriculture in Botswana. According to experts small budget allocations means no infrastructure development to support, no road networks to connect farm lands with market places, no development of innovative solutions in response to climate challenges facing the agricultural sector.

In his open letter to President Masisi this week, Leader of Opposition and Maun West Member of Parliament Dumelang Saleshando called on government to seriously invest in development of farming and production of food in Botswana.

“Your Excellency, our current reality compels us to urgently reconsider our approach to agriculture. In the last debate of the national budget, all MPs who contributed to the agriculture budget debate noted that the allocated amounts are a small fraction of what is needed to turn the sector around,” reads the widely published letter.

Saleshando further called on inclusion of the sector into bespoke strategic economic recovery plans post COVID19.” As part of the economic recovery strategy post COVID 19, consider launching an aggressive program of identifying farmers who can be assisted to expand their operations. Subsistence farmers should be hand held to graduate into efficient commercial operations.”

The Leader of Opposition further added, ”senior civil servants who are part time farmers should be enticed to retire early and take up the new agricultural schemes geared at helping Botswana to produce enough to feed itself.”

Last week when breiefing  members of the media about  impacts of COVID 19 on the economy Minister of Finance & Economic Development Dr Thapelo Matsheka said as part of government response strategy and economic recovery plan Agriculture will be prioritized to accelerate the country’s capacity in food production.

“We are looking at a number of options and ways to prioritize some projects over others, investing in irrigation and food production will be some of our priority areas , post corona we will look at things differently as a country, ” Matsheka said.


Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020

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.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

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.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

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”

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