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COVID-19 Economic Stimulus Programme (ESP): lessons from the 2016 ESP

There is no doubt that by the end of its reign, COVID-19 will have denigrated the world economy, including that of Botswana, which had hitherto been one of the world’s fastest growing and stable economies.

Before COVID-19, Botswana’s economic outlook was rated as stable by the world’s leading ratings agencies, Moody’s and Standard & Poor’s. On 29th October 2017, Standard & Poor’s rated Botswana at A- with a stable outlook. On 27th March 2020, Standard & Poor’s rated Botswana at BBB+ with a stable outlook.

Come 29th May 2020, about two months since the State of Public Emergency (SoPE) and the national lockdown, Moody’s gave Botswana an A2 rating with a negative outlook. The last time Botswana had a negative outlook was on 29th April 2016 when it was rated at A- with a negative outlook by Standard & Poor’s.

It is needless to say that in order to recover from such a negative economic outlook, Botswana, like all countries of the world, must embark on austerity measures and economic stimulation. As you may be aware, since the national lockdown, government introduced such measures as wage subsidies, food hampers, loan guarantees for the private sector, tax concessions, e.t.c.

Commendable as these measures are, they should not be regarded as economic stimulation; they are mere economic relief measures mearnt to mitigate the effects of COVID-19 on individuals and businesses.

In fairness to government, it knows as much, hence the pronouncement by the Minister of Finance and Economic Development, Honourable Dr. Thapelo Matsheka, that government is working on an Economic Stimulus Programme (ESP) to address the effects of COVID-19.

So, post-COVID-19, we will need a well thought out ESP. Inevitably, we will also need austerity measures. I know that austerity measurers are not popular with the masses, but my view is that it will be difficult to arise from COVID-19 with only economic stimulation. Austerity measures, painful as they may be for our people, will be necessary.

In this article, however, I only look at economic stimulation. Austerity measurers will be the subject of next week’s article. In looking at economic stimulation, I, based on the 2016 ESP experiences, make suggestions on how the COVID-19 ESP could be made better. I think if government can learn from the lessons of the 2016 ESP, it can develop a better COVID-19 ESP.

As you may be aware, in 2016 Government embarked on an ESP. This, Government said, was to address the slower growth and greater uncertainty which Botswana’s economy had experienced since the worldwide economic slowdown of 2008.

As stated earlier, on 29th April 2016 Botswana was rated at A- with a negative outlook by Standard & Poor’s. So, there was economic rationale for the ESP. The goals of the 2016 ESP were to stimulate the economy; diversify the economy through the Economic Diversification Drive (EDD) and Special Economic Zones (SEZs); and to accelerate job creation.

The targeted sectors/areas were Agricultural Production; Tourism Development; Economic Diversification Drive; Manufacturing; Buildings and Road construction and maintenance; Re-skilling of Youth; and Establishment of Special Economic Zones.

Through the 2016 ESP, Government intended to use its expenditure to expand the economy through accelerated economic diversification, while creating employment opportunities in the country, including growth in the private sector.

Government also intended to accelerate job creation, eradicate abject poverty; provide world class education as well as improve the health and wellbeing of all Batswana.

More fundamentally, the 2016 ESP was intended to be a bold blueprint for the urgent delivery of national priorities. Also, the programme was intended to entail increased public spending on short, medium and longer-term initiatives.

There is no doubt that these were noble goals indeed. The question is: were they attained? Of course, many of these were long term goals which could not be achieved through the 2016 ESP alone.

So, the first lesson from the 2016 ESP is that in developing the COVID-19 ESP, government should set realistic and attainable goals.

But before we seek to draw more lessons from the 2016 ESP, we need to assess how the economy performed following the stimulus. We use such simple measures as employment creation; poverty reduction and economic diversification.

We start with employment creation. In 2015, prior to the ESP, Botswana’s general unemployment rate was 17.96%. From 2016 the unemployment rate became 17.96%; 17.63%; 17.94% and 18.20% for the years 2016; 2017; 2018 and 2019 respectively.

So, after the 2016 ESP, there was a reduction of 0.33% in 2017. There was, however, an increase of 0.31% and 0.26% in 2018 and 2019 respectively.

We turn to youth unemployment. In 2015, prior to the ESP, Botswana’s youth unemployment rate was 36.83%. From 2016 the unemployment rate became 36.8%; 36.57%; 36.14% and 37.52% for the years 2016; 2017; 2018 and 2019 respectively.

So, after the 2016 ESP, there was a reduction of 0.3% and 0.23% in 2016 and 2017 respectively. There was, however, an increase of 0.57% and 0.38% in 2018 and 2019 respectively.

We turn to economic diversification. According to the World Bank, the diamond industry is still an important driver of growth in Botswana, being the single largest contributor to government revenues and accounting 80% of export earning.

On the contrary, Agriculture’s contribution to the GDP has deteriorated from 2015, it having been 2.20%; 2.05%; 1.99% and 2.00% for the year 2015; 2016; 2017 and 2018 respectively.

Travel and tourism have done better than Agriculture, they having been 13.5%; 12.7%; 13.3%; 13.4% and 13.4% for the year 2015; 2016; 2017; 2018 and 2019 respectively.

Therefore, despite introducing the Economic Diversification Drive (EDD) and Special Economic Zones (SEZs), government has failed to diversify the economy, something which has evaded government since independence in 1966.

So, despite the 2016 ESP, most economic fundamentals have declined since 2016. Of course, the decline cannot be wholly attributable to the 2016 ESP, but one thing we can be sure about is that the 2016 ESP did very little to help the situation, especially that there has been no major world economic downturn since 2016.

Why then did the 2016 ESP not help the situation? Firstly, in my view, Batswana were not meaningfully consulted, resulting in little buy in and low uptake of the programme.

There was a view, at the time, that the ruling Botswana Democratic Party(BDP) hurried the programme in order to ‘buy’ votes for the 2019 general elections after its dismal performance in 2014 which nearly saw the Umbrella for Democratic Change(UDC) force a hung Parliament.

This view was fortified by the fact that instead of the programme being led by civil servants, it was led by politicians. This followed statements by some in the BDP that some civil servants, who were aligned to the opposition, had the propensity to sabotage government programmes to portray the BDP as incapable of governing.

Secondly, perhaps because of the hurried manner in which government implemented the programme, most programmes which were funded were not sustainable. In fact, many did not even address the areas which government had identified as key for economic growth.

For instance, despite government identifying manufacturing as one of the target arears, no single manufacturing industry was started or upscaled as part of the 2016 ESP.

Also, despite government identifying re-skilling of youth as one of the target arears, very little has been done in that regard. No wonder youth unemployment remains as high as 37.52% four years since the 2016 ESP.

The main beneficiaries of the 2016 ESP were buildings and road construction and maintenance, perhaps because they were easy to do. Some say this is because such projects would be visible enough to be used for election campaigns.

Others say, corruption could easily be done through such projects since most participants in that regard are tenderpreneurs who rely on political patronage for tenders.

However, despite the backlog in classrooms and laboratories in our schools, for instance, which contribute to the high student-teacher ratio, very little was done in that regard. Very little was also done in building toilets and ablution blocks.

Consequently, government is now battling with building additional classrooms, laboratories, toilets and ablution blocks in view of the COVID-19 pandemic.

Also, despite government identifying the improvement of health and wellbeing of all Batswana as a priority area very little has been done in that regard. Many clinics and hospitals still some from shortage of manpower, equipment and medication.

In my view, if the COVID-19 ESP is to be successful, government needs to meaningfully involve Batswana in the programme development. Also, government must set realistic and attainable goals.

Perhaps most importantly, government has to focus on sustainable projects which will meaningfully diversify the economy and reduce unemployment and poverty among our people.

For this to be possible, policy makers must give strategic direction and leave the project implementation to civil servants.

*Ndulamo Anthony Morima, LLM(NWU); LLB(UNISA); DSE(UB); CoP (BAC); CoP (IISA) is the proprietor of Morima Attorneys. He can be contacted at 71410352 or anmorima@gmail.com

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Moses vs Ramesses

28th July 2020

Moses returns to Egypt to reclaim the Pharaonic throne

When Moses was deposed as Pharaoh Akhenaten of Egypt in 1352 BC, General Atiku, he was not officially banished from Egypt: he was obliged to flee Egypt as he was not hundred percent sure of his safety.

Ideally, the place he should have headed to was Harran, in modern-day Turkey. Harran was apt in that not only was it the place of his ancestry but it was the major domicile of the Hykso-Hebrews. There, the Hykso-Hebrews abounded more than in any other place on the globe, including Canaan.

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Turn CEDA into a Commercial Bank

28th July 2020

The announcement by President Mokgweetsi Masisi that CEDA now was in position to loan sizeable and therefore worthwhile sums the nation as a matter of course greeted with enormous glee.

As much as I too was euphoric at the news, I could not at the same time help a feeling of censorious pique which dates back to the time I was CEDA chairman from 2006 to 2008.

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Parley July meeting: an executive affair

28th July 2020

Monday the 27th Parliament will resume its July meeting. What is specifically on the agenda of Parliament in this coming meeting? A lot! There will be government and Private Bills, policy proposals, questions, themes and motions.

The meeting is also likely to be punctuated by statements from ministers on a variety of issues. Some statements may come as preemptive strikes to prevent the opposition from either making speeches on the subjects ahead of the government or to simply forestall questions on same.  The House is expected to be active for five weeks nonstop. It is obviously a very short time considering the agenda.

Before its adjournment sine die in March, Parliament was supposed to discuss the National Development Plan 11 Midterm Review. This is what will become a priority of the government in its order of Business or scheduling. The government is expected to table an addendum to the already tabled review document.

The reason is simple, COVID-19 has not only gobbled funds from the fiscus, but has also resulted in a sharp decline in government revenue. The mainstay of the economy is mining, particularly diamonds revenue. These germs are mainly luxury commodities which are prone to international market changes.

Diamonds and other precious goods are seldom needed in large quantities during turbulent times such as these. Those countries that depend on them, such as Botswana, are always at high risk of external shocks. Southern African Customs Union revenue is also likely to decline because of slump in trade.

Tax collection has gone down due to many obvious reasons. Tourism has been shattered. Non-mining sector has also been negatively affected. Therefore, the estimated revenue has declined, necessitating a serious review of the development plan.

Which Bills are likely to be debated in this coming meeting? Two Botswana Defence Force Amendment Bills have been Gazetted; one is Private and the other a government proposal.

The private Bill is proposing to rectify the injustice of not fully paying soldiers who are on indictments or suspensions. The government Bill is a minor amendment relating to the BDF Court Marshall Judge Advocate General position.

Other government Bills include Income Tax Amendment, BURS Amendment, Citizenship Amendment, Legal Practitioners Bill, Environment Assessment Amendment, Financial Reporting Amendment, Accountants Amendment, Citizen Economic Empowerment Bill and a controversial one on Floor Crossing.

More interest will be on the anti-defection Bill and perhaps the citizen economic empowerment proposal. Other Private Bills to be tabled include Police and Prisons Amendment and the Media Practitioners Repeal Bill. Parliament will also debate the following policies; Climate Change, Tourism, National Energy and Minerals.

Whilst there is nothing on COVID-19, MPs are likely to ask questions on the pandemic. So many things come to mind as possibilities of issues likely to be raised. MPs are likely to ask the Ministry of Health, Office of the President and the Ministry of Finance and Economic Development about the whole pandemic fighting strategy.

There may be questions on the capacity and reliability of COVID-19 testing. Questions may be asked on positive cases that quickly become negative and or false alarms cases etcetera.

More focus may be on the budget and procurement. Some controversial tenders are likely to be questioned by MPs. It is expected that given the chance, MPs will likely lament the stoppage of food rations distribution by the Ministry of Local Government and Rural Development.

MPs will raise other miscellaneous issues on corona virus related policy decisions. These include the terms of engagement of the COVID Task Force and enlisting of the public relations private persons team from outside the government to help.

There may be questions by MPs on the business dealings of the President and his intention to acquire a government ranch, Banyana Farm. Clarity may be vehemently sought on these issues. Corruption related issues may be on the agenda of Private Business. So many issues have been reported; direct appointment of the 100KM NSC water pipe tender and other controversies may crop up.

There may be clarification required from the ministry responsible for international relations on the implications of the engagement of an Advocate working for Afri-Forum white supremacist organisation. The consequent and seeming tension between South Africa and Botswana will probably be on the agenda of MPs.

Recently the country has experienced serious fuel shortages. It is likely that parliament will raise issues on this matter and get the Minister to explain further.

Whilst this issue has been all over the media with clarifications offered by the Minister and the Permanent Secretary, parliament is likely to engage on the matter to get assurances into the record.

Answers will be demanded on the exact cause of the shortage, policy failures to predict the crisis and to avert it as well as the way forward.

Power issues have also irked MPs, particularly the recent tariff increases and recent threats to increase them even. All is definitely not well at Botswana Power Corporation, so MPs are probably going to probe these matters further.  It is clear that there is a lot that Parliament will deal with.

The disheartening fact to note is that most of the Government Business will be expected, by the executive, to pass through parliament rather than be passed by it. There is condescension for free and adequate debate as well as ostensible intolerance of alternative views from the backbench and the opposition by the frontbench.

The ruling party caucus will discuss all these matters and once explained fully by technocrats, the expectation will be for MPs to swiftly rubberstamp executive ideas without raising controversial issues or simply reasoning on the floor.

There will be no time to reason! There is likely to be limited time allocation, in terms of minutes allocated to individual MPs per debate, on all these matters aforementioned. The Speakership, which traditionally is the gatekeeper of the executive, is likely to fully cooperate and not protect the MPs against the executive wrath.

The executive will reason that five weeks is too short and that all business must be dispensed with before time elapses. Whilst the backbench will be unhappy with these decisions, there’s nothing it will do, it is numerically weak in the caucus.

The opposition will face the whole ruling party bench and be defeated in their protest for adequate debate time. That’s just how things work in Botswana parliament. The legislature is a governing tool of the executive; it is used to pass through policies, laws and budgets for the ruling party’s own political ends.

It is not an independent institution which can hold the executive accountable effectively. If Bills or policies are not completed and there’s about week remaining, everything could be squeezed into that one last week. It has happened before; the House can pass many Bills in one sitting, even if it means staying up until late night or wee hours of the morning.

There are private motions which if not withdrawn and replaced with new ones, may not address topical issues that arose as a result of or during COVID-19. These are motions which may seek accountability of the government on corona virus related policies.

One of the likely motions is the motion touted by one of the opposition parties; motion of no confidence on the government. If this motion comes on urgency, it may die on arrival.

The ruling party MPs will be under strict instructions to kill it the moment a question is put on whether the agenda should be changed to allow a debate on it.

The only way it can be debated is if it comes in through the normal process. Even that way there is no guarantee; the ruling party MPs may stay outside to kill the quorum like they do with motions they don’t want debated.

They may also debate it and unleash their ‘attack dogs’ and put their views across before defeating it. Other motions which may be tabled include COVID-19 related motions. Expectations of the general public should be managed; the next meeting may be the usual ruling party show to do as they please.

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