For the first half of the National Development Plan (NDP) 11, the Ministry of Investment Trade and Industry (MITI) has added P15 billion into the economy. This was revealed by Minister Peggy Serame in Parliament when delivering the Ministry’s NDP11 midterm review budget estimates on Monday.
She said during the past 2 and half financial years of the first half of NDP11 the Ministry and its investment promotion agencies and different institutions facilitated a total of P6.321 billion Foreign Direct Investment (FDI) across various economic sectors and industries. On the Domestic investment front Minster Serame told parliament that a whooping P9.55 billion was unearthed.
She said Botswana Development Corporation(BDC), the country‘s wholly government owned investment outfit has during the first half of NDP 11 invested P913 million into new and existing businesses across various economic sectors in Botswana , in turn creating 1200 new jobs.
In Selibe Phikwe the Ministry’s regional parastatal, SPEDU has facilitated setting up of 45 companies in the region with a view to resuscitate the economy of the town and entire eastern bloc which was adversely impacted by the closure of BCL Mine in 2016.
The Minister explained that the companies have started enjoying the tax incentives packages designed designated for SPEDU as a way of attracting investor s to the region. To date 19 companies are benefiting from income tax incentives, while 21 have been awarded with 30 % government off take certificates. A total of 2047 jobs have been created in the SPEDU region, against a 3 year target of 6856.
Minister Serame shared that SPEDU has encountered challenges with shortage of serviced land to avail to investors as well as shortage of bespoke factory shells; she however noted that works are underway to facilitate servicing of land which will avail over 1900 hectares of land by 2023.
For the remaining part of NDP 11 Minister Serame revealed that the ministry through Citizen Entrepreneurship development Agency (CEDA) will invest P450 million on 856 citizen companies creating 2400 jobs. She said this will be enabled by the new CEDA revised guidelines as well as the new citizen economic empowerment law expected to be approved by parliament during the current financial year.
In the current financial year spilling over to the next, Botswana Development Corporation will invest P800 million into projects that will retain jobs and promote economic diversification. “In the next 12 months BDC will invest P800 million into projects such as large scale equipment manufacturing, automotive components manufacturing and food processing,” the Minister revealed.
She said these investments will be aimed at producing equipments and materials for development projects in key sectors such as water and energy. In addition Minister Serame told parliament that the state owned Investment Company will during the remaining part of NDP 11, mobilize a total of P3 billion for domestic investment projects across different economic sectors and industries to accelerate economic diversification and creation of much needed jobs.
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”