The reality of an economy going on its knees came last week with the release of Gross Domestic Product (GDP) for the second quarter of 2020 with a decrease of 27 percent. While government expects the economy to shrink by 8.9 percent this year, commercial Rand Merchant Bank maintains an expectation of 10.5 percent contraction in growth in 2020.
All industries in the domestic economy contracted, save for General Government which became the major contributor to GDP for the first time in many years by 19.7 percent. When the domestic economy was hit, “due to the impact of measures that were put in place to combat the spread of the COVID-19 pandemic,” all industries fell except Government, Agriculture and government owned utilities; Water & Electricity.
According to Statistics Botswana, Botswana Government business survived a huge contraction because it “instigated robust fiscal policy responses in order to influence macroeconomic conditions.” There was also aggregation of demand of goods and services, employment, inflation and economic growth. This was done despite contributing to deficits or drawing down of budget surpluses. Government also created new Covid-19 focused employment in the Public Administration sector in order to adhere to the disease protocols like recruitment of teachers, Safety and Health Employees (SHE) and other temporary employees across Ministries.
Most private sector players felt the scourge of Covid-19 especially in Mining and Quarrying where there was a decrease in the real value added of Mining by 60.2 percent which was mainly influenced by Diamond and Coal real value added. There are many private companies in the coal and mining business which are losing value, some are listed in the local stock exchange. Diamond production in carats went down by 67.0 percent while Coal production in tonnes decreased by 40.7 percent.
Companies in the industry of Trade, Hotels and Restaurants felt it when its real value added went down by 40.3 percent in the second quarter of 2020 compared to an increase of 5.1 percent registered in the same quarter of the previous year. The Manufacturing industry recorded a decline of 31.3 percent in real value added during the second quarter of 2020, compared to a growth of 3.5 percent registered in the corresponding quarter of 2019 and this sharp reduction is attributed to a massive decline in the sub-industries of Beverages and Other Manufacturing. These sub-industries include diamonds processing by 58.5 percent and the production of beverages (chibuku and beers) which declined drastically by 84.2 percent due to lockdown during the quarter under review.
It was tools down in the construction industry with all that was coming with the Covid-19 containment measures and lockdowns, the industry recorded a decline of 36.0 percent. The Finance and Business Services industry was also not spared and registered a negative growth of 11.9 percent due to the decline in the real value added of Business Services and Real Estate by 24.4 and 17.8 percent respectively.
All the firms in the transport business also suffered, the Transport and Communications value added decreased by 16.9 percent in the second quarter of 2020,compared to 5.4 percent recorded in the same quarter of the previous year. This steep decline was most significant in the sub-industries, and was attributed to the lockdown measures that restricted movement of passengers and permitted limited goods freight traffic.
Last week when parliament moved to extend the State of Emergency (SoE) for a further six months, the private sector took a firm stance against SoE before exposing its negative implications on the local economy. In a statement released this week, Business Botswana leader of the private sector, stopped short of calling SoE a draconian anti-progressive law which will weigh heavily on the already feeble economy.
According to Business Botswana, such an extension would, without a doubt cause further damage to an economy that is already on its knees. In the 2020/21 – 2022/2023 Economic Recovery and Transformation Plan (ERTP) much more emphasis, at least on the document, was on jumpstarting the economy by igniting the private sector. But many critics are already sceptical on the ERTP implementation, in the specified time frame. Some economists believe implementation of ERTP will further open the economy.
According to a report seen by this publication, government is expected to publish ERTP in 4Q:2020. But the implementation of ERTP is expected to begin in 2021. “With its success relying heavily on prudent project management by government,” says the report.
In the ERTP BusinessPost made a scientific observation that words “sector,” “informal” and “private” were the most used, meaning the mentioned were in the minds of those who made the fiscal plan. But this is not a reflection of what is on the ground, with many companies crying for rescue.
Meanwhile the Business Expectation Survey done during this country’s first lockdown stated that the businesses are ‘credit-shy.’ Also, companies are failing to hold on to jobs, they hanging onto these jobs because they are forced to by SoE laws despite the stinging financial implication from Covid-19. Already more than 400 local companies have officialised an intent to purge jobs at the Commissioner of Labour according to information received by this publication last month.
“Several instruments were put in place to support businesses but a number of these are not in place and for those that are, it is impossible to access them; the question therefore is what is government going to do in the next 6 months different from the previous 6 months?” said Business Botswana president Gobusamang Keebine. Business Botswana President said the Covid-19 pandemic has caused a lot of damage to the economy as businesses are currently operating at bare minimum.
He said that while most companies have folded others are continuing by way of liquidations to avoid the extended debt the SoE places on these companies. “Most employees, though not retrenched as it would be contrary to the SoE are home without pay; any further disturbance to the business environment will kill enterprises and they are certainly going to find it difficult to start all over again,” said Keebine.
Keebine said it is best to deal with the results of lifting the SoE than to postpone these where there will be even greater negative consequences. He said unemployment is going to reach peak levels, crime is going to dramatically increase and social ills are going to increase when people lose their properties. Business Botswana advised that rather government should have used the Public Health Emergency (PHE) Act, which is a tool which can achieve the same objective as SoE but without exposing the economy to very stringent restrictions as it is the case now.
“Using the (PHE) tool will relief Government of the need to lay out a lot of money to mitigate loses arising from businesses having to close temporarily due to lockdowns, etc.; money that the economy and Government does not have. Government must be bold and open the economy now and rescue whatever remains and can be rescued than to extend that action by another 6 months,” said Keebine.
Botswana Democratic Party (BDP) and some senior government officials are abuzz with reports that President Mokgweetsi Masisi has requested his Vice President, Slumber Tsogwane not to contest the next general elections in 2024.
The impacts of climate change are increasing in frequency and intensity every year and this is forecast to continue for the foreseeable future. African CEOs in the Global South are finally coming to the party on how to tackle the crisis.
Following the completion of COP27 in Egypt recently, CEOs of Africa DFIs converged in Botswana for the CEO Forum of the Association of African Development Finance Institutions. One of the key themes was on green financing and building partnerships for resource mobilization in financing SDGs in Africa
A report; “Weathering the storm; African Development Banks response to Covid-19” presented shocking findings during the seminar. Among them; African DFI’s have proven to be financially resilient, and they are fast shifting to a green transition and it’s financing.
COO, CEDA, James Moribame highlighted that; “Everyone needs food, shelter and all basic needs in general, but climate change is putting the achievement of this at bay. “It is expensive for businesses to do business, for instance; it is much challenging for the agricultural sector due to climate change, and the risks have gone up. If a famer plants crops, they should be ready for any potential natural disaster which will cost them their hard work.”
According to Moribame, Start-up businesses will forever require help if there is no change.
“There is no doubt that the Russia- Ukraine war disrupted supply chains. SMMEs have felt the most impact as some start-up businesses acquire their materials internationally, therefore as inflation peaks, this means the exchange rate rises which makes commodities expensive and challenging for SMMEs to progress. Basically, the cost of doing business has gone up. Governments are no longer able to support DFI’s.”
Moribame shared remedies to the situation, noting that; “What we need is leadership that will be able to address this. CEOs should ensure companies operate within a framework of responsible lending. They also ought to scout for opportunities that would be attractive to investors, this include investors who are willing to put money into green financing. Botswana is a prime spot for green financing due to the great opportunity that lies in solar projects. ”
Technology has been hailed as the economy of the future and thus needs to be embraced to drive operational efficiency both internally and externally.
Executive Director, bank of Industry Nigeria, Simon Aranou mentioned that for investors to pump money to climate financing in Africa, African states need to be in alignment with global standards.
“Do what meets world standards if you want money from international investors. Have a strong risk management system. Also be a good borrower, if you have a loan, honour the obligation of paying it back because this will ensure countries have a clean financial record which will then pave way for easier lending of money in the future. African states cannot just be demanding for mitigation from rich countries. Financing needs infrastructure to complement it, you cannot be seating on billions of dollars without the necessary support systems to make it work for you. Domestic resource mobilisation is key. Use public money to mobilise private money.” He said.
For his part, the Minster of Minister of Entrepreneurship, Karabo Gare enunciated that, over the past three years, governments across the world have had to readjust their priorities as the world dealt with the effects and impact of the COVID 19 pandemic both to human life and economic prosperity.
“The role of DFIs, during this tough period, which is to support governments through countercyclical measures, including funding of COVID-19 related development projects, has become more important than ever before. However, with the increasingly limited resources from governments, DFIs are now expected to mobilise resources to meet the fiscal gaps and continue to meet their developmental mandates across the various affected sectors of their economies.” Said Gare.
Letlhakeng:TotalEnergies Botswana today launched a Road Safety Campaign as part of their annual Stakeholder Relationship Management (SRM), in partnership with Unitrans, MVA Fund, TotalEnergies Letlhakeng Filling Station and the Letlhakeng Sub District Road Safety Committee during an event held in Letlhakeng under the theme, #IamTrafficToo.
The Supplier Relationship Management initiative is an undertaking by TotalEnergies through which TotalEnergie annually explores and implements social responsibility activities in communities within which we operate, by engaging key stakeholders who are aligned with the organization’s objectives. Speaking during the launch event, TotalEnergies’ Operations and HSSEQ, Patrick Thedi said, “We at TotalEnergies pride ourselves in being an industrial operator with a strategy centered on respect, listening, dialogue and stakeholder involvement, and a partner in the sustainable social and economic development of its host communities and countries. We are also very fortunate to have stakeholders who are in alignment with our organizational objectives. We assess relationships with our key stakeholders to understand their concerns and expectations as well as identify priority areas for improvement to strengthen the integration of Total Energies in the community. As our organization transitions from Total to Total Energies, we are committed to exploring sustainable initiatives that will be equally indicative of our growth and this Campaign is a step in the right direction. ”
As part of this campaign roll out, stakeholders will be refurbishing and upgrading and installing road signs around schools in the area, and generally where required. One of the objectives of the Campaign is to bring awareness and training on how to manage and share the road/parking with bulk vehicles, as the number of bulk vehicles using the Letlhakeng road to bypass Trans Kalahari increases. When welcoming guests to Letlhakeng, Kgosi Balepi said he welcomed the initiative as it will reduce the number of road incidents in the area.
Also present was District Traffic Officer ASP, Reuben Moleele, who gave a statistical overview of accidents in the region, as well as the rest of the country. Moleele applauded TotalEnergies and partners on the Campaign, especially ahead of the festive season, a time he pointed out is always one with high road statistics. The campaign name #IamTrafficToo, is a reminder to all road users, including pedestrians that they too need to be vigilant and play their part in ensuring a reduction in road incidents.
The official proceedings of the day included a handover of reflectors and stop/Go signs to the Letlhakeng Cluster from TotalEnerigies, injury prevention from tips from MVA’s Onkabetse Petlwana, as well as bulk vehicle safety tips delivered from Adolf Namate of Unitrans.
TotalEnergies, which is committed to having zero carbon emissions by 2050, has committed to rolling out the Road safety Campaign to the rest of the country in the future.