In the next financial year, the Government is confronted with a ballooned wage bill that continues to exert far-reaching implications on the country’s fiscus.
A budget strategy paper forecasting the composition of the country’s treasury for the 2022/2023 financial year has revealed a bigger projected budget deficit emanating mainly from a rise in government salaries expenditure levels.
Experts at the Ministry of Finance & Economic Development anticipates the wage bill to rise by over P700 million next year. Specifically, the 2022/2023 figure for personal emoluments has been revised upwards by P731.56 million, to reach P27.98 billion, compared to the February 2021 estimate of P27.25 billion.
In February, the medium-term fiscal projections and the 2021 Budget Speech indicated that Total Revenue and Grants were anticipated to reach P66.25 billion in 2022/2023, 2.6 percent higher than the 2021/22 budget figure of P64.56 billion.
However, since COVID-19 has been persisting for longer than anticipated and continues to weigh heavily on domestic and global economic performance, Total Revenue and Grants for 2022/2023 have been revised downwards by P3.19 billion and are now estimated to reach P63.06 billion.
This downward revision partly reflects a reassessment of prospects for the mining sector, given continued uncertainty over market prospects in the diamond industry.
As a result, mineral revenues are projected to be P24.08 billion, a downward revision of P1.66 billion from the initial estimate of P25.74 billion.
Customs and excise revenue are forecast at P8.98 billion, slightly lower than the initial forecast of P9.10 billion, primarily due to changed exchange rate assumptions.
The low level of revenue from SACU primarily reflects the adjustment (repayment) of P7.0 billion in 2022/23 because the agreed distribution in 2020/21 turned out to be too high, given the impact of COVID-19 and the slowdown in regional trade on actual SACU receipts in that year.
Furthermore, the continued economic and political uncertainty in South Africa, and slow economic growth, may exert downward pressure on the allocation to Botswana from the SACU revenue pool.
Projections of revenue from VAT and Non-mineral income tax have also been revised downwards, despite measures introduced by Government to increase tax collection.
The downward revision of both income tax and VAT reflects updated data on economic growth and fiscal revenues.
VAT and Non-Mineral Income Tax are forecast to reach P11.78 billion and P14.94 billion respectively in 2022/2023, representing downward revisions by P693.60 million and P647 million from the initial estimates of P12.47 billion and P15.58 billion.
Expenditure commitments by Government are projected to increase again in 2022/2023, despite the commitment to contain recurrent expenses, particularly personal emoluments and pensions, through managing the wage bill.
Ministry of Finance & Economic Development says the anticipated rise in the wage bill primarily reflects a higher base effect from the actual budget figure for 2020/2021, the impact of the substantial upward adjustments in Government wages and salaries in 2019/2020 and 2020/2021, and the “creep” from annual increments related to salary scales.
The revision of personal emoluments is anticipated to increase Total Expenditure and net Lending to P71.55 billion, compared to the initial estimate of P71.07 billion.
Overall, the deficit is expected to increase in 2022/2023, after an expected decline between 2020/2021 and 2021/2022.
Notwithstanding this increase, the trend is expected to be reversed in the next two years and the beginning of NDP 12. The 2022/2023 fiscal deficit is anticipated to reach P8.50 billion (4.0 percent of GDP), compared to P7.22 billion (3.7 percent of GDP) in 2021/2022.
The main reason for the reversal is the sharp drop in SACU revenues, which was expected due to the overpayment in 2020/2021; however, this drop is anticipated to be a once-off.
Nevertheless, the increased deficit in 2022/2023 adds to the need for debt financing in the coming financial year. A longer-term objective is to rebuild the GIA held at the Bank of Botswana, whether through borrowing or returning to budget surpluses.
Meanwhile, the Government Investment Account (GIA) opening balance stood at P4.9 billion at the beginning of the 2021/2022 financial year.
It is projected to decline slightly to P4.6 billion by the end of the 2021/2022 financial year and remain similar through the 2022/2023 financial year.
To address the challenge of revenue collection and hence, boost domestic revenue, several strategies are being developed, including broadening the tax base by considering taxation of the digital economy; introducing electronic billing/invoicing platforms to improve VAT tax compliance.
Furthermore, Government plans to introduce a business intelligence and data analytics function to gain a deeper understanding of the behavioural patterns of taxpayers to apply targeted interventions; strengthening the tax audit function and focusing on sector-specific audits based on risk management and introducing the track and trace system to combat smuggling of excisable goods.
In August, Minister of Presidential Affairs, Governance and Public Administration Kabo Morwaeng told Parliament that Botswana’s Public service is way too big, too expensive to maintain and not sustainable.
Minister Morwaeng revealed that the Government spends over P2.3 billion on public servant salaries monthly, which he referred to is not sustainable.
The total number of people employed in the public service stands at 143 050 with 125, 203 employed by the Central Government and 17 847 employed under local authorities and councils.
Parliament was told that in the month of July alone Government spent a total of P2.36 billion on public servants salaries, with P2.17 billion settling wages of those in the Central Government and P193 million local government employees.
“This wage bill is too big; we are spending much money on public servants salaries. It is not sustainable,” Minister Morwaeng said.
The Minister, who is in charge of the civil service as the political head reporting directly to the President, revealed that Government is currently restructuring the public service and government machinery to align it to President Masisi’s reset agenda to enhance efficient, professional service delivery.
“We are also encouraging our public servants to go for early retirement so that they can explore other avenues while still fit do; as Batswana, we should understand that there are many other ways we could serve our country. It’s not all about working for the Government,” he said.
For many years Bretton Woods institutions criticised the size of Botswana Public Service, advising the Government to shrink and give way for the private sector to grow.
The Government implemented sizeable public wage increases agreed in 2019. The IMF advised Botswana against rising wage bill in its latest assessment of the country’s fiscus last year
“Fiscal reforms are needed to lock-in consolidation efforts. They include civil service reform, acceleration of plans to rationalise the parastatal sector and improve its governance, and strengthening the fiscal framework to anchor fiscal policy better and increase credibility,” advised the IMF.
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.