On Monday 7th February 2022 Minister of Finance & Economic Development will deliver the 2022/23 budget speech. It will be the first time ever in history of Botswana’s 55 years of independence a budget Speech delivered by a female minister. Peggy Serame, an Economist by training, in an unprecedented move, rose to the helm of the country’s treasury, following a cabinet reshuffle by President Dr Mokgweetsi Eric Masisi in April 2021.
The President removed the then Minister Dr Thapelo Matsheka in an unpopular move, the shift was however hailed in some quarters as a bold woman empowerment decision by His Excellency.
THE BUDGET DEFICITS
Minister Serame will deliver a deficit underpinned budget for the year 2022/23, the trend for the past three (3) financial years suggests. In the financial year 2019/20 the preliminary budget outturn for the year shows that total revenue and grants amounted to P55.81 billion, while total expenditure and net lending has increased to P65.39 billion. This resulted in a budget deficit of P9.6 billion or 4.9 percent of GDP, compared to the original budget deficit of P7.3 billion.
The higher deficit was mainly due to a large fall in revenues combined with a smaller reduction in expenditure, as capital spending was reprioritised to recurrent spending, following the 2019/2020 public service salary adjustments. The preliminary outturn for 2020/2021 indicates that Total Revenue and Grants stood at P51.25 billion, which is P2.9 billion higher than the revised budget of P48.33 billion presented in the February 2021 Budget Speech.
The significant difference between preliminary budget outturn and the revised budget is largely driven by mineral revenue, which accounted for P9.56 billion, compared to the revised budget figure of P6.56 billion.
Customs and excise revenue amounted to P16.46 billion, slightly lower than the revised budget figure of P16.50 billion. Contrary to expectations, given the outbreak of COVID-19 and measures taken by Government to defer tax payments by domestic companies during the last half of 2020/2021 financial year, Non-Mineral income tax amounted to P12.49 billion, higher than the revised figure of P11.84 billion by 5.5 percent.
On the expenditure side, the preliminary budget outturn indicates that total expenditure and net lending stood at P65.80 billion, which is P3.56 billion less than the revised budget figure of P69.36 billion. The lower level of spending during the Financial Year 2020/2021 was driven mainly by the development budget, which amounted to P10.22 billion, P2.01 billion less than the revised budget figure of P12.23 billion, representing underspending of 16 percent.
Underspending of the development budget is in part a reflection of slowed construction activities during lockdowns, which impacted heavily on construction and other development projects. Budget deficit for the year stood at around P14 billion. For 2021/22 financial year total revenues and grants are anticipated to reach P63.06 billion in 2021/2022, an increase of 23.2 percent from the 2020/2021 preliminary budget figure of P51.25 billion.
The projected increase is largely attributed to the anticipated recovery in mineral revenue, as a result of increase in sales of rough diamonds. Total Expenditure and Net Lending is forecast to reach P70.98 billion, an increase of P5.18 billion from the 2020/2021 figure of P65.80 billion. The increase in total expenditure during the 2021/2022 financial year is largely attributed to the increase in Development expenditure by P2.46 billion to P12.67 billion.
Over the same period, the recurrent expenditure is expected to reach P58.41 billion, compared to P55.59 billion recorded in the previous financial year. Specifically, personal emoluments for 2021/2022 is forecast to reach P28.77 billion, a slight increase by P70.45 million, when compared to the 2020/2021 figure of P28.70 billion. Budget deficit for the year 2021/2022 the is expected to clock past P7 billion.
For the coming financial year 2022/23 Ministry of Finance and Economic Development had projected in its long term forecast a budget deficit of around P4 billion, however this was before the COVID pandemic which has since disrupted government revenue stream and slowed down some economic activities. The medium-term fiscal projections released along with the 2021 Budget Speech in February 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, given the fact that COVID-19 is persisting for longer than anticipated, and continues to weigh heavily on both domestic and global economic performance, Total Revenue and Grants for 2022/2023 were revised downwards by P3.19 billion and were estimated to reach P63.06 billion in September last year.
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 was projected to reach P24.08 billion, a downward revision of P1.66 billion from the initial estimate of P25.74 billion. For 2022/23, total expenditure and net Lending is expected to reach P71.55 billion, compared to the initial estimate of P71.07 billion.
Recurrent expenditure is estimated to reach P57.43 billion, while the development budget is estimated at P14.22 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 (3.7percent 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 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 Bank of Botswana, whether through borrowing or returning to budget surpluses.
DOMESTIC RESOURCE MOBILIZATION
To finance the budget deficits government had embarked on massive domestic resource mobilization, something expected to continue in the next financial years Historically, Botswana’s national budget has been primarily funded by financial resources generated mostly from outside of the countries, including mineral and SACU revenues.
At the Budget Pitso late last year Minister Serame said going forward, the focus will be on domestic resource mobilization as a key source of Government revenue. “This will mean taking measures to broaden the tax base, ensuring efficiency in our tax collection mechanisms and seeking other avenues to raise revenues, such as in fees and charges,” she said.
Furthermore it was highlighted that efficiency of Government spending will be prioritised, especially by speeding up the necessary public sector reforms and improving the roll-out of public e-services. “This is critical, as we do not have sufficient financial buffers in the Government Investment Account, which declined during 2020,” Minister Serame explained. She added that additional resources, if required, may need to be raised through domestic and foreign borrowing, while ensuring that Botswana remain within the statutory debt limit of 40% of GDP.
Domestic inflation has been on the rise for the last three months, surpassing the Bank of Botswana range of 3-6 percent. The economy is faced with low growth rates, increasing inflation rates and high unemployment rate, especially among the youth. In an effort to address the challenge of revenue collection and hence, boost domestic revenue, several strategies are being developed, including broadening of 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 of 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.
The Director General of the Directorate on Corruption and Economic Crime (DCEC) Tymon Katholo has revealed why he took a decision to engage private lawyers against the State. The DCEC boss engaged Monthe and Marumo Attorneys in his application to interdict the Directorate of Intelligence and Security (DIS) from accessing files and dockets in the custody of the corruption busting agency.
In his affidavit, Katholo says that by virtue of my appointment as the Director General of the DCEC, he is obliged to defend the administration and operational activities of the DCEC. He added that, “I have however been advised about a provision in the State Proceedings Act which grants the authority of public institution to undertake legal proceedings to the Attorney General.” Katholo contends that the provision is not absolute and the High Court may in the exercise of its original jurisdiction permit such, like in this circumstance authorise such proceedings to be instituted by the DCEC or its Director General.
Botswana Democratic Party (BDP) has gone through transformation over the years, with new faces coming and going, but some figures have become part and parcel of the furniture at Tsholetsa House. From founding in 1962, BDP has seen five leaders changing the baton during the party’s 60 years of existence. The party has successfully contested 12 general elections, albeit the outcome of the last polls were disputed in court.
While party splits were not synonymous with the BDP for the better part of its existence, the party suffered two splits in the last 12 years; the first in 2010 when a Barataphathi faction broke ranks to found the now defunct Botswana Movement for Democracy (BMD). The Barataphathi faction was in the main protesting the ill-treatment of then recently elected party secretary general, Gomolemo Motswaledi, who had been suspended ostensibly for challenging the authority of then president, Ian Khama.
Mr Abdoola has known Mr. Uzair Razi for many years from the time he was a young boy. Uzair’s father, Mr Razi Ahmed, was the head of BCCI Bank in Botswana and “a very good man,” his close associates say.
Uzair and his wife went to settle in Dubai, the latter’s birthplace. He stayed in touch and was working for a real estate company owned by Mr. Sameer Lakhani. “Our understanding is that Uzair approached Mr. Abdoola to utilize their services for any property-related interests in Dubai. He did some work for Mr.Abdoola and others in the Botswana business community,” narrates a friend of Mr Abdoola.