The 2022/23 Financial year will be underpinned by massive cost-cutting and contain exercise across all government operations, Minister of Finance and Economic Development Peggy Serame has announced.
Delivering the budget speech for the financial year 2022/23, which begins on April 1, 2022, the Minister, said various initiatives have already been introduced to contain costs, and a further set of measures will be introduced in the coming financial year.
These will target expenditure that can be reduced without compromising on service delivery, and require the beneficiaries of some public services to share in the costs of provision where they can afford to do so. Particular attention is being paid to the amount of money spent on scarce skills allowances in the public service, much of which may no longer be justified in terms of the need to recruit and retain employees.
Further, the Finance Minister announced that the amount spent on overtime allowances will be cut back as it appears to be excessive. Government also spends large amounts on tuition fees and maintenance allowances for students in tertiary education. This is an area of possible cost-sharing with parents, where they have the ability to pay she said. Minister Serame however said in line with the practice and commitments of the Botswana Democratic Party (BDP) Government, extensive consultations will take place before any major changes are introduced.
REDUCING THE WAGE BILL
In an effort to restore fiscal stability government intends to reduce and effectively manage the Government wage bill. This according to Minister Serame will be implemented through the Workforce Planning System which is being developed by the Directorate of Public Service Management (DPSM), through the Botswana Public Service Workforce Strategy and Workforce Plans Project that started in July 2021.
The key objectives of this project are to manage the Government wage bill, promote workforce flexibility and improve productivity in the public sector. The Minister said this helps to identify where public sector employment can be restructured, and hence identify possible savings in the wage and salary bill.” This will directly address the problem of the ever-growing wage bill, which was estimated at over 16 percent of GDP in 2020/2021, compared to the acceptable 10 percent recorded by comparator nations,” the Minister said.
She explained that the benefits of this initiative will start to be realized in the coming financial year. However, since the DPSM is taking a long-term approach to this initiative, and given the transitions required, the project is envisaged to run over a period of three years for effective implementation.”
Over 143 000 men and women are in the employ of the Government, cutting across ministries and state agencies, with 125, 203 employed by the Central government and 17, 847 employed under local authorities and councils.
To remunerate this workforce government has to part ways with over P28 billion from state coffers annually. Think tanks, authorities, and decision-makers at the Ministry of Finance & Economic Development have long raised red flags against this status quo, labeling it “unsustainable and too draining to state coffers”.
In pre-budget consultations, late last year the Finance Ministry technocrats led by Permanent Secretary Dr Wilfred Mandlebe said the restructuring of the public service is inevitable.
“In terms of the wage bill expenditure, we are around 38.9 percent of our total budget, which is almost 40 percent, this is huge, and this is one of the elephants in the room, for us as Finance, this is not sustainable, rationalization of government is long overdue,” Dr Mandlebe said in September last year.
The Permanent Secretary however observed the paradox that comes with the rationalization exercise. I know that when this conversation comes to the surface we will have divergent views about it, even in Parliament, there will be questions as to why do we have to retrench people when there is already a rise in unemployment.”
Mr. Mandlebe said the bottom line however is affordability: “At the end of the day its affordability because governments do go broke, I have seen governments going broke, we don’t want to come to a stage where come month-end people are not paid, and I don’t think employed Batswana can afford to go for a day without a salary, the way we survive on hand to mouth and indebts.
The Finance PS further told members of Parliament that the conversation about reducing the public service is however coming and there are no 2 ways about it.
“Let’s engage Batswana and put this conversation on the table, to even the public servants themselves, because it will come and it shouldn’t come like someone is holding a gun to our head , like we have seen it in other African countries, where they go out to borrow on somebody else ‘s terms, at that point in time the degree of maneuver is very little, we should do this as a self-reform undertaking when we still have time and space to look and consider all the sensitivities around this matter,” said Dr. Mandlebe.
The government spends over P2.3 billion on public servants’ salaries monthly, which totals almost P28 billion on an annual basis, almost 40 percent of Botswanas national budget.
In a post-budget interview with WeekendPost on Wednesday Minister of Finance & Economic Development Peggy Serame said retrenchments are the purview of the Directorate of Public Service Management (DPSM) The Minister however said she does not anticipate retrenchments because there is a lot that can be done without necessarily retrenching.
For the next coming financial years we will freeze recruitment save for special cases like Education, We use existing vacancies to provide for critical needs, also some officers are not replaced when they exit or retire, she said.
REDUCING SUBVENTIONS TO STATE-OWNED ENTERPRISES
Another space that Government seeks to explore to contain costs is reducing subventions to commercial SOEs Minister Serame explained that in addition to the ongoing process of rationalization and restructuring of SOEs, Government will reduce the size of subventions to commercial SOEs.
The approved subventions to SOEs from the Recurrent Budget for the current 2021/2022 financial year amount to P4.08 billion, or 2.05 percent of projected GDP. The proposed provision for the next financial year is marginally lower at P4.02 billion, which amounts to 1.85 percent of GDP. “Subventions will be further reduced in the coming years, through a combination of requiring commercial SOEs to cover their own costs, improved efficiencies across the SOE sector, and SOE rationalization,” she said.
PROTECT YOUR FINANCES THIS HOLIDAY SEASON: A GUIDE TO FRAUD PREVENTION
November marks Fraud Awareness Month across the world and Bank Gaborone has a dedicated mission to inform the public of evolving threats. The holiday season is a time for celebration, togetherness, and giving. However, it’s also a time when the risk of financial fraud increases.
Common Types of Financial Fraud During the Holidays
- Online Shopping Scams: With the rise of online shopping, scammers often create fake e-commerce websites to steal your money and personal information.
- Sim Swap: Fraudsters may try to gain control of your phone number by swapping your SIM card, which can lead to unauthorized access to your accounts.
- Application Fraud: Be cautious when downloading apps, as some may be malicious and designed to steal your data.
- Travel Scams: Planning a holiday trip? Watch out for fake travel deals and websites that can lead to disappointment and financial loss.
- Identity Theft: Protect your personal information, as identity theft can have far-reaching consequences, both financially and emotionally.
- Phishing and Email Scams: Scammers often send deceptive emails and messages, trying to trick you into revealing sensitive information or making payments.
- Mobile Network Fraud: Be cautious about unsolicited calls or messages requesting personal information or payments.
How You Can Identify Potential Fraud
To protect yourself from financial fraud, keep an eye out for the following signs:
- Unexpected Transactions: Check your account statements regularly for any transactions, withdrawals, or purchases that you didn’t initiate.
- Unauthorized Account Activity: Pay attention to notifications of login attempts or changes to your account details that you didn’t initiate.
- Phishing Attempts: Be cautious about emails, calls, or messages requesting sensitive information or payments, especially from unknown or suspicious sources.
At Bank Gaborone, we are committed to ensuring the security of your finances. Our Bank Gaborone 360 initiative encompasses several security features:
- 3D Secure Cards: All our cards are equipped with 3D secure technology, which means that an OTP (One-Time Password) is sent with every purchase for your approval, adding an extra layer of security.
- 24/7 Call Centre: Our round-the-clock customer centre is ready to assist you at any time. If you have questions, concerns, or need assistance related to your account’s security, simply give us a call 3158681Â Â at any hour of the day.
- Secure Online Mobile app: To enhance security and ease of access, you can use your biometric authentication to log in to the app and authenticate transaction. An additional layer of protection is provided through two-factor authentication.
Security tips for customers
- Avoid sharing personal information â the Bank will never ask for login credentials, personal details, card numbers, or OTPs.
- Exercise caution when receiving unexpected links or messages.
- Ensure your device is protected with a screen lock and refrain from storing passwords on the device or in the cloud.
- Promptly report lost or stolen devices to the bank for immediate action.
What to Do If You Fall Victim to Fraud
If you suspect that you have fallen victim to a fraud attempt, it’s essential to act quickly:
- Report the incident to the bank immediately.
- Block your card.
- Contact the customer centre at 3158681 for assistance and guidance.
As you enjoy the holiday season, we urge you to stay vigilant and prioritise the security of your finances. Safeguarding your assets is a shared responsibility, and Bank Gaborone is committed to supporting you in this effort. Remember that you are not alone in this journey. Your bank is here to protect your financial interests and guide you through any challenges you may face. By being proactive and following the tips and security measures outlined in this article, you can ensure that your holidays are joyful, secure, and free from financial fraud.
Challenging times as GROWTH IS EXPECTED TO SLOW DOWN IN 2023
The third quarter of 2023 has been characterised by a worsening of global economic conditions, with global growth forecasts revised downwards by the IMF, rising fuel prices, and the expectation that interest rates will remain âhigh for longerâ. This has impacted on the global diamond market, which has experienced a persistent weakening of demand through the year. Domestically, annual GDP growth has fallen, but remains in line with expectations. Inflation has risen, also as expected, and is likely to rise further in the coming months, driven mainly by global factors.
The IMF released its new World Economic Outlook (WEO) in early October, just after the end of the quarter. The IMF predicts a slowdown in global growth to 3.0% in 2023, down from 3.5% in 2022. Growth is projected to fall slightly further, to 2.9%, in 2024. Current and projected global GDP growth rates remain well below historical averages. The IMF notes that three factors are driving the slowdown in growth.
One is the tailing off of the post-COVID economic recovery, particularly following the very strong 2022 recovery in travel and tourism. The second is the consequence of the tighter monetary policy implemented in most countries to bring inflation down, with tightening of credit conditions impacting on aggregate demand. Third, the impact of the commodity price shock following Russiaâs invasion of Ukraine persists, notably through higher energy prices, reducing real incomes in energy importing countries and of consumers generally. To what extent have these factors had an impact on Botswana? Certainly economic growth is tailing off, with annual GDP growth down to 5.0% in Q2 2023, with a projected further decline to 3.8% for the year as a whole.
However, the slowdown appears to be having a greater impact on sectors that have a domestic focus (such as agriculture, food manufacturing, wholesale and retail, and other domestic services). The main outward-facing sector that has experienced a severe slowdown is diamond trading (discussed more below). With regard to monetary policy tightening, Botswana is feeling the impact of global developments, but there has been no real domestic impact given that the Bank of Botswana has hardly tightened monetary policy while many other central banks have raised policy rates significantly. But Botswana has felt the impact of higher energy prices, which remain elevated despite some easing earlier in 2023, and there has been a squeeze on real incomes and living standards as a result.
The major impact of adverse global conditions has been experienced in the diamond market. This has not yet fed through to diamond mining which, perhaps surprisingly, was up 7.1% in the 12 months to June 2023. This may just be âthe calm before the stormâ, however. Diamond sales through DBGSS are down 31% over the first eight sales cycles of 2023 compared to the same period last year, and Okavango Diamond Company is experiencing similar pressures. It will not be possible to continue expanding mining with sales contracting, as the required stockpiling becomes increasingly expensive. The global diamond market has been buffeted by multiple adverse factors during the year. Restrained consumer demand in the US, notwithstanding some resilience in the US economy, has been one factor, compounded by weak post-COVID recovery in China. Recent demand may have been impacted by a sharp increase in diamond prices in 2022, when demand was strong, but the industry is now paying the price. Synthetic diamonds are taking increasing market share, at much lower prices than natural diamonds. With slowing demand, downstream participants in the diamond value chain (cutters and polishers, traders, jewellery manufacturers and retailers) have all cut back on purchases as their stocks have risen, impacting rough diamond demand. As a result, De Beers have announced that sightholders would be permitted to defer up to 100% of their contracted purchases for the remainder of 2023 while Okavango Diamond Company cancelled its planned November auction.
Inflation and interest rates
After the sharp drop in inflation from its peak of 14.6% in August 2022 to 1.2% a year later, the increase to 3,2% in September was not unexpected. Fuel prices have been the main driver of changes in inflation over the past two years, in part because international oil prices have been so volatile, combined with their very high weight in the Botswana Consumer Price Index (CPI) basket. After the upsurge in oil prices caused by Russiaâs invasion of Ukraine, to over US$110 per barrel in June 2022, prices fell to just over $70 a barrel in March this year. The decline enabled pump prices to be reduced, leading to the dramatic fall inflation as the previous yearâs increases dropped out of the annual inflation calculation. In recent months, however, the deliberate actions by OPEC+ member states to restrict production and supply have pushed prices back over $90 per barrel, a selfish move seemingly calculated to put further pressure on households across the world who have already been badly impacted by the cost-of living crisis. In Botswana, regulated pump prices â which are determined under a highly politicised adjustment mechanism – have lagged the increase in global prices. For instance, the price increase in late October came about a month after the relevant increases in global prices. Following this increase, we expect inflation to continue to rise through to the end of 2023 and into 2024, when it is likely to temporarily go above the upper end of the BoBâs 3-6% inflation objective range. This means that there is unlikely to be any reduction in the BoBâs monetary policy rate (MoPR) in the near future.
The Ministry of Financeâs draft Budget Strategy Paper (BSP) was released in September, and provided updated information on the outturn of the 2022-23 budget, revisions to the current year (2023-24) budget, and the medium-term fiscal framework out to 2026-27. The fiscal data shows a continuation of recent trends, with an (unplanned) balanced budget for 2022-23; a (planned) deficit budget for 2023-24 and 2024-25, and a (planned) balanced or surplus budget for the outer years of the projections, which would mark the beginning of the NDP 12 period. There is a consistent story in the BSP which relates to the need for fiscal consolidation (discussed further in our special feature). In a parallel with Saint Augustineâs famous prayer (âLord, make me chaste, but not yetâ), fiscal consolidation â in the form of a balanced or surplus budget â is always a year or two away. For instance, the BSP released in September 2022 projected a balanced budget from 2023/24 onwards. However, the September 2023 BSP now indicates a balanced budget two years later, from 2025/26 onwards. This largely reflects the dramatic increase in development spending first proposed in the 2023 Budget for 2023/24 and set to be continued in subsequent years. That relates to planned budgets. Outturns are quite different. In both 2021/22 and 2022/23 large projected deficits did not materialise, and in both years, budgets were broadly balanced, due mainly to significant underspending on the development budget, along with higher-than-expected mineral revenues. Notwithstanding a large (47%) planned increase in development spending in the current fiscal year, it seems quite possible that, as in the last two years, the development budget will be underspent and the budget will end up being broadly balanced â although there may be risks on the revenue side if the diamond market continues to deteriorate. Even though the outcomes are good (balanced budgets), the fact that these are unplanned reflects negatively on the quality of fiscal planning and budgetary control.
The rest of 2023 and early 2024 looks likely to be an uncertain and somewhat challenging time for the economy. The main concern is the depressed state of the global diamond market, and the potential impact on economic growth, exports and government revenues â although it is important to note that no negative impact on these important economic indicators has yet been realised. The likelihood that inflation will rise in the coming months means that domestic interest rates are likely to be maintained â at levels that are low by international standards â for the foreseeable future. Projections of adverse climatic conditions in the coming months â with forecasts of higher temperatures and lower rainfall â are likely to have a negative impact on agriculture, water supplies and tourism, and illustrate the longer-term challenges posed by global climate change. Fortunately, Botswanaâs critical financial buffers â in the form of the Government Investment Account at the BoB and the foreign exchange reserves â have been rising, assisting the ability of the economy to withstand possible shocks, at least in the short term.
(Adopted from Econsult Economic Review Q3)
Thamane Launches AADFI Working Group on Climate Change to Support African DFIs
The Association of African Development Finance Institutions (AADFI) has taken a significant step towards addressing the pressing issue of climate change by launching a working group dedicated to this cause. The working group aims to support AADFI member institutions and the wider African DFI community in tackling the challenges posed by climate change.
The launch of the working group occurred on November 9, 2023, immediately following the opening ceremony of the AADFI 2023 Annual General Assembly in Egypt. The theme of the assembly was “The Role of African DFIs in Achieving Just Energy Transition,” highlighting the importance of sustainable energy practices in combating climate change.
Thabo Thamane, Chairman of AADFI and CEO of Citizen Entrepreneurial Development Agency (CEDA), announced the launch of the working group and introduced its members and objectives. The group was approved by the AADFI Board of Directors on August 28, 2023, following a resolution made at the previous annual general assembly.
The working group is chaired by the Development Bank of Southern Africa (DBSA), with Boitumelo Mosako, CEO of DBSA, leading the efforts. Mr. Olymous Manthata, Head of Climate Finance at DBSA, will coordinate the working group’s activities.
Comprised of member institutions dedicated to driving the climate agenda within their organizations and communities, the working group plays a crucial role in supporting AADFI member institutions and the wider African DFI community in addressing climate challenges. It serves as a strategic platform for generating ideas and actions that will enable the association and its members to remain relevant in the climate change agenda.
The working group has several key responsibilities. Firstly, it will support efforts to create a roadmap for African DFIs to accelerate their involvement in addressing climate challenges. This includes leading the effort in attracting technical assistance and support to build the skills and capacity of member DFIs in dealing with climate change.
Additionally, the working group will guide African national DFIs in mobilizing finance and identifying funding opportunities for green projects. It will also play a crucial role in raising green bonds and collaborating with the African Financial Alliance on Climate Change (AFAC) to represent the interests of AADFI members in the alliance. Furthermore, the working group will leverage support from partners such as the African Development Bank (AfDB), the Global Center on Adaptation, and the Green Climate Fund (GCF) to facilitate member DFIs’ actions on climate change.
The working group’s ultimate goal is to drive meaningful change and accelerate Africa’s just energy transition by collaborating with various stakeholders and partners. Thamane urged all member institutions to actively support the working group and participate in its activities. He expressed his gratitude to the DBSA for taking the lead role in the working group and expressed confidence in its ability to deliver on its mandate.
In conclusion, the launch of the AADFI working group on climate change marks a significant step towards addressing the challenges posed by climate change in Africa. By supporting member institutions and the wider African DFI community, the working group aims to drive meaningful change and accelerate Africa’s just energy transition. With the support of various stakeholders and partners, the working group has the potential to make a significant impact in combating climate change and ensuring a sustainable future for Africa.