Thursday, July 9, 2020

A crisis of indecision might be eating down our Government

With elections and petitions over, now the hard work begins

It started early in the week with a budget speech read out by minister of finance Thapelo Matsheka.

It was the first national budget speech since president Mokgweetsi Masisi created a government that is really his and not a leftover from his predecessor.

It was a speech that had in it very few take homes.

Botswana’s economy is in real trouble.

It is also structurally faulty.

Much of it has got to do with the mindset.

There is a belief among Batswana that government has the power to do everything.

This notion is even more prevalent among the so-called educated.

As a consequence of that Batswana continue to overate the wealth of their country.

They feed a strange fallacy of the existence of money kept somewhere abroad and ready to be repatriated for use at home. This money they call it “reserves.”

According to them, government lacks the goodwill to simply bring the money back home.

Everybody seems to know something about reserves, even though much of what is known is half-baked and inherently false.

A majority of Batswana talk and think of foreign reserves in absolutist terms.

For them reserves are forever. Exactly the mistaken thinking they used to have about diamonds.

Unfortunately this wrongful impression of reserves as somehow being timeless also exists in the minds of even opposition politicians that could otherwise be described as modern or even sophisticated.

This is dreadful.

Government should come out and tell Batswana that there is really no sand loads of money stashed away somewhere abroad ready to be used in case of a crisis.

Bank of Botswana too should do a public campaign to teach Batswana about the myths surrounding reserves, how the reserves are managed, the risks inherent therein, how government draws on the reserves; and most importantly disabuse Batswana of the false notion that these reserves are infinite.

At the moment, the nation’s understanding of foreign reserves is deeply miscalibrated, with the potential to spark runaway exuberance, as we recently saw in court with the case of one “Butterfly.”

Every time the economy runs into systemic troubles, people immediately reach for reserves as if that is the panacea.

These are the people who have no regard for the realm of truth.

Government and the Bank of Botswana must explain the needs for reserves, how they are used, what purpose they serve and under what conditions they can be accessed.

More importantly it’s important to say that these reserves are not static. And that indeed government draws on them from time to time to finance government business and its transactions.

Explaining reserves needs to be done with the bluntest and simplest candour and clarity.

This should be a starting point for people to understand how and why government says there is no money.

There is a fiction that reserves are so huge that they can be recalled from abroad and all financial challenges that the treasury, the nation and the economy are grappling with like deficits, low wages, low productivity would overnight disappear.

This narrative is dangerous because it is perpetrated even by some people inside parliament. This narrative delays Batswana from appreciating the scale of economic difficulties they are facing, because there is a false cover called reserves they still imagine will one day come to the rescue.

The issue is no longer avoidable.

Anymore ambiguity will only prove disastrous.

Related to that is the issue of taxes. Both the minister of finance and also the president should prepare the nation that a tax raise is now inevitable, and that it is no longer a matter of if, but when.

In the meantime, government has to work at plucking all the holes of inefficiencies at the tax authority, BURS which blur the reasons why there is even a need for such a raise when government could simply collect from more people, more sectors and be more efficient currently falling through cracks. Openly talking about taxes as early as now could prove much more rewarding than attempting to introduce stealth taxes later.

Raising taxes will carry with it a predictable political penalty. But in the end a majority of people will be more willing to pay tax for as long as there is demonstrable evidence that those taxes enhance social justice.

In the same vein, there are some free public services that cannot continue fully paid for by government. These include education and health. Government must cease being an employment bureau.

Government must become leaner and more agile.

President Mokgweetsi understands these basics quite well.

But his political caution that ultimately feeds into his self-doubt is pulling him in a different direction.

Like Festus Mogae and Ian Khama before him, there is no evidence to suggest that Masisi has the stamina and conviction to cut down the size of government.

Early signs are that the government will substantially grow under Masisi.

Even an ambitious economist like Dr Matsheka, whose faculty is full of cutting down everything down to size will find it impossible to convince the president wedded to social welfare to make a shift.

Everywhere there is talk of economic transformation.

Such transformation will not come unless Botswana makes hard, painful and unpopular decisions

That means a willingness, cold detachment and ability on the part of the doctor to prescribe and administer painful medicine, but still be nice enough to look the patient in the face and tell them that they look much better than yesterday.

Masisi is not against economic transformation. In fact he often talks about it.

But he is not swayed because his politics make him overly frightened of making a big mistake.

An economic programme that thrives on myths and make-beliefs will one day come down crumbling.

This thinking is not confined to government.

In fact it has its origins at party level.

The Botswana Democratic Party is itself susceptible to family squabbles that are unparalleled in Botswana’s politics.

Confusingly – the BDP is often perceived to be the most stable.

The reason why it has survived up to now is in no small measure due to state largesse that the party is always able to spread to treat but never fully heal the fractures.

A recent appoint of Dorcas Makgatho as High Commissioner to Australia is a stark example.

She had just lost an election.

There are many like her in government.

But the BDP will not take such criticism seriously much less kindly.

They are used to doing it all the time.

In fact criticising them for crowding out career diplomats in favour of politicians like Makgatho is for them a begrudged if backhanded compliment – basically an admission of the glut of talent inside their party.

Overuse of politicians to fill up diplomatic posts is ill-advised, even if such politicians are qualified.

In theory it is the president’s prerogative to appoint ambassadors.

But the cost is to the country, especially in times like these.

It is well known that most such appointments are made for appeasement, or to banish a political competitor or in some cases out of mercy.

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Sunday Standard July 5 – 11

Digital copy of Sunday Standard issue of July 5 - 11, 2020.