Mid-week the Minister of Finance, Peggy Serame announced a decision by government to cut VAT
From 14 to 12 percent. The minister said the cuts will be temporary – for six months.
She however did not elaborate how in the meantime government will be able to finance the cuts.
She has also not stated how she thinks the tax cuts will affect government spending, especially if development projects will be set aside or be delayed.
Botswana government also announced that it will increase student allowances to about P2000.
An announcement was made that Botswana Meat Commission will get a loan from Botswana Government.
Cash flow has been the biggest problem for BMC which has failed to compete with private feedlots that have been buying cattle chiefly for export.
Depending on how much the BMC gets from government, and also if the Commission has in place an adequate business model, things are likely to turn around for the better.
We have always maintained that of all the state owned parastatals, BMC is by far the one closest to a majority of Batswana given the fact that it buys cattle from subsistence farmers who are scattered all over the country.
Like the rest of the world, Botswana is going through economic turmoil.
The country faces the biggest cost of living squeeze for over a generation.
Fuel, food and energy prices by far constitute the biggest problems.
Almost on a monthly basis, inflation has been increasing significantly.
The government had needed to intervene in both speed and scale.
It has failed the two tests.
First it took too long to announce the interventions.
And when they happened they were half-hearted.
To be clear, we are wholly supportive of much of the announced measures, save of course the increase in student allowances.
It is not clear to us why Botswana government feels the need to increase allowances of those students that have been lucky to get government sponsorship instead of using that money to get more students at colleges.
This is a classical case not of just populism but also empowering the already empowered.
It was not so long ago when Botswana government increased Value Added Tax from 12 to 14 percent.
But since then, events have conspired to effectively make that decision counter-productive.
The biggest items that a majority of people need to grapple with on the cost of living squeeze has to be food and fuel prices.
The measures announced by the ministers do not address these items, save may be for students who have had money put directly into their pockets.
We are awake to the fact that it is economically next to impossible for Botswana government to come up with any further subsidies of fuel.
In fact we are of the firm view that Botswana government should do away with the current subsidy which has now become an economic albatross around public finances as evidenced by continual failure to service it.
It is not clear if the announcement announcements made by the minister constitute the whole package or if more such measures are coming. But we are of the view that the measures already announced dop not go far enough.
It will not be easy, but Government needs to think of more trade-offs.
The economic headwinds are too strong as things stand.
What is needed is a strong push from government.