Officials of the African Development Bank (AFDB) have assured Government of Botswana that the Bank has offered to support them in laying firm foundations for a more competitive and diversified growth in spite of the challenges the country is facing.
To confirm this, Arnold Madikwe, Director of International Economic Policy Coordination, said, “We have also recently negotiated a loan agreement with the bank to the tune of Euro 153 million as part of the Government Equity contribution to Morupule B Power Station.”
The funding structure of the project, meant to address Botswana’s energy requirements, is 50% debt and 50% equity.
Explaining the decision to help keep Botswana afloat amidst the tumultuous global financial and economic crisis of which the country has not been spared, AFDB lead Economist Dr. Andrew Mwaba, prefaced it by acknowledging Botswana’s “decades of robust growth and huge budget surplus.”
He said, “These are being put to the test by the global financial crisis, which as the Country Paper Strategy (CSP) indicates, have resulted in sluggish demand for and consequently, decline in the prices of diamonds, which are the mainstay of the economy.”
Due attention was also given to the fact that the country’s real Gross Domestic Product (GDP) has nosedived from 5.3% in 2007 to a lowly 3.3% in 2008.
Moreover, the country had to and continues to run budget deficits starting the financial year, 2008/2009 through to 2010/2011.
Apparently, the budget deficit for 2009/2010 alone is estimated at BWP 13.4 billion, which translates into 13.5% GDP.
On account of this, and the need to mitigate the short term financing gap as the country tries to get over with the impact of the global financial crisis, the AFDB presented the CSP for Botswana at a workshop for that purpose last week, that had been a subject of discussion between GOB and the Bank for some time.
Towards this end, a two angled approach was proposed by the paper as a way of helping the midst of the crisis, while at the same time creating an environment for a more competitive diversified economic growth.
The strategy entailed supporting actions to expand private sector investment and removing infrastructure bottlenecks to enhance robust economic advancement.
In this respect, it is intended to finance a number of projects, as well as provide appropriate knowledge and advisory services in order to best orientate the economy on a more productive and sustainable growth.
To achieve this, the Bank officials said a deliberate decision was taken to align ACDB’s funding with Botswana’s existing strategic plan and priorities, namely National Development Plan (NDP) and Vision 2016. So, the present (CSP) was prepared following broad based consultations with Government and various stakeholders during a mission that visited the country in April 2009, according to authorities.
“On the basis of this, and comprehensive review of the needs of the private sector especially SME, and the impact of the global whirlwind, AFDB Board of Directors approved Yen5.5 billion for long term project financing of small to medium enterprises,” said Nicol Onike AFDB’s Officer in Charge of Information and Communication.
Onike stated that the money will be accessed through the National Development Bank by submitting an application accompanied by relevant background information and financial projections to qualify for eligibility.
In a further boost to the private sector, Onike pointed out that, the bank recently introduced a number of new instruments to mitigate the effects of recession.
The most crucial that comes to mind is the emergency liquidity facility which was approved by the Board of Directors on 3rd June 2009, with the aim of maintaining some form of a lifeline for those businesses in Africa and Botswana that were hard hit by the global financial crisis.
According to Onike, this facility is intended to issue loans for business and enterprises which showed potential to contribute meaningfully to the country’s economic growth an increasing employment opportunities, were it not for the adverse impact of the crisis.
To this end 1.4 billion USD was allocated.
However, the AFDB Communication Chief, told the Telegraph in an interview that the ELF is only temporary pending review of the gravity and magnitude of the ongoing economic crisis.
Authorities form the ministry of Finance and Development Planning pleaded with AFDB at the occasion, to consider using the country’s systems in the delivery of Bank funded projects.
“This will go a long way in enhancing the effectiveness of our mutual cooperation,” said the Government official.
As to what the position of the Bank was, regarding this proposal, the AFDB lead Economist responded in an interview with Telegraph, “that given that Botswana has by far showed to have robust accounting systems, there is no doubt that the Bank will view Government’s proposal in favourable light”.
“After all, save for a few projects which included the Pandamatenga Agricultural Project, the Bank already channeled the funds through country systems, and we will continue to do so in the future,” said Mwaba.
He indicated that it is the ultimate wish of the Bank to have all the funding done through existing country systems. However, this will continue to be a case by case consideration.
Madikwe told the Telegraph that by subjecting Botswana to the “Bank’s systems, that’s tantamount to placing us in the same basket with countries previously ravaged by war, which have nothing in place.”
Some of the envisaged interventions earmarked for funding include providing clean, reliable and affordable water supply for domestic industrial and agricultural requirements.
It is also hoped that by supporting appropriate infrastructure investments that would better link Botswana with the region, the AFDB funding would enhance maximum utilisation of benefits accruing from regional opportunities.
Still within the context of the two pillars of AFDB support, it is intended to heighten efforts to strengthen capacity in the public as well as in the private sector.
AFDB officials have stated that while they do diligence for verification of eligibility for both private sector funding and public support, it is for business to identify their niche and maximise their benefits from AFDB funding.
“For instance, whether the support given the small and medium scale enterprises transforms them into real engines of growth, is not really for the Bank, as we believe the bank is doing its best,” concluded Mwaba.