Saturday, July 4, 2020

Botswana emerges from lockdown limping

Botswana this week lifted the nearly two month-long lockdown as the country limps to a difficult road ahead. The easing of some restrictions is largely seen as a necessity to slow the economic damage at a time when the country continues is reporting a spike in new cases of infections. 

President Mokgweetsi Masisi imposed the nationwide lockdown in April on fears that the country might fall victim to the coronavirus outbreak after the neighbouring countries started reporting surges in infections. Covid-19, the disease caused by a strain of coronavirus, has sickened over 4 million people and killed nearly 400,000 word wide, forcing countries to take  extreme measures such restricting movements of people and goods. 

Botswana has so far been spared of the wave in infections of Covid-19 cases, registering 29 confirmed infections, which involve one death and 19 recoveries. The country’s first confirmed cases were imported from travellers coming outside the country.  A swift response from the government’s Covid-19 taskforce team was able to contain the spread of the deadly pathogen, with only a handful of local transmissions.

However, the country emerges from the lockdown at a time when there has been an indication of increase in infections imported from its neighbouring trade partners. The last five confirmed coronavirus cases all happened this month in a space of two weeks, and nearly disrupted plans to fully open up the economy which has taken a hit since global pandemic. 

On Thursday, the government went ahead with its plans to lift the lockdown, easing restrictions on movement of people but within zones, while cross border travels are for essential travel and supplies. The easing of restrictions was down in four stages spread over the period of May. 

There has been pressure on the government to lift the lockdown given the low numbers of recorded cases against the economic damage that was caused by disrupted economic activities. Botswana’s finance ministry officials have shared a dire assessment of the country’s economic outlook, expecting a 13 percent contraction in economic growth, the largest in the country’s modern history. 

The assault on the economy came from all sides. With the economy still anchored by diamond exports, Botswana is once again reliving the painful memories of the 2008 global financial crisis that inflicted damage to the country through strangling the diamond market.  In the latest fresh round, the demand for the shiny stones is being assailed by measures taken by the top buying countries as they imposed their own lockdowns. 

China, where the virus first erupted, has started to repair its economy after months of battling the virus, while other top buyers like USA and India are still in a gridlock over measures to contain the pathogen. The weakened economies could translate in subdued demand for luxurious goods such as diamonds. 

The restrictions on movements in April forced global diamond mining giant De Beers to postpone the third sales cycle of its planned ten sights for the year, which are held in Gaborone, where the company is partnership with Botswana. Already, prices were already falling in the diamond sector, and a glut in supply could amplify the damage. 

The disrupted global supply chains have also dealt a blow on imports, negatively affecting Botswana’s forecasted revenue from the Southern African Custom Union’s revenue pool, where custom taxes are paid into. The SACU revenue is a top contributor to Botswana’s fiscus, thus slowed  or decline in imports will invariably translate in shared revenue. 

Another key economic sector, tourism, remains shuttered and the sector is expected to take a while to recover. In April, as the negative effects of coronavirus took shape, Botswana’s finance minister Dr. Thapelo Matsheka revised his initial February budget, cutting projected revenue for the 2020/21 financial year from P62.4 billion to P48.8 billion.

Matsheka further adjusted the planned P67.6 billion government expenditure to P59.6 billion. Furthermore, due to the lockdown, the government was forced to pick up the bill for the disrupted economic activities, forcing the government to unveil a P2 billion Covid-19 fund, with the bulk of the money aimed at stabilising the economy, partly by providing wage subsidies to afflicted businesses. The government has also been forced to dig deeper into its pockets to widen its social safety nets, providing food packages to those affected by the downturn of events. 

Economists warned that the country with its narrow economic base cannot afford an extended lockdown, advising the government to find a delicate balance between curbing the spread of the disease and opening up the economy. Still, as the economy returns to some resemblance of normalcy, it will be a long difficult road for the country’s fiscal position.

According to the finance ministry data, the projected budget deficits are expected to grow in size. The budget shortfall for the 2020/21 is now estimated to be P10.8 billion, ballooning from the P7.9 billion over expenditure registered in 2019/20 financial year, which was a slight reduction from 2018/2019’s massive P8.8 billion budget shortage. 

The government has been running budget deficits since 2017/2018, with that year’s deficit recorded at P1.9 billion. Another shortfall of P4.4 billion is expected in 2021/22 but will likely be revised too in the coming months.

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Sunday Standard June 28 – 4 July

Digital copy of Sunday Standard issue of June 28 - 4 July, 2020.