Thursday, May 23, 2024

Botswana infrastructure is ‘shriveling’ ÔÇô IMF

Despite Botswana’s relatively high public investment spending, the quality of infrastructure has fallen down sharply in recent years, a study undertaken by the International Monetary Fund (IMF) on the country’s public infrastructure has shown.

A team of IMF experts, amongst them, Lesley Fisher, Isabel Rial, David Gentry, Imran Aziz, and Willie du Preez stated in a report recently published that although Botswana performed better than peer countries and emerging market averages up to 2010, more recently, indicators of infrastructure quality ÔÇöboth survey based and physical indicators of access and service delivery ÔÇö suggest significant bottlenecks.

The IMF says that around one third of investment spending does not result in the level or quality of infrastructure of countries which manage their resources efficiently. The efficiency gap for Botswana is 37 percent ÔÇö which is higher than emerging economies, and the average for all countries.

The IMF experts stated that large inefficiencies in the provision of public infrastructure underscore the need to improve Botswana’s public investment management framework.

“To fully realise economic growth from public investment spending, a number of areas require further attention. In general, Botswana has strong planning institutions, investment funding is predictable, debt levels are sustainable, but there is a need to improve project appraisal, selection, and monitoring,” reads part of the executive summary of the IMF report.

IMF report comes hardly two years after another study carried by the Rand Merchant Bank which also highlighted that the quality of Botswana’s overall infrastructure has declined badly over the past six years, making the country one of Africa’s “Top 5 Deteriorators”.

For investors this is bad news because poor infrastructure increases the cost of doing business.

“In many cases, we find that our clients are more concerned about the challenges of doing business than growth and market size, and therefore they place greater emphasis on the risks associated with the different operating environments Africa offers,” RMB said in 2015.

Interestingly though, at the time, Botswana emerged as one of the 10 countries on the continent that were most attractive for infrastructure investment. Investors aside, the Botswana government was one of the 10 in sub-Saharan Africa which have surpassed the threshold for domestic financing for infrastructure.

In terms of domestic financing for infrastructure, 5-6 percent of GDP is generally considered sufficient. Alongside the Central Republic of Africa, Rwanda, South Africa, Uganda, Botswana allocates between 7.1 and 8 percent of its GDP to infrastructure. In sub-Saharan Africa, national governments are the main single source of infrastructure financing, and that role is increasing. However, the level of public finance is still insufficient to cover the large infrastructure needs.

According to Brookings Institute, a think tank in the United States, these governments spend most of their resources on two sectors: transport and energy.


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