Botswana’s national budget will remain on the red even doing into the Transitional National Development Plan (TNDP). The budget projections were made by Finance Minister Peggy in a speech delivered in Parliament on Monday in which she revealed that the country’s total revenue and grants for the financial year 2023/2024 are estimated at seventy-nine billion, seven hundred and ninety million Pula (P79.79 billion), compared to total expenditure and net lending of eighty-seven billion, three hundred and eighty million Pula (P87.38 billion).
This means Botswana will see a budget deficit at 3.06 percent of the gross domestic product (GDP) for the year 2023/24, compared with 2.1 percent for 2022/23.
Serame admitted on Monday that with years of growing budget deficits even prior to Covid-19 and the European war, Botswana’s fiscal space has become increasingly constrained. By reducing the public sector wage bill as a share of overall spending and other cost containment measures, such as rationalising State Owned Enterprises (SOEs), Botswana forecast to achieve a balanced budget during the 2024/25 financial year.
Botswana has been advised by the World Bank that, in order to turn around its economy, the mineral rich country needs to reduce the presence and influence of SOEs in sectors that are commercial. Through the Country Private Sector Diagnostic (CPSD) report published in July 2022, the World Bank said that there is need to create markets with competitive neutrality hence the need to put in place policies that tackle underlying and cross-cutting constraints, especially those that foster competition in sectors dominated by SOEs.
The report further stated that there is need to harness private sector participation to foster transitions to sustainability, efficiency, and affordability of key enabling sectors such as energy and water.
“This will create markets for entrepreneurs and SMEs to address, private firms to grow, and foreign investors to participate in. These actions would be buttressed with policies to facilitate trade in environmental goods and services and reduce gaps in infrastructure, skills, and access to finance that hinder employment and productivity growth in firms”, reads part of the report.
For a long time, state-owned enterprises (SOEs), have been identified as a drag on government finances, blamed for poor performance and reliance on state subvention.
But now the World Bank says the dominant role that the government of Botswana still plays in large parts of the economy, particularly through its footprint as a shareholder in companies in the corporate sector, is a critical constraint that inhibits the entry and success of private sector participants.
As of 2019, the Botswana government had ownership participation of 10 percent or more in at least 92 companies across 16 sectors, which the World Bank is relatively high with respect to the economy’s size.
The government first came up with a privatisation policy in 2000 to cut down on its number of SOEs which were weighing heavily on the government, often piling on debts and relying on the government to bail them out.
However, the government did not only fail to implement its privatisation policy, but it also increased the number of SOEs to 60 over the years. With clear signs that the increased number of SOEs, and many of them are straining government’s revenues through subventions, another round of privatisation and rationalisation is in the offing.
“The number of these SOEs has grown over the years and this has had a cumulative impact on the running costs of Government as well as on the efficiency and effectiveness of the Public Sector as a whole”, admitted President Mokgweetsi Masisi during a national address in April 2022.
At the time, Masisi further announced that several existing SOEs will be restructured – an exercise he said will be characterized by mergers intended to remove duplication and overlaps of mandates and operations as well as the bringing in of strategic private sector partners to help revitalise and develop selected SOEs.
On Monday Serame said that the 2023/24 budget deficit will be financed through a combination of financing options which includes issuance of domestic Government securities, in the form of bonds and Treasury Bills to the tune P3 billion. Serame said another option will be net external financing, from official multilateral and bilateral lenders which is projected at around two billion Pula. “As a result, a total of two billion, 34 two hundred million Pula (P2.20 billion) is expected to be drawn from the Government Investment Account”, Serame said.
