Saturday, September 26, 2020

Budget Speech: The good, the uncertain and the ugly

Why should the book not be judged by its cover? This copy of the budget proposals refers to Website: www.gov. bw. It is hopelessly dysfunctional.
The budget, though, makes bold statements about the cultivation of a knowledge based development programme. In the civilised countries that speak that language, such a programme requires the support of a vigorous information technology or IT culture.

Further, the cover of Minister Baledzi Gaolathe’s proposals is priced at a hefty P15.00. The price of the 32 pages of budget substance is five times that of the Friday Mmegi, Botswana Guardian or Sunday Standard, which carry three times the number of pages at A1 size or larger including advertisements for much needed jobs.
The price on the commodity, which is wholly financed by the taxpayer, is inhibitive, running contrary to the announced intention of government to build ‘an informed’ knowledge based society, perhaps by 2016.
Finally, it is that section of the public which will appreciate the message: “Turning challenges into opportunities ÔÇô building on the achievements of NDP 9”.

Further, the budget launches National Development Plan 10 whose theme will be “Accelerating Vision 2016 Through NDP 10”, as if the reader might have mistook NDP 10 for NDP 20! Why not: Accelerating Vision 2016?
President Ketumile Masire, who modelled Vision 2016, left office in 1998. Years later, it has finally dawned on the planners that some form of acceleration will be necessary to meet the modest objectives ÔÇô none of them stated in the direct words of the average Motswana ÔÇô set out in the Vision.

There are seven years to go. Masire said then that his vision was that every adult Motswana should have a plot of land, and that every family should have at least one university graduate.
The absence of a land audit disenables Batswana from knowing where they can get ‘a plot’. The parliamentary motion for declaration of assets appears to have put a break on the mapping out of property in land. The land boards have closed applications for residential land. The councils have been instructed to repossess undeveloped plots.

The University of Botswana is closed. Long before the song of the ‘global economic crisis’ was composed, government called for ‘cost sharing’ that will effectively abolish the principle of free education, even if it was not compulsory.

The outward appearances of the budget proposals betray the perennial contradiction between stated intent, spelt out in good words, and practice.
Some of the redeeming aspects of the budget are that “the Pula appreciated against the South African rand by 10percent”. Notwithstanding the effects of inflation there and here, that suggests that Batswana entrepreneurs will be able to buy a little more for a little less in South Africa. That though, will by no means make up for the devaluation of the Pula during President Festus Mogae’s term.
The Pula “lost ground by 20.1 percent against the US dollar”. That suggests that the Botswana government ÔÇô not the average Motswana ÔÇô will get more Pula on the dollar for every diamond sold. Needless to say, this also means that Botswana will import less for more Pula. In the short to medium term, the advantage of a ‘weaker’ Pula against the US dollar will not mean much because the Americans are not buying the diamonds, preferring to save in order to offset the effects of the bank inspired ‘credit crunch’ in the Euro-American economies.

It is unlikely that the Japanese, Chinese, Indians or the Europeans will buy in the short or perhaps even medium term.

“The upper loan limit of the CEDA loan scheme has been increased from P2million to P4million to take into account the effects of inflation over time, complexity and magnitude of the projects. The repayment period for the CEDA loans has also been increased from 5-7 years to 5-15 years,” says Gaolathe.
He also announces that “as at December 2008, 153 projects with a total cost of P53.5 million had been approved under the Young Farmers Fund, and they had employed 339”. That amounts to two people per project of about P350,000. There is also the Youth Development Fund.

Gaolathe promises “to increase the roll out of ARV services from the current 79 clinics to all clinics during NDP 10”.
The budget also makes an attempt at destitute and poverty ‘alleviation’. “Currently 49,852 orphans, 31,300 vulnerable children, 40,525 destitutes, 3,530 home based care patients, 3,202 World War II veterans and 89,471 old age pensioners are benefitting under various programmes,” the budget says.

The change f the drought relief programme to the more permanent labour intensive public works programme should assist in the alleviation of poverty.
What though, is the meaning of: “The value of imports increased by 37 percent to 29 billion, reflecting the increased cost of food and fuel, growing imports of machinery and equipment as well as diamonds? The growth of diamond imports since 2007 reflects the increasing importance of the polishing and cutting businesses that have recently established in Botswana”.
Should the importation of diamonds by Botswana – a mining country – be placed in the same category of imports such as food, machinery ‘and equipment’, none of which the country produces? How did the diamonds shift, in one sentence from an export to an import?

Paragraph 67 reports that a diamond hub was established in April 2008 and: “Already 15 of the 16 license holders are actively operating” employing 3,108 people. Presumably, the licensees are private people, who should bear the costs of importation of diamonds from which they will derive the final profits!

Whatever the case may be, it appears somewhat incongruous that the country that digs diamond should be the one that faces problems of importation of the product. More must be explained about this apparent incongruity.

Paragraph 29 refers the reader to employment, placing the number of informal sector businesses at 40,201, also pointing out that this represents a 72 percent increase from the 1999 Informal Sector Survey. “The majority of the businesses were in the wholesale and retail trade sector, followed by real estate at 20.3 percent”.
Paragraph 30 recognises a decline in employment growth in the ‘formal’ sector and concludes: “In light of this, government will promote the informal sector as another avenue to create additional jobs”.

How does Gaolathe’s budget define the informal sector, as opposed to the formal? Is this a generic definition, or is this one crafted by the Ministry of Finance and Development Planning to fit its own economic world view? Are not the retailers and wholesalers registered legally according to nature of the business they do in terms of its scale and relationship with the consumer.

Ostensibly, past law provided that the wholesalers sell in bulk to the retailers who dispense with goods directly to the retailer from a council approved physical space, unlike the hawkers and the vendors who service their clientele from wherever they are located, as long as such location is not in conflict with the trade of the wholesaler and the retailer.

This definition will determine whether there has been liberalisation of the law to recognise the selling of ‘letlhafula’ from the back of a donkey cart in the same way as it recognises Sefalana or TransAfrica. The practice of ‘real estate’ and ‘hotels and restaurants’ also beg for clarity of definition. After all, it will be on the basis of this definition that the policy adjustment will be made to promote the informal sector to create additional jobs.

Page nine of the budget proposals tells the success story of the recapitalisation of Air Botswana, and the achievement of profits. Profits at the telecommunications corporation are on the decline as privatisation gains momentum.

“Botswana Railways continues to make operating losses” and before government makes any further investments in the organisation, it will increase freight tariffs ‘towards cost recovery levels.’ What have the tariffs been? Where was the management when BR made losses?

The budget is credited with making access to CEDA easier, but page nine does not tell what the applicants for the loans are borrowing for.
Further, the budget opts out of the familiar ‘annual inflation objective’ preferring rather the medium-term objective which is “defined as a three-year time horizon over which inflation is forecast”. The justification is that three years “is considered a reasonable period for monetary policy to take effect”.
Is this a case of changing the goal posts so that the impact of inflation is not immediately discernible to the consumer, thereby averting the public demand on the planners and the Bank of Botswana to do their job, now and not three years later?

An expanded version of the budget, formerly introduced under the stewardship of Vice President, Peter Mmusi and Modise Modise in the budget office, helped to shed light on the uncertainties that might have been raised by the shorter version which makes for easier reading by the finance minister in Parliament.

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