Finance minister, Kenneth Matambo takes to the parliamentary podium on Monday with many people asking the infamous question: “What is in the briefcase?” Since the beginning of the recession in 2008, the arrival of the minister has been greeted with grim faces as if he created the global economic crisis.
The 2013/14 budget comes at a time when Botswana faces a challenge of keeping the economy running, but remains alert on the possibility of a debt trap if it continues spending backed by continuous borrowing.
Analysts do not expect any mention of the civil service salary adjustments even though the fiscal budget will be on the verge of an election year.
The Botswana Confederation of Commerce Industry and Manpower (BOCCIM), which represents over 1000 employers, is expecting a balanced budget, which will lead to a budget surplus.
The organization, headed by Maria Machailo-Ellis, does not anticipate a significant increase in public spending, and expects that priority will be given to maintenance of public infrastructure and finishing off outstanding projects.
“BOCCIM notes that previously, a large portion of the maintenance budget has remained unspent, despite adequate implementation capacity in the private sector. As a result, the private sector is forced to downsize work that could sustain its operations, particularly for SMME’s, is not contracted out by Government,” noted the organization.
BOCCIM also expects government to choose projects that will deliver maximum economic returns and will “crowd in” private sector investment.
“The fiscal buffers that served us well during the global financial crisis have been drawn down and now need to be restored as a safeguard against the impact of possible future crises,” it said.
The Chief Investment Officer of Afena Capital Botswana, Alphonse Ndzinge, said he expected government to continue with austerity measures and sees Botswana reporting a marginal surplus.
“We expect the country to post a moderate fiscal surplus in FY2012/13 and widen further for the projected 2013/14 numbers as restrained Government spending and the windfall from shared SACU custom revenues should more than offset the expected subdued growth in mineral receipts,” Ndzinge said on Friday.┬á
The International Monetary Fund’s (IMF) projections for 2013 is that global economic growth is expected to be gradual with output expected to reach only 3.5 percent compared to 3.2 percent in 2012.
The U.S, China and Japan are expected to grow at 2.0 percent, 8.2 percent and 1.2 percent respectively. The Eurozone on the other hand, is expected to contract by 0.2 percent.
The U.S and Japan remain the key markets for diamonds; the performance of these two economies affects Botswana’s economic prospects.
“This view remains highly dependent on developments for the global diamond market. We also expect the Government to maintain spending restraints with below trend expenditure growth on the back of initiatives such as reducing the size of the public sector as announced in last year’s budget,” added Ndzinge. “This could also be sensitive to expected pressures to fast track the backlog of development projects, especially in light of the political budget cycle next year which could see a looser fiscal policy,” he said.
This is what BOCCIM expects from the 2013 /14 budget:
*Employment: BOCCIM expects the Budget to provide tax deductions for private employers including retailers that absorb workers lacking requisite skills in order to boost employment. The certification process of the Botswana Training Authority (BOTA) is onerous, especially for small firms, hence the need for a simple process that would encourage recruitment and provision of on the job training for unskilled labour. BOTA’s refund mechanism is not a viable alternative for small firms, hence the need for a tax deduction system.
*Balanced budgets: BOCCIM expects a balanced budget and in due course, budget surpluses, so that the government’s savings can be re-built. The fiscal buffers that served us well during the global financial crisis have been drawn down and now need to be restored as a safe guard against the impact of possible future crises.
*Relocation of diamond aggregation: BOCCIM expects the Budget to establish a dedicated fund to facilitate the smooth relocation of DeBeers diamond aggregation business from London to Gaborone as part of the sales agreement. The relocation offers Botswana a golden opportunity to improve regulations, procedures, processes and the mind-set for facilitating private sector development.
*“Off Budget” Levies: BOCCIM is concerned that the proliferation of “off budget” levies and fees has unintended consequences for firms in the form of rising operating costs and the erosion of competitiveness. The aviation sector for example has recently been hit with a steep rise in fees. BOCCIM expects the budget to reform revenue generation and promulgate a gradual levying of fees.
*Maintenance of Public Infrastructure: While BOCCIM does not anticipate a significant increase in public spending, due to the prevailing economic conditions, priority should be given to maintenance of public infrastructure and finishing off outstanding projects. BOCCIM notes that, previously, a large portion of the maintenance budget has remained unspent, despite adequate implementation capacity in the private sector. As a result, the private sector is forced to downsize while work that could sustain its operations, particularly for SME’s, is not contracted out by Government. In this regard, BOCCIM expects both government and the private sector to collaborate in the implementation of the budget. BOCCIM also expects government to choose projects that will deliver maximum economic returns and will “crowd in” private sector investment.
*Public Education: The poor performance of the public education system is a source of concern and poses a grave risk to our competitiveness. This is not seemingly the result of a lack of resources, given that public education continually gets the largest budget share and per capita spending on education in Botswana is relatively high by international standards. However, much of the money is spent on expensive “hardware” (buildings and equipment) while the all-important “software” (teaching, maintenance, management) suffers. A rebalancing of the allocation of resources in public education is therefore sorely needed. All of those involved ÔÇô parents, teachers, learners and government ÔÇô have a responsibility to contribute to this.
* ICT: BOCCIM expects the budget to announce plans and allocation of resources for the use of ICT in government’s transactions with the private sector. We, therefore, expect an announcement on online issuance of visas, business licenses and permits. These measures would reduce business red tape, long queues, business costs and delays.
*Payment of tax: BOCCIM also expects an announcement of initiatives to make it easier to pay taxes by improving efficiency and competency at BURS and introducing electronic means of filing and paying taxes, so as to make the time-wasting queues at BURS a thing of the past.
*Business climate: Although not strictly a budget issue, much greater attention needs to be paid to improving the business climate ÔÇô much has been said by government on this topic, but often this is just lip-service and real improvements on the ground are lacking, and businesses continue to be frustrated by pointless bureaucracy and anti-business attitudes in both central and local government. Botched reforms of immigration and trade licensing systems are a case in point.
*Poor Work Ethic: Various surveys on Botswana have identified the poor work ethic as a major constraint to international competitiveness. BOCCIM therefore expects the budget to define necessary steps to change the mind-set. A statement on incentives for improving both the work ethic and labour productivity is expected.
*Electricity: The current spate of power cuts affects business operations. The budget is expected to shed light on contingency measures being undertaken to address power shortages. Government should also aim to use the private sector to deliver projects and infrastructure wherever possible. The government should use the private sector to generate power (through IPPs, independent power producers), leaving BPC simply as a distribution company.
