Minister of Trade and Investment has for the first time acknowledged that the mandate of Botswana Development Corporation will be radically overhauled to allow the company more flexibility.
The move is also meant to allow BDC to become a big player in the international investment world.
BDC, which is government’s investment arm, is by far the biggest and the most diversified of the companies that are wholly owned by Botswana government with an investment portfolio that sprawls┬ásuch sectors like agriculture, tourism, property, construction and tourism.
Participating at a panel discussion organized by Standard Chartered Bank Botswana, Minister Dorcas Makgatho-Malesu said plans to overhaul the BDC mandate are already afoot.
Standard Chartered Bank had organized┬á a public discussion on the topic of economic diversification.
Vice President Ponatshego Kedikilwe gave a keynote address.
He said the government of Botswana has in various manifestations always strived to diversify the economy away from the mineral sector. The results, he conceded, have not always been satisfactory.
He said since National Development Plan┬á IV, the government has in different shades invested heavily in economic diversification.
The current flagship, said the Vice President, is Economic Diversification Drive under which a wide suite of initiatives are being tried at a go to make the country less dependable on minerals, especially diamonds. The Vice President emphasized the importance of moving faster to achieve economic diversification.
“We are looking for the tangible. Strategy and philosophy I do not mind, but there has to be something we can show the people,” said Kedikilwe.
Alex Monchusi, President of BOCCIM, which represents organized business, said it is important for Botswana as country to accept that the glory days of diamonds as the economy’s mainstay have come to an end.
In that regard, he said a big shift was imperative to move the economy in kind.
“The 2013/14 budget illustrates this albeit in a perverse manner. In the 2013/14 budget, total revenues are P44 billion with SACU receipts contributing P13.7 billion or 31.1% and mineral revenue second at P13.3 billion or 30.4%. However these top contributors are vulnerable. First, mineral revenues are set to decline. Secondly, prospects for SACU revenues are not good as the revision of the revenue sharing formula and tariff liberalization pose threats. Thirdly, the global economic crisis continues to dampen demand for diamonds exports.”
Monchusi said there is therefore the need for new sources of wealth, hence the urgency of economic diversification.
“I need not mention that if we do not find new sources, to replace diamond revenues then the free services will also dry up. It will be extremely difficult in fiscal terms to provide free education, free health, because these are only free for as long as we have diamond revenues and SACU receipts.”
Monchusi called for improved competitiveness, speedier privatisation, a simpler tax system and a reduced public sector wage bill.
“Our wage bill as a percentage of GDP is among the highest in the world, even higher than countries like Sweden, Brazil, Germany, Canada, Mauritius, south Korea, Chile and Costa Rica. It is unsustainable against the forecast decline in diamond and SACU revenues.”
He challenged government to follow┬á through on plans to reduce the wage bill by 5% every year.
“This is why it is important to privatise so that those leaving the public sector find opportunities in a booming private sector.”
Another key point raised by the BOCCIM President was that spending on public infrastructure should be based strictly on value for money.
“Our per capita spending on education is higher than other middle income countries.”
In conclusion Monchusi called for a paradigm shift and┬á a change in mindset, arguing that baby steps would not deliver the results at least not in time to deliver the reforms well in time.
“We have to do things differently in order to get better results. Sticking to the same path of excessive government control will not transform the economy. It is time to let go,” he said when calling on government to make space for the private sector to play its rightful role.
Another panelist, a researcher at the Botswana Institute for Development Policy analysis, Monnane Monnane, said a key constraint for Botswana’s companies as they strive to help diversify the economy is that they do not have access to global value chains.
Dr Monnane said efforts should be made to integrate Botswana companies to the global economy.
One way of doing so, he said, was to develop entry points into the global value chain.
“To enter the global value chain we need to change the BDC mandate. One way of doing so would be a divestiture from BDC shareholding as a way of raising money.?Dr Monnane also advised government to consider drawing on the SACU developmental component as a way of refinancing the changed BDC.
“BDC should be transformed to allow it to invest in the global market,” said Dr Monnane.