Monday, May 17, 2021

How UDC would handle ‘current’ liquidity crisis

Had the outcome of the last general election been different, the Umbrella for Democratic Change (UDC) would be the party in official power. How then would it have handled what its deputy president and point man on finance, Ndaba Gaolathe, still insists is a “liquidity crisis” in the banking sector?

The first thing, he says, would have been to make the public service more cordial, efficient and financially rewarding by introducing better relations with civil servants as well as introducing better remuneration, including that related to performance.

“This would influence personal savings in the banking sector,” the Gaborone Bonnington South MP says.

Dissatisfied with how the government’s bond market currently operates, Gaolathe says that the UDC would take a structured and deliberate action to develop this market by placing more borrowing through local capital markets, developing regulatory and transaction infrastructure as well as developing a more robust and transparent cash- and debt-management regime for the government.

“This would lower borrowing cost of government, make the market more liquid and efficient and assist in the conduct of monetary policy,” he says.

Pension funds and levies would come under renewed focus. Gaolathe says that a UDC government would legislate a more progressive system for the deployment of pension resources by requiring that more of them are invested locally but without unduly harming the risk profile. The party would change the strategy on how government pension funds are managed, and also introduce “better governance” of the government’s various levies, like those of tobacco and alcohol.

“This would mean there is more capital available in the system to start and grow businesses,” the MP says.

The party would have seen need to “immediately” implement and “significantly” improve the implementation capacity of large and key national infrastructure projects such as the construction of the Trans-Kalahari railway to the ports, co-investments into large power generation projects (through private-public-partnerships) and water conveyance projects.

“This would inject money into the system as well as create economic opportunities,” he says.
The party takes the view that micro-lenders are not effectively legislated which is why it would have taken steps to enhance the regulation of micro-lenders through relevant legislation and better supervision.

“This would assist manage the vulnerability of large segments of private citizens to bankruptcies,” Gaolathe says.

An all-encompassing empowerment programme that targets all relevant stakeholders would have been put in place. Gaolathe says his party would have made effort to create a climate that encourages the establishment of indigenous banks as well as encourage financial institutions to improve their risk-analysis capacity and innovation.

“This would ensure we have banks that are better able to identify worthwhile business opportunities and churn out new industries,” he adds.

It would appear that the party believes that the Bank of Botswana (BoB) and other entities don’t share information well and often enough. The MP says that UDC would interact with BoB more often, and require various other stakeholders to publish certain key financial data necessary for transparency among all players in financial markets.

“This would ensure that the Bank of Botswana is more accountable,” he states.

For first-time home-owners who have been having difficulty and continue to have difficulty in the housing market, the party would consider additional measures to assist the latter in securing loans or means for the purchase or building of their homes.

“This would alleviate the harsh effects on ordinary citizens,” he says.

Lastly, the party would have targetted a selection of large foreign investors for specific investments in Botswana, as opposed to what Gaolathe calls “a large random-cast net approach” used by the current government.

“This would bring some capital inflows into Botswana,” he says.

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