The Government’s economic advisor, Nicolas Czypionka, has said diplomacy has passed the sell-by date and it is time to take off the gloves against South Africa in protecting the economy. Czypionka led by example this week in Gaborone where he was discussing the 2007/2008 national budget. He shed off the hat of Task Force Director for the Business and Economic Advisory Council before dismissing the South African economic agenda against its neighbours.
“This is a nasty game,” he told the audience about the economic scheming in the region. “You have to be clever to win it. You have to be even cleverer than your neighbours.”
He warned that Botswana should tread carefully in following the South African economic agenda for the region. He said what should matter most should be the interests of the domestic economy and under the current proposed regional economic integration ÔÇô which is spearheaded by South Africa, Botswana stands to lose more.
“To me, regional integration today is a joke,” he said.
He likened the proposed unit currency for the Southern African Development Community (SADC) to “cloning” the regional currency along the Euro. This, he equally dismissed as unachievable. The reason regional integration is a failure even before it is conceived, he said, is because the region does not even have economic, structural or legal convergence.
“It is not possible,” he said, adding that there is a huge trade imbalance already between Botswana and South Africa, with Botswana importing almost everything from its giant economic neighbour and exporting close to nothing in comparison. The playing field is already uneven and buying into the regional integration agenda would erode the country’s competitive and comparative advantage. Even in monetary policy terms, Botswana has a different system from Mozambique.
“We cannot talk of integration when there are neighbours such as Zimbabwe, whose political system is at ground zero,” he said.
Instead of integrating, he argued that Botswana would even make a good case by opting out of Southern African Customs Union. Within the Union, he said, the country is being dragged down by the inefficiencies within the customs union.
“Mauritius is a good example. It is currently successful because it broke away from the shackles of integration and set itself free. The electric cables that are being bought from South Africa are not even from South Africa, they were manufactured in Mauritius.”
Czypionka touched the nerve centre of economic diplomacy when he talked about the issue of tax harmonization. South Africa, through its Finance Minister Trevor Manuel, has virulently pursued the issue of tax harmonization in the region. Manuel even went to the extent of labeling the Botswana International Financial Services Centre (IFSC) a “tax haven” because of the tax incentives given to companies that enlist into the IFSC tree.
“I disagree violently with tax harmonization. If Botswana wants to be competitive and different from South Africa, then we have to undercut them from everything,” he said.
Amid gasps, he launched the killer punch: “If Trevor Manuel doesn’t like it, then tell him to jump into the sea.”
Czypionka said Botswana economic authorities have to develop a strong mental strength and protect the country’s economy from being overshadowed by its neighbour. The tax harmonization outlook, he noted, would be such that the country would only get the crumbs of the investment cake. The holding companies would be setting up in much more robust and big economy of South Africa and only setting up subsidiaries in Botswana. “That way, Manuel would still benefit from tax collection. They have to be undercut, in almost everything.”
Czypionka said in a year and half that he has spent in the country, he found the country so amazing and shocking.
“It is only in Botswana that dreams are confused for reality. Sometimes people live the dream instead of reality and this really puts me in a difficult position because I am just an advisor ÔÇô I don’t have a mandate to carryout implementation,” he said.