Monday, September 27, 2021

Masisi recommits to economic development

Botswana’s president Mokgweetsi Masisi who was thrust to electoral victory in 2019 on the promise of economic transformation premised on citizen economic inclusion and job creation has assured the nation that his administration remains committed to growing the economy and tackling the exclusion of citizens from the economy by narrowing the inequalities.

In a nation address made on Saturday night, the president said the diamond dependent economy’s gross domestic product output (GDP) has to grow by an average of 5.7 percent to become a high-income country.

“We cannot get there at the 4.3 percent average of the last eight years, and it is all about productivity, innovation, ethics, and a belief system that upholds the decency and integrity of Batswana collectively and individually,” the president said.

“We do not want to continue to be ranked as the eighth most unequal country in the world. We are appalled by the youth unemployment rate, and the unemployment rate as a whole. We cannot co-exist with the current levels of poverty,” Masisi said in a speech beamed in the national media.

After expanding by 3 percent in 2019, real GDP contracted by 7.9 percent in 2020, a deeper contraction than the 7.6 percent decline in 2009 caused by the 2008 financial crisis. From 2010 to 2018, the GDP had an average growth rate of 3.7 percent, reflecting a gradual decline in economic growth over the ten-year period. Economists have previously said that the Botswana economy is operating below potential output, which experts have suggested should be above 6 percent.

According to the Ministry of Finance and Economic Development MFED, economic growth for this is expected to grow by 8.8 percent. The International Monetary Fund (IMF) expects GDP to grow by at 8.3 percent in 2021, driven by a strong rebound in mining activity, the easing of restrictions on mobility, and the recent public wage increase. While top credit ratings agency, Moody’s, has  forecasted Botswana’s economy to expand by 6.2 percent.

In his address, president Masisi said government productivity has been a let-down, and signalled that going forward, the administration will be more strategic when it comes to the national budget. 

“We need to remove barriers that block advancement and wealth creation among our people. That means ending the de facto discrimination against our own citizens. We must obliterate silos of the debilitating corruption,” he said. 

President Masisi disclosed that in the coming weeks, his administration will be evolving the revised set of priorities that will drive the tone of development his sentiments have espoused.

“In the aftermath of our reset, my Cabinet and I have resolved that our government will redouble our efforts to deliver the promises we made to Batswana in 2019. We intend to continue to progress the implementation of these projects in accordance with NDP 11 and our recently passed ERTP. Within that broader context, we have determined that we must prioritise. By prioritising, we dedicate additional resources to achieving certain high-impact goals first, which then catalyse other impactful developments,” the president said.

He revealed that the government will be adopting new methods to accelerate the implementation of these priorities. The top priorities include aligning the Botswana civil service machinery to the presidential agenda, staring with the presidential transformational agenda, which he says will come with “significant government reforms in the public service.”

The other priority, according to the president, is to enhance the value chain development, expected to  unlock opportunities for new, high-growth companies in the private sector and youth employment among other citizen empowerment attributes. 

“The initial sectors of focus will be minerals, tourism, food, and education. We also intend to identify new sectors in the global export product space that we can successfully grow in Botswana, resulting in significant job creation for our youth while also driving much-needed export diversification,” president Masisi said.

In selecting these priorities and adopting a new implementation model, Masisi said many Batswana don’t feel the country’s wealth because of income and wealth inequalities, with many left behind. The president said a large section of the budget goes towards keeping people’s heads above water rather than investing in and catalysing  to reach their full potential.

“Our middle class is too narrow and has low level income. It is a mere semblance of the middle class that we want to create and intend to build to attain our goals of Vision 2036. The bottom 50 percent of our people has only 9 percent of our national income,” said the president.

While the president has set a tone for a change, it will happen at a time when the country’s fiscal strength has deteriorated. In the latest update from Bank of Botswana, the Pula Fund reduced slightly to P6.5 billion, down from January’s P7.4 billion, which was an improvement after many months of successive declines.

In 2020, the fund had its biggest fall, ending the year with P2.8 billion, lower than the P20 billion it began the year with, indicating that P17.2 billion or 86 percent of the funds was used in 2020. The depletion was attributed to frequent withdrawals by the government to plug the budget deficits caused by high spending. Between 2017 and 2019, budget shortfalls have added to P21.8 billion, while projections for 2020/2021 financial year points to an all-time high budget deficit of P21 billion.

Moody’s has said that the latest shock delivered by the pandemic has exposed the structural limitations of Botswana’s growth model, characterized by the large presence of the public sector and exposure to fluctuations in global demand for diamonds, which accounts for 15 percent of gross domestic output and around 90 percent of exports.

While the government has reaffirmed its commitment to economic diversification with the adoption of the Economic Recovery and Transformation Plan (ERTP) presented in 2020, the mixed track record on implementing structural reforms suggests that progress will likely remain very gradual, said Moody’s.

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