Tuesday, September 22, 2020

One good thing Khama did with the economy is what he didn’t do

On a purely objective basis, there is nothing that Ian Khama achieved in the decade that he was Botswana president between 2008 and 2018.

Interestingly, there is a widely-held view in capital cities of the First World ÔÇô generated by the analysis of some Gaborone-based diplomats – that there is actually one good thing that Khama did by not doing anything. According to one a diplomatic source with knowledge of this thinking, Khama is deemed to have “left macro-economic fundamentals largely intact.” The result, the source adds, is that Botswana’s macro-economic fundamentals are stronger than those of some European Union countries that were previously part of the Eastern Bloc.

Macro-economic fundamentals refers to the most basic macroeconomic indexes such as economic growth rate, inflation rate and unemployment rate that indicate the heath of the national economy. The net effect of Khama’s restraint means that while there was some tampering (which “largely intact” bears out) with those fundamentals, he didn’t do extensive damage.

Botswana’s vast foreign exchange reserves are a positive factor that indicate strong fundamentals. Had Khama remain in power long enough, this solid base would likely have been eroded. In 2015 and without consulting neither the bank of Botswana nor the finance minister as was later revealed, Khama decided to dip into the foreign reserves and launched what he called the economic stimulus package (ESP). The latter’s implementation violated two separate pieces of legislation: the Public Finance Management Act and the Public Procurement and Public Assets Disposal Act. Going back to the days of President Sir Ketumile Masire, under whom Botswana began accumulating its relative wealth, it was almost taboo to take out huge sums of money from foreign reserves. When launching the programme, Khama said that henceforth the government would draw down from the reserves when it faced economic challenges.

What became problematic about ESP was that against what the law prescribes, the money was disbursed by the Office of the President (not the finance ministry) and government tenders were awarded by the sane office and not the Public Procurement and Public Assets Disposal Board. Then there merged rumours that most of the companies that were winning tenders financed with ESP money were owned by ruling party operatives who were close to Khama himself. Khama was playing with fire because extending money supply without stimulating productivity in an economy can seriously harm macro-economic fundamentals. Had he stayed in power beyond April this year, he would certainly have continued taking money from foreign reserves and disbursing it the way he had been doing since 2015.

However, there is an area where Khama was supposed to do something to ensure the macro-economic fundamentals remain strong. Had Khama stayed in power longer, he would also have been unable to deal with rising unemployment. Nothing more strongly gives an indication of that than his complete inaction when BCL Mine in Selebi Phikwe was closed down due to depressed copper prices. The mine was a lifeline for a region of over 200 000 and Khama couldn’t respond to this emergency with so much a personal visit to Selebi Phikwe but would only stop by during his national farewell tour.

Despite adopting foreign policy through which he wanted to curry favour with the west, western diplomats were dismayed with Khama’s administrative ineptitude and deemed him hopelessly incompetent.
 

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The Telegraph September 23

Digital edition of The Telegraph, September 23, 2020.