Sunday, June 16, 2024

What is the next populist economic programme after the flop that is ESP?

This commentary will certainly make us look or sound like economic doomsayers. But at least the reality on the ground will save us from that label. The reality is that the popular Economic Stimulus Programme (ESP) that President Ian Khama first announced in September 2015 and later launched in Machaneng village in February 2016 failed in almost all aspects. It has achieved little of its major objectives. The programme has not achieved much that one can write to Maun about. The labour market remains in terrible condition, and the economy continues to grow slowly. Trade estimates show that in the coming year the domestic will not grow at any rate beyond 4 percent. 

First things first – an economic stimulus is about pumping money into an ailing economy quickly to spur growth. Can we say our ESP has done that in the last 18 months? The answear is NO! Clearly ESP has failed to achieve what it was created to do ÔÇô jerk the local economy. Given the pinch that local companies continue to feel, clearly, this whole economic stimulus thing was grossly oversold.

Despite this obvious failure of the programme, at least to date, we are less likely to have the government enclave evaluating it. Just to at least see the few positives that could have come out of it. Apart from the few temporary jobs that Khama announced in December 2016 in his SONA, there is less to talk much about. Actually there is more to talk about such jobs than there is about ESP as a whole. The so-called 18 000 jobs are not just menial but also low paying. Who in their right mind want such kind of jobs for his fellow citizens? What is so significant about a job that lasts for less than 12 months in a context where nearly 90 percent of each batch of graduates’ year after another do not get decent jobs? We have said this before, the number of young people who we churn out every year is just too high to be absorbed by a welfare system, however big the amount of money we channel into the system. All we are doing is increasing the number of people that are being impoverished. Poverty degrades people and takes away their dignity and self-esteem ÔÇô that we should not forget at any given time. 

This commentary has much to do with ESP and its failures rather than poverty. What Botswana needs most is to get its people out of poverty. It is not just ESP but new sources of growth and job creation ÔÇô sustainable jobs we should emphasise. 

The tell-tale sign that the stimulus programme did not achieve its potential of job creation is that as a country we now seem to be deviating and resorting to coming up with short solutions to what is essentially long term problems of unemployment. In some countries economic stimulus packages at times even include tax breaks, subsidies and direct payments to individuals, which enhance unemployment benefits. Given the millions of money that we continue to waste, perhaps the best option for our unemployed citizens could be the direct payment. This could be a topic for another day though. 

For now, one cannot avoid stating that for a very long time, Botswana remained one of the few countries where the government wealth was so immensely higher than that of citizens and companies put together. This is an anomaly we are still failing to confront. Rich state, poor citizens ÔÇô what a shame. 

In the meantime, failure or not to evaluate the ESP, we need to share views on how to better chart the course of sustainable private sector led growth that the country so urgently needs. Clearly, we made major mistakes in designing the programme. We mixed the core objective of pumping money into the economy as quickly as possible with too many extraneous objectives. Actually populism took over both the crafting and implementation of the programme. Youth were told to register companies ”because money is coming”. Where is it now? How many of those youth who frequented CIPA offices across the country can come forth and bear testimony of what the “mighty” ESP has done in their lives? 

Instead of spreading the money across all sectors, or at least limiting it to productive ones, we decided to splash it on the construction sector. Where has that taken us? We are at a point where one can, without shame or fear, state that we failed to use ESP to put money into the pockets of many of our people as quickly as we could. 

The development of our economy has long reached a critical juncture, as indicated by the slowing pace of economic growth, chronic unemployment and mounting pressure on government budget. Already the economic technocrats at the government enclave have began to blame the ESP for the “red” that government budget is in. The flagship programme has been listed amongst the factors that will lead to the government reporting deficit budget for a prolonged period. 

According to the government’s Budget Strategy Paper, it is anticipated that the economy will record a budget deficit of P6.8 billion during the financial year 2017/18 due to the implementation of this notorious ESP. The data contained in the same paper shows that for the financial years 2018/19, 2019/2020 the economy will record negative growth of -4.2 and -2.2 percent respectively. 

The truth of the matter is that our economy will not experience a significant turnaround if we don’t take urgent measures to stimulate private investment. For instance we could dole out targeted subsidies and tax breaks to sectors which are currently performing below potential due to supply-side constraints.  That way we could have a better chance of making a quicker impact on the growth of the economy. Efficiently addressing these challenges will be key to the successful implementation of the National Development Plan 11 looking further ahead. In the meantime, the #Bottomline is that ESP has not jump started our economy, so the question is what is next? 


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