Sunday, October 17, 2021

When simple questions become difficult to answer

What may seem to be a straight forward question that would fetch a simple answer on whether the economy of Botswana is on a reformation or regression path could be the most difficult to fathom, according to economist Moatlhodi Sebabole.

Sebabole might have asked the question but he did not offer a clear answer. Instead he presented what was to set the agenda for the local business community which was his audience.

Speaking at the 23rd First National Bank Botswana budgetary review this past week he mentioned that Botswana might have weathered the storm.

He based this statement on the fact that the figures that Finance Minister Kenneth Matambo announced regarding the imports, exports, foreign exchange reserve balance and the government account balance reflect prudent spending.

“Macros were good,” he said, referring to the economy as a whole in terms of the outlined large scale economic factors. Another indicator he mentioned was that of the share of debt to Gross Domestic Product (GDP) which is at 40 percent remains lower than the regional average of 60 percent.

This optimistic outlook does not seem to be reflected at an individual, household and firm level to which Sebapole described as a lack of a trickle-down effect.

He said the economic structure is still significantly reliant on the traditional mining sector, which from a diversification perspective signals vulnerability of the economy.

This is the same exposure which existed then and still does today. Sebabole highlighted the expected economic growth to be estimated at 3.3 percent but expressed that it was a “good number but useless if it doesn’t have a trickle effect,” referring to impact on local businesses.

“Isn’t it about time we have a disruptive budget?” he asked.  To emphasise his point he gave an example of an approach of the British Tobacco company in terms of its impact to the South Africa economy which indicates how much it contributes to the overall economy, how many jobs are created due to its operations, where revenue is disbursed and how much of it is spent, citing in that regard that such detail is necessary so as to create a budget that is poised to receive and not only give as is the case with Botswana.        

John Cairns, a foreign exchange market expert based in South Africa working for Rand Merchant Bank offered a global backdrop and was quick to point out that the economic lag that Botswana currently finds itself in is not of its own making but is rather the product of the global economic torpid state.

He noted that the protectionist approach that United states President Donald Trump is heralding is a potential threat to the global economic growth as that would a less global world. He emphasized, however, that it did not pose a direct threat to Botswana as it the country had no direct trade links to America. However, growth in America’s economy, he said, resulted in a positive environment in Botswana.

He described the current stand point as a “wait and see environment” on the backdrop of a substantial stimulus package injected into America to see if it could lift the US economic rates, which would mean Botswana will get out of the current rut.

He mentioned South Africa as another country whose currency movements spilled over into Botswana saying that the Rand’s volatility should not be expected to decline.

He highlighted the imminent removal of the incumbent South African Finance Minister Pravin Gordhan posed a potential threat as it would result in the Rand’s weakness.     

A sector often commended to have immense potential in bolstering growth in the economy is the small and medium enterprises sector which entrepreneur Dr. Tiro Mampane shared on at the review.

Mampane is the founder of the local health institute Boitekanelo Training Institute. He highlighted a number of snags that negate the conduciveness of the operating environment needed by SMMEs.

He said it was important for government to realise that certain enterprises don’t need physical location to carry out their business such as those in the information, communication and technology space and should therefore not be requested to prove office space when seeking licensing.

He also observed the turnaround time of regulatory authorities in response to applications which impedes agile decision making in business.

He also talked flaws of the government procurement system which tends to encourage briefcase business over local producers when seeking for products and services.

Mampane also cited that government still struggled to unbundle mega projects remains which would allow SMMEs to also participate. He proposed that government should prioritise making the business environment supportive to SMMEs as an opportunity of diversifying sources of economic growth.

The economic figures as cited by Sebabole indicate a positive juncture but as was previously noted by another economist, Keith Jefferies, in the 2016 fourth quarter economic review “for many people and firms economic conditions continue to be tough.”

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