Sunday, September 20, 2020

WHO IS THE ECONOMIC LEADER OF BOTSWANA?

The people at the Ministry of Finance have observed that Rre Khama has two pet areas, poverty alleviation and security. They have cleverly allowed Rre Khama to tie himself to these, knowing also that they are the two areas that the opposition has been focusing on. We therefore have a situation where the most powerful office in the land controls less than ten percent of the national economy in a country where government is the dominant economic force.

Rre Khama is going around the country looking after poverty projects which at the same time attract criticism from the opposition. It is generally accepted, wrongly I believe, that a 7% growth in the economy is required to lower unemployment. Poverty alleviation or eradication projects do not lead to that 7% growth. There is no way that 10% of the economy can lead to 7% growth. The Watchdog column has maintained that Rre Khama has taken away the poor from the opposition. The question is “At what cost?” The answer is “At the cost of allowing the Ministry of Finance to control 90% of the economy during his term”.

The Sunday Standard of 29 April 2012 reports that Rre Khama is the most popular president in Southern Africa. We therefore have a unique opportunity to really turn this country around. We cannot however do this because we find ourselves in a situation where the most powerful person in the land is in control of less than ten percent of the government economy because he has allowed himself to be deceived by public servants who are supposed to be at his control.

In the economy of a country the issue is not about the number of people but the number and value of economic transactions that they execute. If you have a small population where the people engage in numerous high value economic transactions you have a vibrant economy. If you have a significant number of people spending half their income on food and the rest on accommodation and transport it naturally follows that you are looking at limited economic transactions. Once these have taken place the people have to wait for another twenty days before they repeat any meaningful economic activity.

The above suggests that we need to place money in peoples’ hands so that they transact more economic activities. We need a significant number to spend in other areas other than food, accommodation and transport. Alternatively we should empower them to spend more on food, accommodation and transport. To do this we need to place money in their hands.

You place money in peoples’ hands by removing regulations that stifle their economic activity. I am not here interested in issues like work and residence permits. Citizens do not need these. But they need licensing restrictions to be removed. You give more big money jobs to citizens and their companies. You buy more from small citizen firms. In the short term, you dismiss those with pensions, start with those at the Ministry of Finance, so that they can take a third of their packages and spend. You employ more young people so that they can have their first salaried employment and build up exit packages for future spending. You put higher taxes on unproductive use of the pension packages and give incentives by purchasing goods and services generated by the taken pension packages.

I read that Rre Khama has instructed the Ministry of Trade to look at removal of barriers to trade. Rre Khama has executive power and the Minister of Trade serves under his direction. Certain things require common sense and there is no need for delegation. Removal all licensing requirements that prevent economic activity of our young does not have to be delegated.

The few rich who dominate the economy can only do so many economic transactions. They can only eat so much food, sleep and live in a limited number of houses and travel so much. After they have satisfied these they can only spend so much on luxury goods and we do not produce these locally. This exposes the fallacy that bringing in rich families from London for the diamonds will add to economic activity in a significant manner.

We cannot create a middle class by importing people. That is substitution, otherwise known as settlement. As things stand we have a few rich people and a lot of poor people. Even if one were to hold that they are not interested in equal distribution of the national wealth, enlightened self interest suggests that in a country with a small population you need a middle class with real spending power. Instead of wasting time trying to attract foreign investment we should stimulate citizen consumption by developing a middle class with real spending power.

Supposing you build a house, furnish it and then invite someone to rent it. You guarantee that you will provide courts where he can take you in the event of a dispute and promise to respect the decisions of the courts. In return you ask him to employ your children as maids and garden boys. For purposes of skills transfer you ask him to train the garden boy to be a driver after five years. This is the sort of development planning of Masire, Mogae, Gaolathe, Kedikilwe and Mathambo .This must stop.

If two people write an exam and both get 60% it does not follow that they both got the same answers right. It is possible that one may have gotten five right answers to five that the other has gotten wrong and vice versa. If one combines the answers they got right, one ends up with a higher percentage of correct answers. This is how a leader exploits and unlocks value. I have listened to a lot of our leaders complain about Batswana. If one takes the approach that I take then one may unlock value out of Batswana.

If you mine more non renewable resources, diversification within the mineral sector, to support poverty alleviation and infrastructure development without growing a middle class you are wasting time. Thirty percent of the money that you spend on the poor is taken by the rich as profit. The poor only get 70% value out of what you give them. It does not go to growth of a middle class. You therefore have a situation where as president you are tied up to a program that in the final analysis benefits the already rich and only keeps the poor alive without prospects for a better life.

Citizens know how to unlock value. If you threaten to repossess land if they fail to develop it in two years they unlock value by selling to foreigners. We therefore have a situation where the government is the driver of citizen dispossession of land. If government can suspend development projects because of lack of funds why can a citizen not do the same?

There is no way that the Ministry of Finance could have suddenly figured out that it will let Rre Khama chase ten percent of the economy whilst it controls 90 percent. The idea has the hallmarks of a long standing conspiracy that predates the emergence of Rre Khama. If the Ministry of Finance believes that the current poverty eradication or alleviation schemes can bear fruit, they should not mind being given control of these schemes whilst Rre Khama takes control of the 90 percent that the people at Finance are in control of. This will also give them an opportunity to prove that they are not glorified bookkeepers.

I read something about Rre Khama sending ministers to poor areas. That is what he should do with the Ministry of Finance. They should chase the 10% to get the best out of it to prove their economic prowess. The “there is no money excuse” will be shown to be cover for “We do not have a clue how to unlock value to meet the needs of our people, but we are smart enough to mess with a president’s mind to the disadvantage of the people he leads”.

Rre Khama should send the Ministry of Finance people to the poor areas, like he has suggested, and let them demonstrate their economic prowess. It is time they gave us something originating from their knowledge of economics. They have relied too much on luck, diamonds. They have not been innovative. Our poor have paid too high a price whilst we used diamonds revenues to cover up for their lack of imagination. No amount of money is going to turn a bookkeeper, even if a holder of a degree in economics, into a development planner.

Rre Khama knows that the issue is about unlocking value, not making pronouncements about lack of funds without demonstrating that you have gotten maximum value out of your mineral wealth or other resources. When he first came on board Rre Khama was clearly against the “there is no money excuse” He should provide leadership inspired by his earlier wisdom of knowing that a leader cannot stand in front of his people and tell them that there is no money, without first demonstrating that he has gotten the best out of the resources that his people have placed at his disposal.

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Sunday Standard September 20 – 26

Digital copy of Sunday Standard issue of September 20 - 26, 2020.