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Has Botswana’s economy prospered under Khama?

Publishing Date : 13 February, 2018

Ndulamo Anthony Morima
EAGLE WATCH


In a rather unconventional manner, the Minister of Finance and Economic Development, Honourable Kenneth Matambo, prefaced his budget proposals for the 2018/2019 financial year with praises for outgoing president, Lieutenant General Dr. Seretse Khama Ian Khama.


Ordinarily, such praise, if befitting, would be appropriate for an outgoing president who has served his country for the period of time that president Khama has. But the question is: is such praise warranted? Put differently, has Botswana, under president Khama’s stewardship, made significant achievements in the economic development space as Matambo asserts? 


The first accolade that Hon. Matambo gives to president Khama is that under his leadership Botswana withstood the impact of the 2008/2009 global economic and financial crisis. According to Matambo, by maintaining an expansionary fiscal policy stance, the Government was able to save jobs, both within the public service and the private sector, while investing in critical economic and social infrastructure such as water, energy, roads, schools and health facilities.


That government was able to save jobs during the 2008/2009 global economic and financial crisis is true. The question is: were the jobs saved in a sustainable manner? Considering that less than a decade after thousands of Batswana lost jobs because of the closure of such companies as the BCL mine one may argue that the jobs were not saved in a sustainable manner.


In my view, Botswana did not, as a lesson from the 2008/2009 global economic and financial crisis, do enough in diversifying its economy. According to the 2017 Ibrahim Index of African Governance ( 2017 IIAG) Botswana scored only 1%, attaining position 48 in Africa in as far as diversification is concerned.


This does not seem to be in consonance with Matambo’s assertion that efforts to diversify the economy have yielded positive results during the past decade, to the extent that the share of the mining sector in the domestic output declined from 25% in 2008 to 20% in 2017, signifying a corresponding increase in the contribution of non-mining sectors over the same period.


Hon. Matambo further states that to ensure fiscal sustainability, the budget deficits, which emanated from the expansionary policy stance, were highly contained to the extent that instead of totaling P31.9 billion as originally projected over the entire NDP 10 period, the cumulative deficit was only P9.2 billion.


But, according to the 2017 IIAG, Botswana’s budget balance performance was average at 51.5%. Remarkably, however, Botswana excelled in budget management and fiscal policy where she scored 88.9% and 88.9% respectively. Is Matambo right in claiming that as a result of government’s expansionist policies during the 2008/2009 global economic and financial crisis it invested in such critical economic and social infrastructure as water, energy, roads, schools and health facilities?


I think not. Many villages in Botswana have, since time immemorial, been faced with acute water shortage. Lack of water has become the new normal in such arears as North East and Molepolole for instance. Our energy sources have not been diversified since we are still primarily reliant on coal generated electricity and still depend of South Africa for supply of a significant portion of our domestic electricity needs.


In as far as the construction of roads, schools and health facilities is concerned, however, government did reasonably well except that many projects were delayed with some left incomplete. Most of these projects were only completed in 2016/2017 under the Economic Stimulus Programme which, rather than funding programmes with the capacity to meaningfully stimulate the economy, became a project backlog eradication programme.     


According to Matambo, the adoption of the Economic Stimulus Programme in 2016/2017 aimed at boosting economic growth, promoting economic diversification and creating jobs amid weak recovery of both the global and domestic economy, was an example of forward looking and bold leadership by His Excellency the President.


Yet, according to the 2017 IIAG Botswana raked position 48 and scored a shocking 1% in diversification. She scored 65.9% and attained position 2 with respect to employment creation though unemployment remained high at 17.84% according to Goldman Sachs. That the rate of unemployment declined from 26.2 % in 2008 to 17.7 % in 2016 is not an achievement as Matambo argues, but a failure.   


Hon. Matambo’s assertion that president Khama’s achievements during the past decade were in the areas of economic diversification, and reducing unemployment can, therefore, not be correct. This notwithstanding, Matambo is right that Growth of the non-mining sectors also reflects private sector response to macroeconomic policy decisions such as the reduction in corporate tax in July 2011, from 25% to 22 %.


He is also right that over the same period, the minimum income tax threshold was increased from P24 000 to P36 000 specifically to allow for an increase in personal disposable income necessary to enhance wealth creation, savings and participation in economic activities. He is also correct in asserting that continued supportive monetary policy also resulted in the country’s average inflation rate declining from 12.6 percent in 2008 to reach a low of 3.3 percent in 2017.


Hon. Matambo also claims that one of president Khama’s achievements during the past decade is poverty reduction. He is right. According to the World Bank’s 2015 report, poverty in Botswana declined from 30.6% to 19.4% between 2002-2010, particularly in rural areas, due to increased labor and agriculture-related incomes and more opportunities for the poor.


This, according to the World Bank’s 2015 report, resulted in 180,000 people being lifted from poverty, 87% of which live in rural areas. This is an achievement worth celebrating. No wonder, according to Matambo, the survey results published by Statistics Botswana in January 2018 show that the proportion of people living below the poverty datum line has been declining over the years, from 19.3 % in 2009/2010 to 16.3 % in 2015/2016.


That in terms of abject poverty, that is, for those people earning below US$1.25 per day, the rate declined from 6.6% in 2009/2010 to 3.3 % in 2015/2016, or in a more relevant purchasing power terms of US$1.90 per day, to 5.8 % in the latter year is commendable. 


Matambo also notes as one of president Khama’s achievements the fact that in 2017 Botswana managed to maintain an “A investment grade” rating by both Standard & Poor’s and Moody’s Investors rating agencies. His is right because, as he assets, these ratings are necessary for attracting foreign direct investment, which is a prerequisite for economic growth and job creation in the economy.


But the question is: have we leveraged from such ratings to attract foreign direct investment as a vehicle for economic growth and job creation? Looking at our high rate of unemployment one may conclude that we have not. One area which Hon. Matambo conveniently left out of president Khama’s score card is transparency of State-owned Companies in which Botswana scored an abysmal 25%. No wonder the demise of such state owned companies as BCL which left many Batswana unemployed.


So, on the whole, it would be an overstatement to claim that Botswana’s economy prospered under president Khama’s stewardship. What is, however, without doubt is the fact that the economy remained stable. The economy was so stable that Botswana, as observed by the World Bank’s Country Director for Botswana, Guang Zhe Chen, continued being one of the few countries in Africa that fully funds social protection programs out of its own resources, dedicating 4.4% of its GDP to social spending.


While other countries fund their social protection programs through sovereign debt, something which will burden future generations forever, others rely on their foreign investments, thereby depleting their balance sheets and further damaging their economic position.

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