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Economic diversification efforts not paying off – Sebabole

Publishing Date : 10 February, 2020

Author : REARABILWE RAMAPHANE

Chief Economist at First National Bank (FNBB), Moatlhodi Sebabole says Botswana’s efforts towards diversifying the economy and realizing a mixed revenue profile are clearly not paying off. Sebabole said this recently when giving pre and post budget reviews for the 2020/21 financial year.


Citing Botswana’s revenue and grants basket profile Sebabole says the figures show a clear trend of dependence on mineral revenue signaling undesirable outcome against the run of efforts and investment in trying to pick up other revenue channels. Owing to the steep downturn in the diamond market during the 2008/09 Global financial crises Mineral revenue accounted for only 30 % of Government revenue in the 2009/10 financial year with SACU revenue accounting  for about 26 %  and Non mineral economic sectors  revenue going in at 19% while VAT contributed  in 13 %.


Against all efforts to diversify the economy the Mineral revenue rose through the years to account for about 37 %  of government total budget in 2015 until dropping down a bit to just over 35 % for  2019/20 financial year. However total revenues and grants for the 2019/2020 Financial Year were  revised to P60.71 billion with the main revenue contributor being Mineral revenue at P18.43 billion; Customs and Excise at P13.79 billion; and VAT at P7.92 billion. This placed mineral revenue at just above 30 % of total revenue and grants.


“As long as Mineral revenue still accounts for over 30 % of our total revenue, zigzagging up and down through the years to over 35 %, our revenue profile poses a serious risk,” cautioned Sebabole. The Economist further indicated that other revenue windows such as Customs and Excise revenue have remained below 25 % for some time signaling trade stagnancy and little improvement on the export sector.


Within the Foreign income earning basket Mineral revenue controls the channel, sitting at almost 90 %. “In Africa it is Botswana and Angola with this unhealthy revenue profile, Angola because of their Oil and Botswana because of our diamonds, this signals that we have failed over the years to diversify our economy and promote export of other products to foreign markets,” he said.


For the 2020/21 financial year total revenues and grants are estimated at P62.39 billion, of which, Mineral revenue is estimated at P20.02 billion. Customs and Excise revenue is expected to be P15.38 billion, with Non-Mineral Income Tax estimated at P14.22 billion, while VAT is expected to amount to P8.55 billion.


These estimated figures mirror that government revenue will still in the coming years rely heavily on mineral exports. However Moathodi Sebabole who is also chairman of National Economic Transformation strategy set up by President Masisi last year says government consolidated efforts and singling out Export development as one of its key priority areas sparks some confidence going forward.


Delivering the Budget Speech on Monday Minister of Finance and Economic Development Dr Thapelo Matsheka highlighted that amongst government‘s key priority areas promotion of export growth comes on top. “The objective is to ensure that the drivers of economic growth in Botswana shift towards export promotion. This, Mr. Speaker, will address the balance of payments problem, which has emerged in recent years as a constraint to economic growth,” he said.


Dr Matsheka explained that as a result, greater effort is required in implementing the country’s Export Strategy, since increased exports of goods and services do not only contribute to growth, improved balance of trade position; but are necessary for replenishing the country’s foreign exchange reserves. The Minister explained that on the positive fronts, acknowledging the slight progress thus far, and preliminary review of the first half of National Development Plan 11 signals that economic performance was in line with the original NDP 11 projections, while economic diversification progressed fairly well during the first half of NDP 11.


The share of the non-mining private sector in value added terms rose to 66 percent in 2018, compared to 63 percent in 2015. The sectoral pattern of growth also showed that the services sectors of Transport & Communications, Trade, Hotels & Restaurants, and Finance & Business Services were the fastest growing sectors.   


He however noted that Botswana still imports most of its requirements, including basic products that do not require huge investment to produce locally. Minister Matsheka explained that using Government’s purchasing power through programmes such as the Economic Diversification Drive (EDD) and citizen empowerment initiatives, additional measures will be put in place to ensure reduction in the country’s import bill. “It is only through a deliberate and vigorous implementation of the Export Strategy and Import Substitution Strategy that the country can restore its external balance and create the jobs that are required in an inclusive economy, in which Batswana are major players,” he said.

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