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Budget Speech: A response

SHARE   |   Sunday, 08 February 2015   |   By Duma Boko
Leader of Opposition, Duma Boko Leader of Opposition, Duma Boko

The national budget is the official instrument through which we must, in principle and aim, channel public funds in a manner that reengineers the economy to spur growth, transform the economic landscape of our country and, most importantly, stimulate the creation of jobs especially for young Batswana. Our young people have been pushed into joblessness by years of jobless growth.
I need not remind the nation that most of our citizens are systematically handicapped by poverty; deliberately consigned to the social and economic backwaters. They live lives of exilic marginality and are, at best, curious bystanders in the economic affairs of their country.
According to World Bank estimates, 80% of our country’s wealth is owned by foreigners while of the remaining 20% only 2% is owned by indigenous Batswana, with the rest belonging to naturalized citizens. Many, far too many, of our fellow citizens are submerged in crushing poverty. Many children go hungry and suffer malnutrition and stunted growth. Many of our children in Government schools study in overcrowded classrooms where any there are, and in buildings that deserve only to be torn down. Many families are unsure of their next meal. These levels of poverty mock any and all legal fictions that rank our people as enjoying any of the rights enshrined in our Constitution. These levels of poverty and neglect are a violation of human rights.
I must also state, with carefully modulated politeness, that these challenges will continue to defy the episodic and marginal Presidential interventions with soup, blankets and shirts. They require serious and creative interventions that will set this country on a path of self-sustained progress and growth. These submerged multitudes listened very carefully to your budget speech, Minister, hoping that the curse of want and poverty may yet be lifted from their lives. You succeeded, Honourable Minister, in disappointing these multitudes, I contend.
Performance against Vision 2016
The Pillars and ethos of Vision 2016 are a reference point against which to judge where we are today and where we ought to be. Even though the Government of Botswana deserves credit in some areas, the lapses and failures are significant, and they have undermined our nation’s ability to realise its full potential.
Inflation and the Interest Rate
In as much as it is important to control inflation in the economy, it is equally important to note that the fight against inflation is not a panacea and that it should be linked to the broader macroeconomic strategies to grow the economy. However the Government-in-waiting wish to take this opportunity to commend Bank of Botswana for having been able to keep inflation within the 3-6% BOB targets. It is important to note that Botswana‘s inflation is mainly driven by food prices. Government should therefore put more effort in addressing the supply constraints in the agriculture sector.
In light of this, the Bank has maintained the bank rate at 7.5 percent since December 2014 to foster economic growth and enhance competiveness. This quantitative easing by the Central bank is intended to boost private investment. Our biggest concern is the failure of Bank of Botswana to regulate commercial Banks. It is clear that by and large commercial banks tend to undermine efforts by Bank of Botswana by continuing with various types of charges to the customers despite lower interest rates. This totally undermines the efforts to growth the economy through expansionary monetary policy. Despite the lower lending rates by the Central bank, customers continue to facing higher borrowing rates, through numerous charges by commercial banks.
The Minister stated that as a result of this quantitative easing by Bank of Botswana commercial bank credit grew by 14.0 percent from P39.4 billion in November 2013 to P44.9 billion in November 2014, which, according to the Minister is supportive to economic growth. This could be misleading. The reality is that this increased credit is mainly as a result of Household debt. Batswana are wallowing in huge debts. Bank of
Botswana observed in its 2014 monetary policy statement that the rapid expansion in credit awarded to households by the country's 13 commercial banks was currently higher than the increase in nominal Gross Domestic Product (GDP). The Governor of the Bank of Botswana said the rapid increase, which currently exceeded growth of incomes, could result in future repayment difficulties. Market data indicate that the burden of household borrowing mainly for consumption has been rising, with the ratio of debt to disposable income increasing from 24 percent in 1999 to 33 percent in 2012.
In fact the reality is that already many households are defaulting on their monthly payments of mortgages and other loans. The property market is rapidly declining as a result of this. The disdain with which the BDP-led Government treats workers, refusing to even make inflationary adjustments on their salaries for more than 6 years, is the reason the why the whole financial sector is under threat.
Balance of Payments and Foreign Exchange Reserves
The Minister reported that overall balance of international payments was a surplus of P13.1 billion in 2014.A positive balance of payments also led to the recovery of the foreign exchange reserves in Pula terms. At the end of December 2014, the reserves amounted to P79 billion, equivalent to 18 months of import cover of goods and services. Despite this report, the Government-in-waiting is extremely concerned with the management of our foreign reserves. It is important to review the way we manage our reserves. There is a need for transparency in the management of our foreign reserves. This should assist explain to wider public cases of significant drawdown of reserves, for instance, between 2008 and 2013.
Furthermore Monetary Policy should look into embarking on a continuous debate around the loose exchange rate regime and consider if whether this strategy has helped diversify the domestic economic base and whether the current dispensation is appropriate for cushioning against potential speculative attacks. On exchange Rate movement, we commend the Government for its decision to disclose both the rate of crawl of the Pula, and the weights of the currencies in the basket. Furthermore we agree with the decision to change the weights of the currencies in the basket to 50 percent South African Rand, and 50 percent for the currencies that make up the IMF‟s Special Drawing Rights. Such a move will boost welfare of households as we continue to import over 75% of our goods and services from South Africa.
Botswana’s most pressing concern is the creation of jobs for unemployed Batswana. The 2013 World Bank report indicated that formal labour market opportunities in Botswana are very limited, and a large share of adults work in low productivity—low wage jobs (e.g. In agriculture) or are unemployed. The unemployment rate is also very high at 17.8 percent in 2009/10, though if discouraged workers are taken into account, the rate would be closer to 30 percent. The very large unemployment rate in Botswana, underscores the need to increase employment opportunities in parallel to human capital development. There is a need for broad development policies where human capital investment would be coupled with strategies to develop the private sector.
We need to have targeted measures to support employment creation. There is a need to identify areas where job creation is possible – which we term “jobs drivers.” Specifically, the UDC economic agenda points to employment opportunities in: infrastructure development, the agricultural and mining value chains, tourism and other value-added services, the public services, rural development, the knowledge economy and SADC regional development.
Promoting employment opportunities in rural areas would be essential to provide long-term answers to inequalities and poverty. A vast fraction of the population depends on subsistence agriculture. Their productivity is low and low investment in turns limits the individual profitability of human capital investment. The poor in rural areas are also typically affected by one self-reinforcing factor: lack of access to financial services. Redistributive policies (cash and in-kind transfers, progressive taxation) have potential benefits in terms of addressing poverty – and thus inequalities. Old pension and other measures
Youth Unemployment
The High Youth Unemployment is the biggest challenge in this country. According to the 2013 Budget Speech, Government has established programmes such as the Internship programme, Youth Development Fund, LIMID, Youth Empowerment Scheme and EDD to create jobs for the youth. THE UDC Government will make it mandatory, as part of the Citizen economic empowerment Law, that every Government procurement should have a certain percentage set aside for youth and women. That is how you create jobs.
The BDP Government has no plan whatsoever to address the plight of the youth of this country. The effects of youth unemployment can persist for years. Those who begin their careers without work are more likely to have lower wages and suffer joblessness again later in life. The economic loss can be substantial, too, and not just in the form of higher welfare payments. Part of these losses may be due to missing out on training and experience accumulation that typically occurs with young workers. What the UDC Government intends to do is to address the mismatch between skills and jobs: create apprenticeships with companies in Botswana. Companies will only be willing to invest more in the young and revamp their training programmes if the Government links every government procurement with skills development for the youth.
Inadequate political leadership
We wish to state that Botswana‘s problem is a leadership and governance problem. The challenges to the budget process are: ineffective prioritisation, excessive supplementary budgets and misappropriation of public resources with impunity. These have rendered the budgeting process an academic exercise.
Improving efficiency in the public sector
The opposition strongly believes that improving public sector efficiency is strongly linked with adoption of procurement policies that are derived from the creation of a Citizen Economic Law in this country. Privatisation of public entities should be informed by a strong policy on who will own the privatized entity; how many jobs will be created as a result of such efficiencies and how privatization results in economic growth.
Citizen economic empowerment should be an integral part of sustained economic growth; and one of doing this should be through ensuring that Citizens participate in the privatization process. For the privatisation programme to be sustainable and beneficial to Batswana, government should come with a scheme that will ensure that Batswana participate and benefit from the privatization process. Government should establish an Investment Fund, to allow Batswana to buy into state assets up for privatisation.
Although Citizen economic Empowerment Law is critical for Botswana to create sustainable jobs, it has to be part of a broad industrial Policy Framework which under the UDC Government will provide a strategic direction to the economy. Without citizen economic empowerment Law, Batswana shall remain poor; and Botswana will continue as the 3rd leading country in the world in terms of income inequality. To create jobs, you need economic empowerment law that will support citizen SMME businesses through procurement.
Improving project implementation
Contrary to what the Minister believes, it is misleading to inform the Nation that the adoption of E-Procurement solution by PPADB will help improve project implementation. Yes E-Procurement should expedite allocation of projects; which is the whole objective of the solution. What Botswana faces is poor implementation of projects is mainly cost overruns and failure to deploy the right human resource complement. E-Procurement solution will not address this. The solution to corruption is prosecution and imprisonment not E-Procurement.
2015/2016 budget proposals
The Minister stated that through this budget, Government will address key priority areas which include: human capital development; fight against HIV/AIDS including elimination of mother-to-child transmission of HIV; poverty eradication; provision of water and power supplies; employment creation; as well as maintenance of existing infrastructure.
The government-in-waiting supports the Government its efforts to fight AIDS; However on other areas such as human capital development it is not clear what the strategy is. We all agree that policies geared towards the provision of health and education services can be effective to reduce inequalities and increase growth. But it is important to note that, the quality of the education system is not a simple function of funding allocated to it. For instance, the pupils-to-teachers ratio plays an important factor, and so do the skills of teachers. It could thus be very well the case where growth and inequality reduction gains would be maximised with targeted improvements in the quality of the education system. Conditions of service for teachers should be reviewed as a matter of urgency. The Government-in-waiting believes that throwing money at Education sector without addressing fundamental structural challenges in the sector is not helpful.
Research and Technology. As a nation with ample sunshine throughout the year, should we not have been in the forefront of solar energy research? The Botswana International University of Science and Technology should spearhead efforts to develop commercial products based on our natural resources. Instead, this institution appeared plagued by administrative challenges seemingly (according to Press Reports) attributable to interference from Government appointed authorities. We have one and half times more cattle than people, should we not have been leaders in leather works? Should we not have been self-sufficient in, and exporters of beef and all dairy products? We give credit for the decision to offer more support for work being done at the Innovation Hub and BITRI but
Pharmaceuticals and Medicine. Foreign pharmaceuticals securing patents based on indigenous medicinal herbs, our own pharmacists and medical researchers should be given the wherewithal to do that. The Chinese have not abandoned their traditional medical remedies. This indigenous knowledge that has been accumulated over millennia should be harnessed, not lost. Botswana is renowned for developing and exporting animal husbandry vaccines. This achievement can be replicated in other areas. Scientific research should be brought to bear on available traditional remedies (including claimed to cure HIV/AIDS) to uncover their potency and use. Botswana’s Medical School should spearhead this process with government encouragement and leadership.
Recurrent budget and social protection of citizens
The Ministry of Local Government and Rural Development has been allocated P5.20 billion or 14.2 percent. Out of this the Government intends to spend only 9.7% of the budget on Social Protection Programmes at P472.82 million comprising provision for Old Age Pension at P393.60 million, Destitute Allowances at P48.52 million, allowances for people with acute disabilities at P20 million, and World War Veterans at P10.70 million. The Ministry's provision also covers Food supplies for primary schools and clinics at P379.12 million; Transfers under the Orphan Care Programme at P350 million; as well as maintenance of Government facilities at P33.64 million.
According to the World Bank’s 2010 Public Expenditure Review, the poor represented only about one third of the beneficiaries of the various social safety net programmes in Botswana, with programmes differing significantly in terms of their targeting efficiency. Despite the fact that Botswana spends more on social safety nets as a share of GDP (about 3.2 percent) than countries such as Chile, it is covering only about 20 percent of all poor households. The rest of the resources intended for the poor are lost through corruption and inefficiencies. Compared to other many other high-middle income countries, Botswana is covering only about 20 percent of all poor households.
Income security is a concern for all age groups, but becomes even more acute for older people. The devastating impact of poverty, conflict, migration, and HIV and AIDS means that older women and men cannot rely on support from their adult children. In fact, increasingly, older people have to support their adult children and grandchildren. In Botswana older people’s income and their role as carers are a vital part of the household economy. As many younger adults migrate to find work, older people stay at home to care for children, and often they receive only sporadic remittances. Thus for Government to continue giving old people a monthly pension of P300 is cruel indeed. The Government-in-waiting urges the Government to consider raising the old-age pension to a minimum of P500.00.
Poverty Eradication. Prosperity is not broad based. It is estimated by the World Bank that 80 percent of the wealth is owned by foreigners, and of the remaining 20 percent, only 2 percent is owned by Batswana while the 18 percent is owned by naturalized citizens. Many, far too many of our fellow citizens go hungry; the children are malnourished and in some cases families are not sure of their next meal.
Unemployment. Prosperity is not broad based when unemployment is officially at 17 percent affecting most of the youth, in a country of only 2 million, with a middle income status and foreign exchange reserves that top P76 billion. Each year the educated youth join the ranks of the unemployed. If the Press reports are anything to go by, unemployment will get worse with business downsizing of several companies this year.
Housing. Prosperity is not broad based when many, far too many Batswana cannot afford decent housing. Housing is a basic necessity of life just as food, water, clothing and companionship. Now more than ever before, housing is beyond reach for the majority of the working population. The Botswana Housing Corporation, a public institution established to provide affordable house has not lived up to expectation. Late in the day, even the rolled programme does not meet the demand for low-cost housing.
Social welfare is mismanaged and politicised. The elderly, the destitute and the disadvantaged feel beholden to a party in power which has personalities and televises handouts of the basics of life (blankets, food and houses built through charity) in an upper middle-income country. Vision 2016 talks of a caring and compassionate nation - not a “caring and compassionate political party” that humiliates those who are entitled to social welfare benefits in their golden years, or those for no fault of theirs are not able to provide for themselves.
Employment, poverty eradication
Self-employment should receive more attention through more establishment of more polytechnics and vocational schools. Support for small and medium scale firms should not be lest to private banks. The Botswana Development Corporation and the statutory banks must take a lead.
Agriculture. Horticulture and crop farming should have increased funding that must include extension support, training, seed subsidies and availability of marketing outlets. A strategy of irrigation and land reclamation (as opposed to rain-fed cropping) should be speeded up. The agricultural products will provide a basis for the rapid growth of agro-based manufacturing and industrialization. Food production is not only necessary for feeding the nation, it is also a strategic imperative since food is a necessity.
Our proposals
We would propose an additional expenditure of P800 million this year for spending on the development of vocational training and education in Botswana. This programme will finance the training of more than 10 000 citizens for six month and one year courses to equip unemployed but trainable citizens for semi-skilled and skilled (depending on level) role jobs in the envisaged construction of the Trans Kalahari railway, Kazungula bridges, local area Government maintenance work and other community infrastructure projects.
This project would replace the current Ipelegeng project, and most potential beneficiaries of Ipelegeng, at different levels of education backgrounds and age brackets would instead be tracked through the special vocation and technical training scheme (This means more than P600 million of the P800 million would be re-routed from the current Ipelegeng scheme).
We will step up expenditure on vocational training in the Botswana education system from the current levels which are measured to be less than 5% of combined expenditure on higher secondary and tertiary education to about 30% over a five year programme and ideally to about 40% in 10 years. This kind of prioritization on technical and vocational training of citizen is a minimum required to empower citizens to be employable and attain higher paying jobs (and to significantly tackle the chronic unemployment problem in Botswana).
We would propose an additional P10 million to establish a Parliamentary budget office. This is part of our longer term plan to enhance the governance system. A parliamentary budget office plays the neutral role of providing economic forecasts and impact studies on any bill or key bills that are tabled in Parliament. This means the public will also enjoy the benefit of neutral forecasts on the impact on their welfare on proposed bills. For example, should there have been a Parliamentary budget office, it would have been possible to provide the public with a neutral assessment on whether the economy or economic distribution of income would fare better under our Government-in-waiting proposals or under the current way of doing things.
We would propose an additional P500 million to purchase more land and embark on Public Private Partnerships (PPPs) for the servicing of those land-parcels in-order to make more land available for housing needs of a large number of Batswana
We would allocate an additional P20 million for the training of the Police Force as part of significantly enhancing its capabilities and capacity as a professional law enforcement agency.
We would spend an additional P200 million for further PPP Research and Development, commercialisation and joint ventures in potentially niche sectors of Botswana such as food (meat recipes, cheeses, chocolates, morula drinks, honies), medicines, material sciences, coal beneficiation, solar technology. We acknowledge that Government of Botswana
We would invest an additional P300 million in PPPs for water drainage infrastructure/technologies and solar/bio power technologies to both harvest water and generate power effectively in communities.
Our view is that there should not be any shortage of water in a place like Gaborone where there are occasional floods, and where if the water was harvested effectively, the country would not be under as much water-shortage strain. We have noted the already existing investments in the north-south water carrier, but we believe much more can be done if resources were permitting.
We would set up a fund for SMMEs to offer grants for technology enhancement and to assist SMMEs access foreign markets and Government procurement opportunities. We would legislate and provide more extensive guidelines on Public Private Partnerships across sectors in the Botswana economy including PPPs for buildings, roads, research centers, power stations, agricultural projects and other initiatives via which the Government wishes to facilitate the development of our economy and social welfare.
We would deploy the PPP framework to embark on self-sustaining or profitable special projects which the private sector alone, or the Government alone or the labour unions alone cannot successfully achieve. We would legislate guidelines for the use and governance of public sector employee pensions and provide special incentives for investment vehicles that invest in large agriculture and agro-processing projects.
We will offer an across the board inflationary adjustment for all public sector employees of 8% -15% for this year with the lower end of employees receiving the higher end of the proposed increase. We need to also enhance the spending power of our public sector employees without jeopardising financial discipline.
We will legislate the use of monies from special levies such as the alcohol levy, motor-vehicle accident fund fuel levies and cigarette levies for use in targeted areas of our health-care system. We are certain our additional expenditures are affordable based on how we plan to save from some unnecessary expenditures or even generate moderate amounts of money from some activities or investments. Our full bench of MPs will explain some of these matters over the coming days.
These are indicative figures and broad taste of a raft of measures we wish to embark on to catapult Botswana to a first world country. My colleagues will provide more insights around some of our plans, why we choose to pursue them and how this might be implemented.
My party the UDC enjoys the presence in its ranks some of the most diligent and able professionals who value team effort and with whom we will lead our people to greater prosperity when we are in Government in 2010. We appreciate the work that the officials at the Ministry of Finance and other ministries have put for this year’s budget. But with a more capable and responsible political leadership, we can do better, much better. 
This is an abridged speech by the leader of opposition Duma Boko in response to the Budget speech.

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