Don’t increase taxes – Gaolathe

SHARE   |   Thursday, 16 February 2017   |   By Staff Writer
Don’t increase taxes – Gaolathe

MP for Bonnington South Ndaba Gaolathe has urged Government not to review taxes up, warning such a move can undo any efforts to revive the economy.  “Botswana should not be increasing taxes at this time. Despite the Bank of Botswana’s commendable efforts to keep inflation in check, there are some concerns that the household sector is collapsing under the burden of 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 Bank said the rapid increase, which currently exceeded growth of incomes, could result in future repayment difficulties. Markets 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 (and even higher in recent times),” he said when  debating the 2017/18 Budget provisions on Wednesday. In fact, he said, 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,” he said. “The banking sector is still dominated by foreign banks.  Botswana needs to start a process of grooming homegrown banks and financial institutions through a variety of policy instruments.  First, we must lessen the barriers to entry and allow for a second tier banking system to subsist with a first tier system.  This should overtime give indigenous banks the history, and credibility to elevate to the first tier. Another clear mechanism available to Botswana is the way pension fund management contracts are awarded to citizen-owned asset managers.  Botswana is fortunate to have experienced citizen portfolio managers who have worked successfully at the most prestigious financial institutions in the world.”

“Importantly, the size of the pension fund resources mainly of Government workers and parastatals is the same size as the entire banking sector.  This is an opportunity to align the use of these funds to the country’s development objectives including the modernizing of infrastructure and strategic investments in the clusters that form Botswana’s economic strategy.  Almost 60 billion Pula of these resources are available for this strategic purpose. “The empowerment of citizens should form an important part of broadening economic opportunities for all citizens.  We need a law that entrenches the participation of citizens in businesses (in general) and lucrative contracts without jeorpadising our ability to attract world class investors across the globe. “Despite early efforts to attract investors and the Business Roadmap strategy, it is still and onerous task for investors to establish in Botswana.  Countries such as Rwanda are far ahead in implementing one-stop centers where it is possible to register and start a business within days.  Botswana is also becoming notorious not only for expelling foreigners but for the opaqueness with which immigration is managed. We cannot achieve the strides associated with economic transformation if we do not accept that Botswana needs to embrace the difference that an exceptional highly skilled international skill base can make for Botswana. “We still do not have all the specialist kills we need in business, engineering, science, agriculture, mining, manufacturing and healthcare to significantly change the landscape of our economy.  We need to welcome these skills and wisely use them to transfer knowledge to own workers.  We can achieve this without displacing or undermining our own workforce. Gaolathe urged Government to increase trade with the rest of Africa, targeting the northern parts which have immense agricultural and mineral resources which Botswana, with its capital resources, could find technical partners with whom to participate in the value chain.  “That is not to say Botswana has fully exploited its access to South Africa’s markets and value chains. To fully realise these possibilities we need to leverage   our good name and foreign relations.  We have to do this in concert with a coordinated drive involving the private sector and Government as investors as well.”

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