06 Feb 2020

This year’s budget is loaded with calls for efficient government spending if its ideals are to be realised.

Former deputy governor of the Bank of Botswana and Econsult managing director, Dr Keith Jefferies, said this during presentation at the annual FNB Botswana budget review seminar in Gaborone recently.

Dr Jefferies said the budget, presented before Parliament by the Minister of Finance and Economic Planning, Dr Thapelo Matsheka, was in line with the eleventh National Development Plan (NDP 11) that prioritised promotion of export-led growth and sought to ensure more efficient government spending,.

“Government has to become smaller, not in absolute terms, but relative and management of government spending needs to be better and prioritised. There is need for higher taxation and new forms of tax, better revenue collection and more efficient use of funds,” Dr Jefferies said.

Dr Jefferies said the country spent eight per cent of the gross domestic product (GDP) on education, which he said was one of the highest per capita in the world, but still there were “poor, inefficient outcomes” from the education sector.

“In agriculture, the state spends heavily on ISPAAD (Integrated Support Programme for Arable Agricultural Development), as crop production subsidy, but there are poor returns.  In healthcare, Botswana spends far more than Malawi per capita, and about the same as Mauritius, but we have a similar infant mortality rate as Malawi, while Mauritius is better in that regard,” Dr Jefferies noted.

He told his audience that the problem stems not for a lack of funds for government spending but rather from poor management and a lack of accountability.

But he did acknowledge that government did face some funding issues, stating that while the country in 2008 had big savings, low borrowing, and foreign reserves at 90 per cent of GDP, the country had since come to a position of having lower reserves down to 40 per cent of GDP and increased borrowing.

“As such there is a need to reduce wastage and focus on high return projects.  The budget has many positive aspects such as the promotion of fiscal sustainability, export led growth through Special Economic Zones (SEZs), private sector growth, review of programmes as well as cost recovery measures.  But the devil is in the detail; implementation will be crucial,” he said.

For his part, economist Mr Daniel Kavishe of Rand Merchant Bank (RMB) Global Markets Research, said Botswana could take a leaf out of the Rwandan economy, which he said had worked towards having efficient outcomes for its spending.

“Rwanda’s economy is smaller than that of Botswana, and could possibly be said to be recording high growth due to coming from a low base.  But they are doing some things right- investing in people, creating the right climate for business, and having a good governance structure, where the level of operation in government is expected to be similar to that of a private company,” Mr Kavishe said.

He noted that in Botswana, South Africa and Namibia, ‘government balloon budgets through social spending,’ Rwanda ensured that companies maximised their revenue, then tax consumption as opposed to heavy social spend.

“They made sure that post the genocide the country develops a vision to ensure that unemployment is down to zero, and they attract companies that will be allowed to maximize their earnings.  The Rwandan economy transformed, from 77.9 per cent of exports being mineral based in 2004 to the dominant sector being services which accounted for 65.7 per cent in 2017,” Mr Kavishe said. ENDS