09 Feb 2022

First National Bank’s Treasury Quantity Analyst, Mr Gomolemo Basele says efforts  to diversify the economy need to be ramped up to broaden the  local tax  base.

Reviewing the 2022 budget speech on Tuesday, Mr Basele said as the curtain falls on the National Development Plan 11, and the country readies to usher in the start of NDP 12 in 2023/2024 financial year, government would have to contend with key issues as part of its efforts to promote fiscal stability.

He said to improve the current revenue mix, following several changes in the tax regime, Botswana would have to improve its tax collection efforts to create a buffer against volatility in mineral revenue.  

He expressed delight that Botswana’s GDP growth expanded by 8.4 percent in quarter three of 2021, compared to a contraction of 4.5 percent in the previous year, a growth he attributed to an increased output in diamond related industries, as well as wholesale and retail industries.

Giving the outlook in terms of  revenue  and expenditure over the medium term, he indicated that the size of the country’s deficits was expected to decrease from what played out as an  8.4 percent deficit in 2020, narrowing to 5.1 percent this year and to 3.2 percent next year.

This, he said was based on the improved mineral revenue, which will also allow government to ramp up its development expenditure in line with the next National Development Plan.

“Most sectors reflected improved performances compared to corresponding periods in 2020, due to the low base that resulted from global movement restrictions.

Botswana’s economy is reported to have registered a growth level of 9.7 percent perform in 2021,” he said.

He said economic growth was expected to moderate to 4.3 percent  in 2022, as economic activities continue to normalise, adding that non-mining sector performance was expected to benefit from increased development spend over the forecasted horizon.

Mr Basele stated that over the medium term, preliminary budget figures indicated a more positive outlook for Botswana’s fiscal position, as a result of a substantial rebound in mineral revenue in the financial year 2021/22.

Given the challenges experienced  in the  mining  sector, he noted that for the first time in a decade, government also sought to implement a two percent increment on VAT, as another means to improve government revenue collection, and foster government coffers.

He said it was also pleasing to note that the outlook in terms of SACU collections was improving across all markets, with normality returning to some sectors, although challenges still persist.

To further cushion the economy from the impact of the pandemic, Mr Basele said the fuel levy was also increased and a tax amnesty offered to businesses to try ramp up revenue collection domestically.

He however cautioned that expenditure still remained a challenge, adding that the public sector wage bill was a major concern and negatively impacted the country’s rating by international rating agencies. ENDS