“One of the most critical challenges in attaining the objectives of NDP 9, Vision 2016 and the United Nations Millennium Development Goals is simply to improve economic performance,” he noted.
For the 10 years ending in 2002, Botswana had recorded annual budget surpluses, and observers suggest that this week’s budget may well have recorded another deficit, but for the last-minute devaluation of the Pula.
It is clear from the Minister’s speech that he is having problems finding the revenues to finance the development and recurrent budget this year.
He proposes to amend the Income Tax Act to limit or remove various allowances and exemptions, to tax any business income accruing to religious organisations and Charitable Trusts, and generally to remove loopholes and to tighten income tax collection.
One of the several reasons given by the Minister for tightening the budget is government’s decision to accept the recommendations, as amended, of the Presidential Commission on the Review of the Public Services Pay Structures, which will result in an average increase in salaries of 15 percent. This will cost P600 million. (This happened in 2001/02, as well).
Another reason is that, in his words, “Performance of the two major revenue sources – Minerals and Customs and Excise - depend crucially on what happens to the US dollar and the South African Rand in the international currency markets. Government has no control or influence over these developments. Therefore, revenue forecasts presented in the 2004/2005 budget are subject to wide margins of error”.
Several observers are of the opinion that the timing of the salary increases has to do with the forthcoming elections in which the votes of the 100 000 or so civil servants are critical to a sound victory of the BDP.
Some important paragraphs in NDP 9 relate to what seems to be a very costly breakdown of executive responsibility for implementation of NDP 8, about which the Minister has not spoken, and which bear wider exposure.
The first of these, relating to Ministries’ Development Expenditure during NDP 8, reads: “As a result of the new projects and revisions to existing projects, the overall Total Estimated Costs (TEC) of the NDP 8 development programme increased by P14,128 million (120 percent), from P11,807 million to P25,935 million. Actual expenditure on development projects during NDP8 turned out to be about 73 percent above the original TEC of P11.8 billion for the Plan”.
Another reads: “The difference between the amount of the TEC expected to be spent, and that approved, reflects capacity constraints within line ministries, especially in service departments, such as the then Department of Architectural and Building Services, which is responsible for all Government construction projects”.
Reviewing NDP 8 performance, NDP 9 records that: “The latest estimates of development expenditure now indicate that spending on the development programme will continue to rise to the end of the Plan period”.
It adds, by way of explanation, that: “The carry-over of the TEC from one Plan to the next results not only from implementation constraints, but also from the natural overlap of ongoing projects between Plan periods.’
It stressed that “The fiscal strategy for NDP 8 was developed after extensive consultations with all stakeholders”. It then elaborated on the “implementation capacity constraints”.
“It must be appreciated that financial and human resources projected in the Plan are expected to accrue over the six year Plan period. The other experience is that adequate attention was not given to recurrent costs of projects, which include manpower, operating and maintenance costs.
As a result, there was a huge backlog of maintenance of Government infrastructure, for which an accelerated programme was instituted during 2002/03. On the basis of the lessons learnt from the past experience, priority during NDP 9 should be given to maintenance of the existing infrastructure before making provision for new facilities.’
‘Another important issue is that of the linkage between public sector salaries and productivity. The linkage is that if real wage increases are not compensated for by improved productivity, they would tend to generate inflationary pressures in the economy. In addition to being inflationary, these increases impact negatively on the budget, the balance of payments, investment and employment prospects for new entrants into the labour market, among others.
During NDP 9, the introduction of performance-based pay, as part of Performance Management System (PMS), will be critical in ensuring that salary increases are consistent with productivity growth.” The Minister did make mention of this.
Referring to the recent devaluation of the Pula, Dr Derek Hudson, a former Deputy Governor of the Bank of Botswana, argues that the Bank should have acted earlier to “create a competitive exchange rate when the Pula was over-valued last year”.
By implication, the same question could be asked of the Minister and his advisers: Why did they act so late?
How, in fact, are NDP priorities determined? A costly, massive, still incomplete office block in the government enclave in Gaborone seems to have been given priority over rebuilding that dangerous, deteriorating stretch of road between Dibete and Mahalapye.
Costs of road building have escalated enormously so that the road, apparently to be built this year, could cost some P100 million. Did other road projects have prededence over this one?
Not only much money, but also many lives, could have been saved if its construction had been scheduled earlier.
