Last Updated
Friday 21 November 2014, 15:04 pm.
Budget could be P2bn in surplus

*SACU to provide lion's share of income
*Mineral revenues to remain flat
The 2013/14 national budget due for presentation on Monday could contain a welcome P2.1 billion surplus powered by higher than expected revenues from the Southern African Customs Union (SACU), forecasts suggest.
By Staff Writer Sun 23 Nov 2014, 09:07 am (GMT +2)
Mmegi Online :: Budget could be P2bn in surplus








Latest available projections from fiscal authorities, contained in the 2013/14 Budget Strategy Paper, indicate that the modest surplus would arise from revenues of P44.85 billion against expenditure of P42.7 billion.

At that projected level, the surplus would be marginally higher than the P1.15 billion forecast for the 2012/13 financial year.

The figures made available in the Strategy Paper indicate that a surplus of P2.1 billion, rising to P4.9 billion in 2015/16 would be a base case scenario or the most reasonable outcome given known factors.

Despite the weaker diamond market this year, which will translate into lower mineral revenues, the second budget surplus in as many years is expected to be powered by an extra R6 billion SACU's five members states expect to share.

Initial estimates by SACU had put the union's revenues at R55 billion but a revision has uncovered an under estimation, which now has the amount at R61 billion.

"We have been informed by South Africa, who are the administrators of the SACU revenue pool, that there was an underestimation in calculations and there would now be an extra R6 billion to share among us," finance and economic policy secretary Taufila Nyamadzabo told BusinessWeek recently.

After a three-year spell of deficits due to the 2008 global economic recession, Botswana's budget bounced back to a surplus this year on the back of another bumper payout from SACU.

Another once-off adjustment from SACU, worth P2.8 billion, was behind the surplus projected for the 2012/13 budget. In the current financial year, revenues from the customs union are expected to constitute 33 percent of total revenues in Botswana, overtaking earnings from minerals income for the first time.

For the 2013/14 financial year, the adjustment SACU members are due to share is expected to compensate for lower mineral revenues, which could suffer from reduced production and softer prices.  Although SACU revenue are now the highest contributors to the Botswana government coffers, analysts have warned of the risks associated with reliance on the customs pool for budget support.

Recently, the IMF cautioned that slow global growth, along with other evolving structural factors in SACU could burn a permanent P5 billion hole in the revenues that Botswana receives from the customs union. Similar threats hang over Debswana, which distributes 80 percent of its revenue to government. The diamond giant's production dropped 12 percent last year as the uncertainties in key global markets dampened prices.

However, the budget may receive a boost of up to P2.7 billion from Debswana, which announced last year that it would pluck P3.4 billion from its capital reserves for distribution to shareholders.

On the expenditure side, it is expected that the 2013/14 budget will continue the austere note struck in the 2012/13 budget, as indicated by government's plan to increase spending by only 4.4 percent.

Besides spending on ongoing projects, the push for a surplus in 2013/14, as part of an overall fiscal consolidation, is expected to be reflected by greater monitoring and evaluation of approved programmes and projects.

"To run a modest surplus, government needs to spend less than it receives as total revenue," the Budget Strategy Paper reads.

"Programme and project management remains a great challenge to government with notable delays in completion dates, change in scope and resultant cost over-runs.

"There is therefore an urgent need to improve on programme and project design, project implementation and execution as well as containing costs by avoiding over-runs."

Despite the tighter spending, it is expected the 2013/14 budget will see an increase in expenditure on maintenance and repair of existing public infrastructure, up from P1.84 billion.

"Lack of regular maintenance and repair over time is depriving the society of maximum benefits from the existing infrastructure," the Strategy Paper reads. "Against this background, provision should be made for maintenance and repair in order to restore the functionality of existing facilities and improve service delivery to the public."

Restrained expenditure in 2013/14 will also be expected to be reflected in the five percent cut in the government wage bill, a decision originally announced in last February's budget speech.



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