Analysis paralysis and the approaching fiscal storm
Mbongeni Mguni | Monday May 26, 2025 18:02
The gap between knowing what to do and doing it, has been the proverbial thorn in the side of public sector policymakers and the reforms they have attempted to make over the decades since the discovery of diamonds.
For those tracking the numbers, the current fiscal challenge is not about the past months. The fiscal crisis now manifesting in reports of government delaying to settle some payments, parastatals postponing paydays for employees and rising public debt, can be seen as far back as a decade ago, when mineral revenues entered a downward slide.
For those with greyer hairs on their heads, the crisis goes even further back in time to the decade after commercial diamond operations began, when prudent policymakers began advocating for greater economic diversification.
Genesis of a crisis
In fact, some scholars argue that diversification as a concept predates the diamond boom of the 1970s, as post-Independence policymakers always targetted a broad, deep economy as seen through legislation such as the Industrial Development Act of 1968.
Those who have monitored public spending and the trajectory of the economy over the years, say the central challenge is implementation, or putting the right action to the right words.
Everyone knows the problem, everyone is united on the solution and in fact, it can be argued that few countries in Africa or the world, have more in-depth information about what reforms are required in the economy.
Over the decades, tomes of research, policy documents and studies have been developed around the path that the economy should take beyond diamonds, to escape the Middle-Income trap and reach the sustainable high-income dream.
The challenge with analysis paralysis is that the data or information on what is required builds up so much that actually taking to step to implementation becomes daunting.
“There’s a body of knowledge about what we need to do to move the economy forward and the reports have been there from as far back as 1988 – the challenge has been implementation,” said Business Botswana CEO, Norman Moleele recently.
Key reforms required to move the economy away from the dependence on diamond mining, have moved glacially over the decades, due, ironically, to the comfort provided by the very same diamond revenues.
With generally healthy savings in past decades, government was able to dictate the pace of reforms required for diversification. The fact that many of these reforms have large turning circles and involve painful adjustments, have slowed the pace of change, particularly as the politicians involved in driving them have a five-year electoral shelf-life.
Meanwhile, the trajectory of the fiscus in the past decade has been sobering. Nearly all the available graphs showing historical performances of various macroeconomic indicators confirm a gradual downward decline, from before the pandemic, before the 2015 recession, before the 2008 global recession and stretching all the way back to the dawn of the millennium.
From the budget balance, levels of foreign reserves, national savings as housed in the Government Investment Account, to the concentration of revenue streams in the budget, the figures are depressing.
Essentially, revenues in the national budget have generally been declining over the years, while spending has been rising.
The country has been running deficits since the 2017-18 fiscal year. These have drained government savings and forced authorities to raise more debt from the local capital market and international financiers, while raising taxes and other levies.
The pandemic and failure by authorities to pare back spending and fast-track the much-needed reforms has meant that the diamond slump which has beset the economy since 2023 found depleted savings and forced government into record deficits and mounting debt.
The new administration, which took office on November 1, is also casting a wistful eye back at the previous decades of plenty, while tackling a fiscal baptism of fire that is manifesting in a hand-to-mouth affair in public finance.
Frustrations are coming to the fore.
“You can cry and say those who came ahead should have seen this and you would be right,” President Duma Boko said in Tsabong recently, when detailing the fiscal challenges facing the country. “These were reasonably foreseeable. Any sane leader should have foreseen that reliance on a single commodity for an economy exposes you to exogenous or external shocks. “It doesn’t require an economist just common sense. These things were not addressed and we are here today where the country does not have money.”
Making changes
Just what are the reforms that everyone agrees should be done, but which have taken so long that the current crisis has been allowed to settle?
The Bank of Botswana, with its arsenal of the country’s top economists and analysts, is the best place to look for answers. And the central bank over the years has been warning about the existential threat posed by the slow pace of structural reforms in the economy.
The reforms include reining in on spending, particularly broad-based subsidies, and simultaneously broadening the tax base, while providing the optimal environment for private-sector-led growth. Ending blanket subsidies in particular, in areas such as water, electricity, health and education, has come up frequently in the central bank’s recommendations.
Reforms proposed by other experts include reducing the size of the public service, hiving off some parastatals through strategic privatisation so that government does not compete with private enterprise. Other reforms include an enhanced Public Private Partnership (PPP) agenda, greater industrialisation and more value addition activities within the economy.
All the policies, laws and most of the regulations required for these reforms are already in place. For example, the PPP policy dates back to the year 2000 with a dedicated unit established in 2010. However, thus far only two projects have been developed involving direct funding from the private sector. A list of 16 is updated annually but remains trapped in stasis, with prominent economist, Keith Jefferis, noting that the projects that are generally referred to the PPP list tend to be low profile at best.
Again, the lethargy is largely because healthy government savings have papered over delays in implementing the PPP policy.
Unlike his predecessors, Boko, has no elbow room to manoeuvre. Besides the weight of the new government’s electoral promises, the fiscus, ailing as it has been for a decade, has taken a rapid turn for the worse.
“The reality is that the economic situation of our country, the mainstay of diamonds has several years of not doing well or not doing at all, with a total collapse of the diamond industry over the last three years up to now,” Boko said in Tsabong, in an address to public servants. “As we speak, the diamond mining industry are investigating how to cut jobs, slightly over 1,000. “That’s the truth we are looking at, that you may not know or know how it affects you. “This means that production at your mines has fallen down due to the challenges that diamonds are not being bought. “What does this mean: it means that the source of revenue that we are reliant on for your challenges to be addressed, the inflow is low and in fact it’s not there at all. “When it’s like this, the IMF say to us, you have a bloated public service and you need to retrench to manage these economic adversities, by the collapse of the mainstay of the economy.”
For the new administration, the chickens of past inaction have come home to roost.
A cultural shift
Leading organisational transformation advisor, Oabona Kgengwenyane, believes the current fiscal challenge is an opportunity to audit and reset attitudes, particularly in the public sector, out of the analysis paralysis that has forestalled the economy over the decades.
“I always tell people that the 2008 financial crisis was not long enough so that we really feel the pain,” he said sardonically, in a brief interview with Mmegi. “One of things we say in consulting is that you must not let a crisis go unleveraged. “So if we go into a crisis, one of the best things we can get out of it, is where people wake up and say the situation has changed.”
He continued: “You know, the three meals a day, fancy cars, nice houses, going to holiday in South Africa, is actually under threat. “So hopefully when it becomes a bit personal, you'll know that there is something that has to be done.”
Kgengwenyane, a veteran in change and performance management, says he recently had an opportunity to interact with Boko where he shared ideas about the mindset shift required in the public service and beyond.
“In Botswana, we have lived in this thing of bureaucracy. It’s not about the policies. The policies from way back we have produced them, doing them and they are sitting in other policies today. “Even the president, I've told him, if we don't transform the mindset of Batswana, all these things again, we will be crying in the future. “If I was the President or ministers or cabinet, I would do a very quick audit in terms of talent. The science is there to see how people think, who is the best leader in the team? “I'll take the audit, I'll pick the few who can really drive the economy forward, drive education, drive health and do this through a scientific assessment not because of politics.”
Kgengwenyane says a leaner, more agile public service with the right leadership is required to break the country’s analysis paralysis and take the leap forward to the required level of development.
“There's no organisation that can outperform the quality of its leadership,” he told Mmegi.
As they scramble to steer the country away from the approaching fiscal cliff, Boko and his lieutenants will be eager to charge through the analysis paralysis that has gripped policymaking over the decades.