A frank-talk ‘shootout’ at the BoB
Mbongeni Mguni | Wednesday March 11, 2026 08:34
“I have a demand governor, and (BoB) board chair and a demand is a non-negotiable requirement. “From yourselves, what we need is unbiased and straightforward, objective financial and economic advice without any fear or favour. “We are going to have to implement those painful adjustments, painful decisions.”
Finance Ministry permanent secretary, Tshokologo Kganetsano, set the ball rolling last week at the Bank of Botswana Monetary Policy Statement launch. The annual event where the central bank traditionally unveils the direction it will lean towards in terms of interest rates for the year, is frequently dominated by discussions on trending economic challenges and solutions.
Usually, however, the event is a buttoned-down affair where the air is heavy with pleasantries, economic jargon and other formality. The steep challenges the economy finds itself in this year, however, turned the event into a frank-talk shootout, featuring some of the finest minds in the economy.
In the room were the CEOs of several commercial banks, a former BoB governor, senior Finance Ministry officials, legislators, including the Speaker of the National Assembly, the Debswana managing director and other luminaries.
A prolonged downturn in diamonds and the erosion of buffers from the pandemic, has triggered two years of successive economic contraction, the first since Independence, forcing government to scramble to develop both a survival plan and an economic transformation model.
For banks, a sector known for reporting healthy profits even in the midst of contractions, the crisis announced itself in the form of tightening liquidity and consequently tighter margins. The now traditional announcements of higher profits by listed banks are noticeably absent this reporting season, as the market awaits financials from the year ended December 2025.
For consumers, besides contracting economic opportunities, interest rates swung higher by up to 200 basis points last year, while government’s reduced spending became evident in public healthcare and the ability to settle obligations associated with civil servants’ service providers.
Kganetsano, who was until December 31, 2024 a deputy governor at the BoB before moving to become permanent secretary in the Finance Ministry, said the situation the economy finds itself in cannot be called an emergency, as it has been known for decades.
“I just Googled the meaning of the word emergency and it says a serious, unexpected and often dangerous situation requiring immediate action,” he said. “I often get surprised when some of us present today’s economic situation as an emergency and I beg to differ. “We have long known that if we don't do anything, then we will destroy the economy. “That has always been known and actually, the need to diversify the economy is something that I learned a lot about when I was still young and more than 30 years after my graduation, we're still talking about it, but on the ground, there’s little or no traction.”
During his time at the central bank, Kganetsano was amongst those pushing for more urgent action on the known structural reforms needed to de-risk the economy from its dependence on diamonds.
“How do we move forward,” asked Kganetsano. “First, we need to recognise and acknowledge that individually and collectively, we have failed this nation, we have failed to diversify the economy and even today, we are an economy that is heavily dependent on diamond-financed government spending. “This is the longest period we have gone without selling diamonds properly and the challenge now is structural, requiring structural adjustments. “Structural adjustments on their own are very painful and if we are to transform this economy, we need to be prepared to take the pain.”
He added: “We have to implement meaningful and painful structural adjustments and the pain will be much less if we do it voluntarily, rather than wait until somebody comes and imposes those on us. “I see us fast moving in that direction, because I sense that there are many of us who are failing to adjust to the new reality and for some of us, it’s business as usual.”
The central bank, acting as government’s primary economic advisor, has over the years pushed for reforms such as the reining in of spending, particularly on broad-based subsidies and simultaneously the broadening of the tax base.
Other tough reforms called for by bodies such as the IMF have included rationalising the civil service, improving the efficiency of public service delivery and shifting towards a private sector-led economy.
Former central bank governor, Moses Pelaelo, who previously warned in August 2023 that the economy would not be able to survive any major shock due to the dire state of government savings, said the crisis was an opportunity for the required reforms.
“You never waste a crisis,” he said, adding: “I think it's very important that during this time, the reforms that are required to be undertaken need to be done clearly with the honesty and integrity.”
While much of the frank-talk shootout was around the pace of reforms required to be led by government, shots were also fired at the BoB around its role in providing clear advice to government.
In July 2022, amendments to the BoB Act granted the central bank greater autonomy from undue 'political or industry' influence and sharpened its role, while improving internal governance. The amendments, the first to the BoB Act in 26 years, were designed to “ringfence” the Bank from political coercion and influence.
At the shootout, Pelaelo and others challenged the BoB to take up this role with more gusto and provide government with undiluted advice on the economy.
Andrew Motsomi, now the Debswana managing director, but formerly a BoB deputy governor and career central banker, said there was need for boldness.
“I think clearly our economy is going through very difficult times and having gone out into the private sector and picked up one or two lessons, I realise that the bank is a unique institution, pretty much ringfenced by legislation and pretty much safe in many respects. “We look up to the bank especially in these very difficult times to provide objective and unbiased advice to the government, particularly in dealing with the current challenges that we see,” he said.
Motsomi added: “I do recall back in our days when the IMF was coming here, there was always an issue around that we have a bloated civil service. “It didn't quite make a lot of sense, but now, in these difficult times, these are very, very pertinent issues that need to be confronted. “Clearly the central bank is better placed as a ringfenced and independent institution to continue to advise government in an unbiased and very objective manner as we navigate these very difficult times.”
For Pelaelo, one area where honest conversations are required is in the foreign exchange framework. The former governor believes there should be dialogue around declining foreign exchange reserves and the current framework being used to manage the Pula, know as the “crawling peg”.
“We are having a managed fixed exchange rate regime where the performance of the external sector is extremely poor and somebody was asking, where are the exporters, where are we getting the foreign exchange? “But we have this exchange rate that everyone wants to be strong, how? “If we can't have an honest conversation about whether or not a crawling band exchange rate regime is appropriate in the context of diminished foreign exchange reserves, then we are not being honest and we are not having the right conversation.”
Under the crawling peg exchange rate system, the Pula’s value and movements are tied to a basket of currencies being the South African Rand and the IMF’s Special Drawing Rights (SDR) currencies which include the British pound, US dollar and others.
To maintain the system, the BoB uses its foreign exchange reserves to intervene when market forces push the Pula outside its target range. If the Pula comes under pressure, the BoB can sell foreign currency to buy Pula and bolster its value, or alternatively buy foreign currency to prevent it from appreciating too quickly. This intervention however hinges on having adequate reserves.
For Pelaelo, the reforms required will ultimately have to broaden the tax base, a key recommendation the BoB, IMF have made on numerous occasions. To a certain extent, government is making traction on this particular reform, with the recent budget speech pledging to reduce the number of VAT zero-rated goods and services.
However the real broadening involves increasing the taxable economic activities in the country, by digging into previously unassessed areas and also developing new taxpaying entities, such as envisioned by the Botswana Economic Transformation Programme.
“There's no nation in the world that progresses being a nation of rent-seeking behaviour, where you become hunters and gatherers of things and sell them,” Pelaelo said. “No, we're going to need to have the tax base broadened, but more importantly, remember that what government gives its citizens, it must first take it from its citizens.”
Part of the reason participants at the frank talk shootout questioned the BoB’s role in advising government is due to the trajectory of public finances.
Public debt levels are rising and expected to breach the 40% of GDP limit this financial year, while the budget deficit approaches nine percent of GDP, above the four percent limit. The Finance Ministry is due to table a bill seeking to raise the debt to GDP ceiling to 60%, the first such move since at least 2005.
“The government behaviour also needs to be called. “A rule-based fiscal discipline should be respected because ultimately, we know that taxes are going to have to come to bear,” Pelaelo said.
For his part, Kganetsano, conceded that thanks to the diamond-based success of the past where government enjoyed healthy balances, “certain things” such as developing capacity in debt management had been ignored. Fiscal authorities are now playing catch up in this area.
The question of whether the additional debt was “good or bad” was dependent on what it was being used for, he said.
“The BETP is categorised between purely private sector projects, PPP projects and purely public sector projects. “So if our borrowing to a large extent goes towards those PPP projects that have the capacity to generate or to create jobs and generate returns, we can take our debt to GDP ratio to above where we are today and still survive because in the next three or four years will we begin to realise the success of the projects. “However, higher debt is a no if we borrow to consume and I've always said that our economy is deceiving to a large extent.”
He continued: “When you drive into Gaborone, if you are not familiar with the Botswana economy, you would that the economy is booming because there will be loads of cars on our roads, fuel stations mushrooming at every corner of these villages and cities. “What are we consuming there? We are consuming imported commodities which is fuel. “You go to the shopping complexes, you think the economy is booming, but what are we consuming? We are consuming predominantly imported commodities. “Go in there, ask everyone walking out of the shop how many items have been made in Botswana? Possibly zero. “So our economic activity is confined to the retail level, but we want that economic activity to go down to the production or factory level then that will be sustainable.”
The economy, as it in 2025, as in 2024 and as in every year since the pandemic, continues to be centre of debate. Outside of the frank-talk shootouts, ordinary citizens are desperately hoping all the planning and strategising by those holding the reins of the economy, result in meaningful impact.