COVID-19 trips up well-laid economic plans
Mbongeni Mguni | Friday September 18, 2020 19:11
“We have listened and heard our people. That is why the next BDP government will lead the country on a path to economic transformation and create jobs that will roll back the scourge of poverty.”
This is the essence of the BDP’s economic promise, as declared in the manifesto which won the elections last October. In fact, the party committed more than two thirds of its 56-page manifesto to various pledges of economic transformation and inclusion, detailing how new legal and policy reviews would be used to move the nation towards “shared prosperity”.
“The BDP has led Botswana’s transformation before,” the manifesto reads.
“The first transformation was from a traditional low-income economy based mainly on the agricultural sector, to an upper-middle income resource-based economy.
“We have now started to lead Botswana on its second transformation: from an upper-middle income economy to a high income economy, from a resource-based economy to a knowledge-based economy, and most importantly, a people centred, inclusive, sustainable economy.”
The 2019 manifesto was one of the BDP’s most ambitious in terms of economic goals. Following years of stagnating growth, accompanied by lower than required job creation, high expectations were set and demanded.
While voluminous, the BDP’s economic pledges revolve around partnering with the private sector and investors on creating value chains in areas such as agriculture, tourism and mining, boosting SME growth, incentivising manufacturing, creating a digital and knowledge-based economy and others.
These would be achieved through policy and legislative review as well as institutional reform, which of necessity would be supported by the appropriate redirection of budgetary resources.
The manifesto was also surprisingly detailed in some of these aspirations. For instance, the ruling party pledged to “immediately evaluate and confirm the economic value of mineral assets of the BCL Mine to provide necessary data for investors,” roll out solar energy use nationally, and review laws on blacklisting workers.
Following the election, the first ‘checkpoint’ was the budget in February where the hopeful and skeptics alike would be able to see whether the party was literally putting its ‘money where its mouth is,’ in terms of the promises.
Finance and Development minister, Thapelo Matsheka, in his first speech, made it clear the budget was adhering to the BDP’s economic pledges, even breaking down the document to mirror the party’s priorities such as economic transformation, doing business reforms, citizen empowerment and others.
“As a demonstration of government’s commitment to infrastructural development, and as promised in the ruling party’s manifesto, over half of the development budget for 2020/2021 is proposed for the following economic sectors: water allocated P1.4bn, Transport allocated P1.3bn; Agriculture allocated P862m; ICT allocated P823m; Land Servicing allocated P541.5m and Energy allocated P521m,” he told legislators.
In fact, Matsheka made reference to the BDP’s manifesto three times in his 33-page speech, stressing that spending priorities and other policy initiatives were being done in line with pledges that voters had endorsed in giving the ruling party a fresh mandate in October.
By April, the economic pledges were under pressure, having kicked off at an arguably robust pace. The onset of COVID-19, with first case on March 30, had dried up the revenue lines Matsheka and the ruling party were relying on to begin actualisation of the economic pledges.
As an example, the P12 billion Matsheka had intended for the development budget would have to shrink considerably as mineral revenues fell due to the suspension of mining activities, commodity sales and global demand slump.
The development budget has been cut to P11.1 billion, through project reprioritisation and deferrals. The recurrent budget of P55.6 billion announced in February, has been cut to P50.4 billion through difficult decisions including the deferral of civil service salary adjustments and other key spending activities.
Matsheka’s numbers show that the full extent of the drop in revenues was not fully translated into lower spending. Forecast mineral revenues, for instance, dropped by more than 50% to P10 billion, but total budget expenditure dropped by only 2.4 percent to P66 billion.
This, of necessity, means a higher deficit, which moved from the original forecast of P5.2 billion in February to the current estimate of P13.6 billion.
Within that higher deficit is extraordinary funding for government’s slew of COVID-19 relief measures across ministries, drought relief initiatives and others. The deficit also covers the Economic Recovery and Transformation Plan, a blueprint to not only lift the economy out of the COVID-19 slump, but reignite some of the manifesto pledges around economic transformation and the pursuit of upper-middle income status.
Analysts have said COVID-19 shrunk the national cake at a time when government sought to not only grow it but also make the pieces more equal, particularly for ordinary Batswana. The shrunken cake has meant louder outcries from Batswana and more cynicism from the public towards the BDP’s election pledges.
The pandemic has also meant that rather than pursue the lofty goals of the manifesto, the ruling party’s attention has been diverted to managing the crisis on public health and the economy. Some of the pledges made were soft targets requiring simple policy tweaks at little or no direct financial cost, but the enormity and mystery of the virus meant all official attention was facing one way.
However, with the passing of the Economic Recovery and Transformation Plan (ERTP) by Parliament last week, the ruling party has an opportunity to resuscitate the pace of its economic pledges.
The ERTP closely echoes the manifesto promises. In fact, the ‘economic clusters’ it identifies such as agriculture, tourism, manufacturing, mining and creative industry, are similar to the BDP’s ‘value chains’ which include “agriculture, tourism, mining, motor, electronics and solar industries”.
The ERTP, which will require P14.5 billion funding from this year up to March 2023, adds the elements of “resilience” and “restoration” to the BDP’s manifesto. The two documents both focus on expanding growth and accelerating transformation to a higher and more inclusive economy.
Where COVID-19 has tripped up the BDP’s economic manifesto, the ruling party will now be judged on how effectively it delivers on the ERTP’s targets.