Tax incentives could address load shedding crisis

| Friday February 8, 2008 00:00

Don't get me wrong, I am not saying it's wrong for people to point fingers and call for heads to roll at BPC and government enclave. South Africans had tried to call for heads to roll at Eskom and Union Buildings but did not succeed. But at least Eskom has been honest in admitting failure on their part. Talk is that they never thought the South African economy will experience such unprecedented boom. Botswana is in the same situation where suddenly there is a mining boom and the energy demands are likely to increase until....God knows. I will submit that Botswana, just like SA never anticipated such growth and as some had correctly pointed out, we in Botswana are in a worse situation as we are 80 percent dependent on South Africa for power.

Whether this is in compliant with Vision 2016 of a proactive and self-reliant nation, it's another thing. I was wondering how can this year's budget address these problems instead of pointing fingers at the ministry of finance and ministry of Minerals, Energy and Water Resources. Isn't it better to propose that both government and private sector share the cost associated with load shedding? Let's first look at SME before addressing problems of big business.

There is little really that government can do about SMEs in regard to power cuts. For avoidance of doubt SMEs cannot afford the cost of generators. Secondly, most SMEs are owner managed so the problem of retrenchments is not predominant. This will mean most SMEs may run at a loss due to power interruptions as some are dealing with perishable goods. This year's budget should find ways in which SMEs could be assisted for them to survive. The idea here is not to encourage SMEs to depend on government but a way in which government can contribute to success of SMEs given the power cut crises that threaten survival of SMEs.

Turning to big business; these are actually the major taxpayers and cash cows to government. Of course big businesses pay millions of taxes to government, employ majority of citizens and they support SMEs through procurement and other services. More importantly, big business in Botswana is major foreign exchange earners for the economy. Some of these big companies are global companies which provide expertise and train locals to add value to Botswana economy. But the bottom line is that big business must make profit in order to survive. How then can this budget assist big business to survive. I read in mmegi newspaper during the week how the price for generators shot up suddenly due to power cuts. A medium-sized business would need a generator 'power station' that cost P200, 000.

A larger business may need 2 or more generators at that price. What this means exactly is that big business must produce their own power stations in order to survive. As I have said, SMEs in Botswana do not have capacity to produce their own 'power stations'. So large businesses are torn apart between two decisions, either to close down or purchase these expensive generators. Given such scenario, it is only sensible that government intervenes through tax subsidies to allow big business to remain in Botswana. How can this be done? By providing capital allowances for companies at 200 percent of the cost and writing off that expenditure against their income statement to reduce the tax burden. In that way, big business may continue to operate in Botswana without massive retrenchments that are looming. This proposal may need approval by parliament as it is effectively an amendment to the Income Tax Act. This can be passed through parliament as a matter of urgency for survival of not only big business but small business. In that vein both the government and the private sector share the costs associated with load shedding. Emang Chibua