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Reflecting on Botswana’s 2021 budget speech

CORRESPONDENT
Reflecting on Botswana’s 2021 budget speech
This year’s budget speech was the first of its kind. Unlike prior ones, it was delivered virtually.

A lot was said. The speech was wide-ranging; it covered topics from achieving food security to the inefficacy of parastatals. Many of the issues touched upon were not new, such as high levels of youth unemployment; the inefficiencies associated with public spending; the perils of economic dependence on minerals; along with the stock and trade macroeconomic issues. There were almost no surprises, as almost all the issues brought up are part of the collective consciousness of Batswana.

A speech of this nature is also perhaps best analysed by paying attention to what it did not say or say in a cursory manner. To its credit, the speech did focus on development issues and clearly outlined steps the government was either taking or was going to take to address the issues.  However, toward the end of the speech (on page 29), the Minister of Finance and Economic Development, Thapelo Matsheka announced: “Mr Speaker it will also be necessary to borrow from external sources. My ministry is currently in negotiations with development finance partners for possible loans to finance budget deficits.”

To mitigate some of the damage due to the coronavirus (COVID-19) pandemic, Botswana has been drawing down on its reserves. Future budgets are expected to incur deficits and therefore it has become ‘necessary to borrow’ to finance the budget shortfall. The government will have to ensure that investments made now reap dividends and off-set the cost of borrowing. Raising taxes has to be accompanied by a concerted effort to boost equitable growth. A debt trap must be avoided at all costs.

The issue of inequality was marked by its absence from the speech. In one sense, inequalities were present in the background and in the abstract when the finance minister touched upon issues of poor productivity and competitiveness, youth unemployment, and the economic impact of COVID-19. However, addressing inequality escaped concrete mention, which is surprising, especially as inequalities have likely worsened in the wake of, and during, the pandemic. Botswana remains one of the most unequal countries in the world.

First and foremost, an economic recovery that doesn’t explicitly target inequalities will likely disappoint and further deepen inequalities. A recovery that doesn’t, as a matter of priority, narrow the income gap, that doesn’t dramatically aim to improve health and education outcomes, that doesn’t bridge the widening digital divide, will not be a robust one. It will be a skewed recovery at best, or not be a recovery at all for the majority.

Second, if the problems are incorrectly identified, then it follows the solutions are unlikely to be the appropriate ones. For example, issues around inefficiencies in public spending and poorly performing state enterprises is perhaps less about putting in place proper accounting/monitoring systems and

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embarking on a privatisation drive and tied more closely to political economy considerations such as maintaining a system of patronage and fraternity. On the one hand, patronage has helped keep the peace and maintain a certain social order. However, if Botswana aims to prosper as a nation, it will have to find alternative and equally effective ways to avoid conflict, while also developing and fostering institutions that are effective and purpose-driven.

Given that inequalities and inequities have perpetuated despite an explicit focus on social spending (i.e. social protection, health and education) indicates that the issue requires deconstructing political economy mechanisms that reinforce inequalities and continue to maintain a significant proportion of the population at a relatively low level of income.

Third, the approach to developing strategies and conducting reviews has to change. For a small country (a population of 2.3 million), there is no dearth of well-crafted strategies and policies. Leaving aside the important issue of policy implementation, conducting reviews and developing more strategies (in their current guise) is a cumbersome and expensive process that takes away critical human resources at a time when the opportunity cost of doing so is extremely high. When COVID-19 was at Botswana’s doorstep, the government moved quickly to institute preventive measures that helped dramatically reduce the onset of the virus. This was done hastily and practically, albeit with rigour, paying attention to what had worked (now and in the past) in other countries. It is with similar urgency and pragmatism that the government needs to address its longstanding issues for which strategies and policies are in place, but the issues remain.

Fourth, having witnessed how competitive the global economy has become, the emphasis on an export-driven growth model, one predicated on goods, is misplaced. Services are likely to drive growth now and in the near future. It is a sector showing some results and promise and will likely play a key role in the economic recovery if guided and incentivised in the right way. The competitiveness that the East Asian miracle economies exhibited during the 1980s and 1990s was during a different era and with a characteristically different labour force. There is unlikely to be a repeat performance.

Finally, and in conclusion, Botswana and Batswana have much to be proud of. There has been tremendous progress since independence. A global recovery from which Botswana is likely to benefit is on the horizon. However, the toxic mix of high inequality, high unemployment and relatively high poverty must be addressed with the same urgency directed at preventing COVID-19. Otherwise, Botswana risks leaving many behind and deepening the chasm between the have and have nots.

TAIMUR KHILJI*

*Taimur Khilji is an economist at the UN Botswana Resident Coordinator’s Office.



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