(This article must be read in conjunction with the previous article previewing the Budget Speech to avoid me repeating concepts here)

Listening to the Honorable Dr Matsheka, Minister of Finance on Friday on Duma FM, I had quiet hope that the budget would be different from previous budgets. It turned out not to be so; in fact this budget could be worse, with a potential of undermining the growth path the country needs to embark on. I will note however that Dr Matsheka was appointed extremely late in the budget process and therefore could have changed very little.

From the onset of the Speech (and throughout) Dr Matsheka set the right tone; with similar themes recurring:

• A focus on a transformation agenda
• Curbing wastage and improving efficiencies
• Increasing involvement of private sector in delivery of services and projects in the economy
• That we cannot carry on with business as usual
• He highlighted that the goal was to move Botswana to a high income country meaning we must grow our per capita GDP (GDP/population) from $8,0000 to $12,000 by 2036 and that this required sustained growth of 6% every year from now until then. He believes this is achievable with a private sector lead economy and hence the government is looking at the below:
• Focused on agriculture and manufacturing with a focus on export lead growth.
• Economic Diversification Drive (EDD) focusing on import substitution strategy that would reduce Botswana’s dependence on foreign products.
• Reviewing parastatals and realigning them to the country’s transformation strategy.

To achieve the above the strategies discussed fell into 2 categories.

1. Growing the economy for sustainable job creation. This broke down into:

• Need for investment in economic infrastructure – over half of the budget would go to the main priority areas of water, transport, agriculture, ICT and energy projects. ICT projects would be delivered via BOFINET (one of the best performing parastatals in my eyes) to roll out fibre networks and also focus on e-services.
• Improving regulatory efficiencies to encourage private sector growth – a review of the PPADB Act to improve procurement, amendment of the Environmental Impact Assessment Act to improve ease of doing business among those mentioned.
• Developing Human Capital – over 33% of the total budget is allocated to Health and Education but the Minister noted that we are not getting value for money (as highlighted in previous article) and hence an audit of these 2 sectors would be instituted. The Minister highlighted our need to move from a resource to a knowledge based economy and to this end a National Human Resource Development plan will be tabled this year to improve the quality of graduates and a National Employment Policy is being drafted with the World Bank to combat unemployment.
• Developing a vibrant Agriculture Sector – the minister conceded that a change of approach was needed and hence more focus will be put on how to finance and service subsistence and commercial farmers with a review of current policies like ISPAAD due this year
• Promoting Citizen Empowerment – the Minister notified us that the Citizen Economic Empowerment Policy would be converted to being a law and focus on citizen reservation for tenders, mandatory subcontracting of 40% for any tenders awarded to foreign companies, reservation of concessions in tourism and prioritizing infrastructure to tourism areas
• Investing in Creative Industries – the Government would review laws to allow this sector to grow (very weak here with little spoken of)
• Reforming the regulatory environment for Investment – Government will continue integration of online company registrations with BURS and PPADB and will create an e-visa platform to ease application of visas. SEZA will roll out incentives to attract FDI such as a 5% corporate tax for 10 years (10% thereafter), faster allocation of fully serviced land and waivers on transfer duties on land and property.

2. Social Programs to sustain Livelihoods – this strategy would include continuing on the social welfare focus of the government to ensure inclusion, efficient use of public funds to ensure value, a review of social welfare programs, a draft poverty policy to be developed, re-organizing Ipelegeng to perform productive activities (I wish he had elaborated on what this means) and a health care reform strategy which would focus on private sector leading service delivery.

After giving this lengthy preamble on the Government strategy, the Minister then focused on the business of the day. I had hoped that the numbers would reflect the preamble and focus on the productive ministries of education, Trade and Investment, Science and Technology and Communications.

First Disappointment – the budget had moved from 73% Recurrent 27% Development to 80%/20%. This after the Minister championed using the development budget for growth and lamenting that too much our budget is focused on recurrent expenses. This was caused by the populist move towards elections to increase government employee salaries. In fact this year’s development budget is smaller than Budget year 2009/10 after the total budget had doubled. Our recurrent expenditure is clearly out of control.

Second Disappointment – the Minister stated that 80% of the development budget will be to carry out existing projects and 20% for new projects in water, energy and ICT.

Third Disappointment – Ministry of Defense was allocated 16% of the total budget. Whilst the need for security is understood, can we truly claim to be focused on curbing unemployment and focusing on economic growth when the total budgets of Sports, Youth and Culture, Investment and Trade, Agriculture and Science and Technology put together are less than that of both Local Government and Defense?

In short, after all the rhetoric, the numbers and actions of the Government do not reflect a commitment to the talk. As a country we are now saddled with growing expenses as a result of increased public sector salaries, poor implementation of projects and policies and government spending that does not encourage the private sector growth that is spoken of. We also saw very little in detail on how agriculture, manufacturing and creative arts were to be grown. We heard headlines with no detail and plans. There also seemed to be an obsession with talking about developing for exports which is ironic considering we import almost everything we consume. Government policies to encourage setting up of factories for basic things such as toothpicks, matches, paper, furniture and consumables should be prioritized (possibly started as parastatals then handed to private).

My only comfort from this budget was that Dr Matsheka did not have too much influence on it as he had recently been appointed and that over the year he will put strategies in place to move towards the kind of budget he spoke of in the rhetoric. For now, we will endure another hard year promised by this budget.