Budget opens country to external shocks - Experts

Budget review - Ngoni Chiutsi
Wednesday, 15 February 2017
Budget opens country to external shocks - Experts

Economic analysts say the budget presented by Finance minister, Kenneth Matambo this week is vulnerable to external trade shocks hence the country must speed up economic diversification drive and widen the revenue base.

Speaking during the FNB 2017/18 budget review meeting this week, First National Bank research manager, Moatlhodi Sebabole, said the biggest source of government revenue is mainly minerals and Southern African Custom Union (SACU) however, the two were susceptible to external shocks.

“The composition of our budget for the past six years is that almost 60 percent of its revenue is coming from SACU and minerals and it’s a weakness that needs to be addressed,” said Sebabole. He said the budget is also focusing to get more revenue from SACU than minerals and against that background, it means the country is at the mercy of recovery of international trade and of South Africa, which contributes almost 90 percent to the customs union. Sebabole added that if South Africa does not do more international trade outside the SACU bloc, Botswana will face budgetary headaches.

“Last year South Africa didn’t do well on the international trade because of the low commodity prices and we didn’t collect much from SACU. If you are presenting a budget that says that the majority (revenue) will come from SACU, it means the external vulnerability will very much hit us,” he said.

Sebabole also highlighted that diamond sales depend almost 60 to 70 percent on the US market, and this also presents a challenge if the market crumbles. The economist reiterated that Botswana is predominantly a mineral dependent economy, and there is need to diversify the economy and widen the revenue sources. He expressed concern why Botswana is not getting much Foreign Direct Investments as compared to other countries in the region despite the country being stable and receiving many international accolades for being the safest country to invest.

Sebabole said it beats logic how a country like Mozambique is getting the lion’s share of the FDI inflow into the region yet the country is not politically stable. “We should look at our regulations and business environment and see how best we can attract foreign direct investments,” he pointed out.

Speaking at the same occasion, FNB Chief Executive Officer, Steven Bogatsu, said the global economic instability of 2016 hurt most economies. “On the home front, the ripple effects of the closure and liquidation of companies such as BCL will manifest this year,” said the banker.

Against the background of uncertainty, Bogatsu said there is need to cautiously remain optimistic. “We need to put up strategies .....and the key to the success of these strategies lie in dedicated implementation of the strategies. The key to successful strategy implementation is to step out of the ivory tower and look at what Batswana are saying on the ground,” said the CEO. He said there is need to equip the SMMEs with knowledge and skills that they need to better manage their businesses and catalyse and stimulate the economy.

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