5 December 2016

Botswana: Nation At Crossroads

President Ian Khama will tomorrow make his last but one State of the Nation Address (SONA) before retiring in March 2018. Through SONA Khama will have to convince the nation that his administration has made strides in achieving its goals, among them creating a Botswana where sustained development is achieved through inclusive, diversified economic growth that further advances the country to high income status; accelerated job creation, the eradication of abject poverty and the provision of quality education. Khama's mettle has been be tested by a long list of problems in different sectors of the economy and international markets that have conspired to undermine any achievements made during his reign. Although he has in the past bragged that the ruling Botswana Democratic Party (BDP) administration has consistently sought consensus by reaching out to all sections of the public, through various forms of consultation, the mood in the public space has been fouled. Khama is walking a tight rope as the political landscape and its demographics have been shifting since the 2014 General Elections. There is growing discontent against the Khama administration which is accused of failing to diversify the economy away from mining, creating sustainable jobs to arrest rampant unemployment and escalating job losses.

Unemployment, job losses

Unemployment rate among population aged 15 years and above was, according to the 2013 Botswana AIDS Impact Survey, estimated at 20.0 percent. The unemployment was largely concentrated among the youths of age 18 to 34. With local universities producing an estimated 20 000 graduates annually, government has only been able to create few jobs in the same period. This has led to thousands of graduates roaming the streets, or enrolling in national service, graduate volunteer scheme and the internship programme which are seen in some circles as exploitation disguised as job attachment. Many others previously employed in the private sector have suddenly joined the unemployed masses after the companies they worked for closed shop due to unfavourable business environment. The latest unfolding saga is the liquidation of BCL and its subsidiary Tati Nickel Mine - the second biggest employer outside government, where close to 6000 workers were instantly rendered jobless on October 09. Khama chose to send his Vice President and ministers to meet the BCL and Tati Nickel workers. All eyes will be on Khama to hear how he proposes to tackle this thorny subject tomorrow.

Numerous other mines and diamond cutting firms have also closed shop throwing thousands more employees into the streets. All point to depressed commodity prices, and the uncertainty in the global market. Botswana Mine Workers Union (BMWU) accuses Khama of disregarding input from other stakeholders and not willing to engage them. Its president Jack Tlhagale, dismissed promises that government is injecting funds to support revitalisation of Selebi-Phikwe region as propaganda and a lie. He said they are not expecting to hear any good news from the SONA 2016 because Khama and his government have shown that they do not care about the welfare of workers. "Nothing gives us hope. The President is refusing to meet workers to assure us that government is finding solutions for this crisis. It is most unfortunate for a developing economy. We have a serious problem when government does not want to engage. They want workers to be in desperate situation to start asking for handouts. This government wants workers to believe that they are doing them a favour by creating jobs but every citizen has a legitimate expectation and right to gain employment in their own country," said Tlhagale.

The lawsuit filed by Norilsk Nickel - demanding about P3 billion and other claims from government for the aborted Nkomati deal - will only escalate the crisis already created by the closure of BCL. Tlhagale said there is there is no hope of saving the situation if the Khama administration does not consult, and disregards trade unions. He said it is disappointing for a whole minister, who claims to be a democrat, to attack trade unions accusing them of causing instability and destroying good relations between workers and the employer. Since Thursday the deposed miners have been trekking to BCL to collect their meagre separation pay of one month notice and some gratuity. Apparently government refused to pay retrenchment packages, which have been agreed with the union, arguing that the ongoing exercise is liquidation. "There are no terminal benefits under liquidation. The Office of the President is refusing to meet us to discuss the issue, always referring us to the liquidator. There is nothing showing direction in trying to resolve this crisis," said Tlhagale.

On Thursday Selebi Phikwe West MP Dithapelo Keorapetse cornered the Minister of Mineral Resources, Green Technology and Energy Security Sadique Kebonang to state the quantity and value in Pula terms of water consumption by BCL per annum before liquidation. After revealing that BCL consumed P49, 279 million value of water, Kebonang conceded that the closure of the mine would negatively affect WUC revenue and Botswana Power Corporation (BPC), who are creditors in the ongoing liquidation.

Economy

After basking in the glory of budget surplus from 2012 Botswana quickly dipped to a deficit of P6.990 billion in 2015/16, with forecasts going forward projecting another deficit of P6.05 billion in 2016/17. There is pressure to cancel the deficit and build surplus if the country is to remain credit worthy in international financial markets where Botswana borrows to finance her annual budgets. Total external debt and guarantees jumped from P32.574 billion in 2014/15 to P33.67 billion in 2016, representing 16.3% of the GDP in 2015/16, well within statutory limits. Following a modest growth rate of 3.1% in the world economy in 2015, the IMF World Economic Outlook report adjusted the domestic economic growth downwards to just 2.6% this year due to the steeper than originally projected slowdown in mineral revenue. However, the economy is expected to recover modestly in 2017 to a growth rate of 4.1% due to an improvement in the water and electricity sector. These two are expected to increase from -13.3% in 2016 to a massive 39 % in 2017 due to ongoing construction of infrastructure to augment economic recovery and growth among them North-West Power Transmission Lines, North-South Water Carrier II, Oil Storage project and sewerage systems. Khama is expected be-labour this point in his address.

Commodity prices continue to be depressed creating uncertainty and putting further pressure on the local economy, which remains heavily reliant on diamonds. Khama will take solace in the domestic inflation rate which continued to fall within the Bank of Botswana's target of 3-6%, with average annual inflation dropping to 2.8% in 2016. In turn the Bank of Botswana has pursued an accommodative monetary policy, lowering its Bank Rate thus reducing the cost of borrowing. But such may be defeated by the fact that to date government is yet to conclude 2015/16 public service salary negotiations with trade unions. This continues to negatively affect public servants who are the majority of workers in Botswana. Foreign exchange reserves are also shrinking. At end of August 2016, foreign reserves stood at P83.1 billion. This was a decrease by 5.7 % from P87.8 billion in August 2015. Of the total reserves, government share was only P34 billion, being a decrease of 17.6% from P40 billion in 2015, representing an equivalent of 19 months of import cover of goods and services.

ESP

Khama is expected to present the results of the much hyped Economic Stimulus Programme (ESP) unveiled last year and touted as the master stroke - a holistic action plan for achieving the goals of stimulating economic growth, accelerated employment creation and the promotion of economic diversification. In addition to stimulating inclusive economic growth a key ESP objective is to re-boot Government to ensure the urgent delivery of existing national priorities and address the backlog caused by the 2008/09 global recession. A chunk of the foreign reserves was to be used to finance ESP, whose achievements are eagerly awaited. Identified as key sectors that will drive the programme were: Infrastructure, Agriculture, Tourism and Manufacturing and Services, enabled by the establishment of Special Economic Zones (SEZs) and the Economic Diversification Drive (EDD). Last year Khama declared that "Government has no greater priority than the urgent need to reduce unemployment and underemployment, including among our youth. In this respect EDD, now supported by ESP, remains a key instrument for growing jobs as well as the economy".

Energy

The promise to transition Botswana from an energy dependent to energy surplus nation as a priority remains just a dream in the Khama administration. Morupule B Power Station has failed and government is in the process of selling it under controversial circumstances. Botswana continues to experience huge supply deficits and frequent power cuts, contrary to what the nation was promised last year. Even the refurbishment of Morupule A is experiencing major challenges putting the project under uncertainty. The colossal failure of Morupule B and other projects, raises questions about the Project Management Office (PMO) set up to oversee the implementation of major energy and water projects which Khama promised to establish last year.

Water

A large part of the country continues to experience acute water shortage despite Khama announcing major developments to address the problem last year. Khama said Government availed a budget for emergency projects, network extensions, groundwater investigations and the expansion/installation of water treatment plant capacity. Altogether, more than P1 billion worth of projects were last year at various stages of implementation. Just three months before deadline the Mmamashia-Kanye NSC Connection project, which commenced in August 2014 and is scheduled for completion in February 2017, the project is behind schedule. The project will be supplying the villages of Thamaga, Moshupa and Kanye with water from Mmamashia Water Treatment Works. Although nationwide outcry continues over water shortage, Khama had promised that additional Government initiatives to improve water supply and sanitation include projects such as Maun Water Supply and Sanitation Phase II, Kanye and Molepolole Sanitation, Seronga/Gudigwa water supply, Shakawe Water Treatment Plant, Mogodi Hill - Pitsane Pipeline and Boteti Northern Cluster Water Project. Other interventions announced by Khama are yet to bear fruit, and he will be expected to provide answers tomorrow.

Immigration

The Department of Immigration and Citizenship, which facilitates the movement of people in and out of the country has been criticised for their stringent vetting process that has turned away investors. Although Khama has in the past promised that the Department's operational efficiency will be improved there is nothing showing on the ground. At the time Khama promised a comprehensive system which will be integrated with other systems for consistency, efficiency and data integrity to facilitate on-line services especially for critical functions such as VISA, residence and work permits applications. BITC executives appearing before the Parliamentary committee on statutory bodies and state enterprises recently echoed the same sentiment, that the investors they are trying to attract to set up in Botswana are frustrated by immigration processes where their applications are rejected without giving any reasons.

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