Botswana’s central bank has urged the government to overhaul the southern African nation’s tax regime and prepare the economy for declining contributions from diamonds.
Botswana relies on the gemstones for almost a fifth of its gross domestic product and used the revenue generated from sales to transform the nation from an economic backwater into one of the continent’s wealthiest societies. However, their role is set to diminish over the next 20 years and successive governments have struggled to diversify the economy.
Although the government has been able to finance most investment projects from diamond sales, “there is recognition that growth in diamond revenues has plateaued and might recede in the future,” the Bank of Botswana said in a study published Friday as part of its annual report. “It is thus important to explore alternative and sustainable sources of financing for public infrastructure.”
Specific tax reforms include removing widespread exemptions on value-added tax and investor concessions, the bank said. “We have recommended the expansion of the tax base through, among others, reducing the number of VAT-exempted items and replacing these with targeted social transfers,” said Tshokologo Kganetsano, director of research and financial stability.
Botswana has VAT exemptions on a range of items including agriculture inputs, basic food items and medicine. It also has several long-standing tax concessions for investors, including the International Financial Services framework that provides for a 15 percent corporate tax rate, rather than the standard 22 percent, and conditional exemptions on capital gains tax, withholding tax and other rates.
“Research on investment incentives suggests that tax concessions are often of little value in attracting genuine long-term investment,” the bank said. “Investment tax credits or accelerated depreciation allowances are preferable and more effective.”
Ian Khama, a retired army general, stepped down as president of Botswana on Saturday, handing the diamond-rich country to his deputy after a decade at the helm.
Mokgweetsi Masisi becomes only the third leader to take charge of the southern African nation outside the Khama political dynasty that has dominated national politics since independence from Britain in 1966. Masisi, 55, inherits a country that has for decades been heralded as a beacon of African democracy and sound economic management but faces a huge task of reducing the country’s dependence on diamonds.
“I am not sure about his competency in as far as the economy is concerned, but if he has the respect of his ministers then he should be able to make them deliver,” said political analyst Ndulamo Anthony Morima.
Masisi, a trained teacher who has also worked for the United Nations Children’s Fund as an education project officer for eight years until 2003, was elected lawmaker in 2009. He served in the president’s office as a minister of public affairs from 2011 until 2014 when Khama named him minister of education, a post he held until appointed vice president last year.
“The business community sees him as being more business-friendly so that should work well for the economy. He seems to be more likely to come up with regulation that enables more economic activity,” said RMB Botswana economist Moatlhodi Sebabole.
Masisi takes office more than a year before the election under Botswana’s constitution that restricts the president to serving two five-year terms. Khama, son the son of Botswana’s first president, Seretse, also took over from Festus Mogae a year before the 2009 election.
One of the world’s poorest countries in the 1970s, Botswana transformed itself into one of the fastest-growing economies by harnessing around $3 billion a year in diamond sales, to become one of the world’s biggest producers, and gained middle-income status.
But dependence on its wealth from the diamond industry might be catching up with the landlocked country of just two million after the collapse in commodity prices in 2014 tipped its economy into recession three years ago.
“He is well versed with current challenges that the country is facing and I am sure he is quite capable of delivering,” said Mothusi Sename, a 41-year-old taxi driver in Gaborone, referring to Masisi.
END OF POLITICAL DYNASTY?
Khama’s departure leaves his younger brother and tourism minister Tshekedi as the only member of the family holding a high-profile post in the government, and depending on who Masisi picks as vice president, it would be the first time a Khama is not part of the top tier of national leadership.
Khama, a 65-year old bachelor, is known as a straight talker having publicly criticised leaders including U.S. President Donald Trump for an alleged slur against African countries and then-president Robert Mugabe of Zimbabwe for overstaying his welcome.
Khama was born in Britain after his father a married a white British woman Ruth Williams, defying convention and opposition in Africa and Britain. Their story was depicted in the 2016 film ‘A United Kingdom’.
His party, Botswana Democratic Party (BDP), is expected to name Masisi as its presidential candidate for next year’s election.
Anthrax has been detected in dead hippos floating in the Okavango River, officials in Botswana said, after more than 100 of the animals were suspected to have been killed by the disease in neighboring Namibia.
Botswana's Ministry of Environment, Natural Resources Conservation and Tourism advised people not to touch the dead hippos and to report any sightings of hippo carcasses.
The Okavango Delta is a major tourist attraction in southern Africa, supporting a diverse range of wildlife.
Namibian media reported on Monday that more than 100 hippos had died in the remote Bwabwata National Park, in the northeastern part of the country, with anthrax the suspected cause. The Okavango River flows through Namibia before entering Botswana. Tourism is important for the economies of both countries.
Gem Diamonds Ltd reported a 14 drop in half-year revenue, hurt by lower production and a decline in average diamond prices, and said it received an acquisition offer for its mine in Botswana.
The company, which mines diamonds from the Letseng mine in Lesotho, said on Thursday its revenue fell to $93 million for the six months to June 30, from $109 million a year earlier.
The average price per carat fell to $1,779 for the period, from $1,899 in the same period last year, while carats recovered fell 12 percent to 50,478, Gem Diamonds said. Weaker demand from China and the United States has hurt diamond prices, while India's surprise move to abolish high-value bank notes in November also dented demand for diamonds in the Asian country.
Gem Diamonds said cost-cutting measures are underway and that it identified savings of $15 million to be implemented from October. The company, which placed its Ghaghoo mine in Botswana under maintenance in February, added the board was considering the mine's purchase offer.
The International Monetary Fund (IMF) has revised Botswana's 2017 and 2018 economic growth forecast due to rising diamond demand, investment in the water and power sector and reforms to attract investment.
The IMF on Wednesday lifted diamond-producer's 2017 and 2018 economic growth forecast to 4.5% and 4.8% respectively.
"The forecast assumes a gradual pace of reforms to improve the efficiency of the public sector and foster private sector activities," the IMF said. Following a downturn in 2015, growth is expected to gradually increase supported by a recovery in the diamond market and moderate fiscal stimulus, the IMF said in the report.
The latest forecast is higher than the IMF's previous forecast for Botswana contained in its Africa regional economic outlook report released in April, which forecast growth at 4.1% in 2017 and 4.2% in 2018.
The IMF’s growth projection is more bullish than government forecasts. Finance Minister Kenneth Matambo said in February during the national budget presentation that the local economy was expected to grow by 4.2% this year.
The Cross Border Operation between RSA and Botswana at Gemsbok Port of Entry is focusing on prevalent crime incidents such as stock theft, smuggling of goods and drugs between RSA and Botswana. Patrols, stop and searches are continuing along the border.
A 30-year-old man, a Botswana citizen was arrested at Meerhof farm near Gemsbok Border Post on 16 June 2017 for alleged theft of 14 Dorper sheep worth R19 200 in May 2017. He will appear before court on 19 June 2017 and might be linked to other stock theft cases reportedly committed in the same areas.
A 39-year-old man who was arrested on 15 June 2017 during the operation for possession of dagga worth R2000 and will appear in the Ritfontein Magistrates’ Court on 19 June 2017. Police investigations are continuing.
Major General Mnguni, Deputy Provincial Commissioner responsible for Policing addressing a joined parade of Botswana police officials and SAPS officials at Gemsbok Port of Entry.
- South Africa Today
Botswana will on 01 June 2017, make effective the Tourism Development Levy, that will levied to all Non-SADC visitors. The USD30 will accrue an estimated USD 5,7 million at ports of entry.
The objective of the Levy is to raise funds for conservation and national tourism development in order to support the growth of the industry and broaden the tourism base, resultantly improving the lives of the people of Botswana. Payments are done at the ports of entry through electronic payment machines through cash (US Dollars), debit and credit card.
After the payment, a unique receipt corresponding to the passport will be automatically generated. The receipt should then be presented to Immigration Officials. The passport and the receipt will be stamped and handed back to the traveller. The receipt will valid for a 30 day period and can be used for multiple entries. As a tourism lecturer at the Tshwane University of Technology, I support this levy as it will increase the resources that the government of Botswana has to drive tourism development. The tourism industry is primarily private sector driven, whilst the state creates an enabling environment for tourism to growth.
The private sector is not responsible for maintaining the roads, airports and other forms of infrastructure. The creation of an enabling environment requires the state to build the necessary infrastructure and super-structure that will enable tourism to grow such as airports, roads infrastructure, water supply, and electricity that tourism commerce requires in producing the highly sought after tourism experiences.
There would be resistance from the private sector, but the private sector must be playing a leading role in working with government, so that the spirit of collaboration wins. The private sector must identify priority investments that should be done by the state, to drive economic growth.
Marketing must also be undertaken to ensure that Botswana increases its share of global tourism receipts. South Africa experienced an increase of 13% in tourist arrivals, and Botswana can also achieve this, if the growth trajectory is achieved.
The spirit of collaboration between the public and private sector was very evident from Team Botswana that sold Botswana during the Tourism Indaba in Durban. African countries during the year 2017, must ensure they the Single Aviation Market for Africa becomes a reality. Skills development in the tourism industry is imperative, especially foreign language training that will ensure that tourists are responded in their own languages.
The focus of foreign language training is to focus on languages such as French, German and Mandarin, considering that China will produce the greatest number of outbound tourists. The growth of tourism will be supported by aviation, and aviation demands airport infrastructure which is expensive to finance. The growth of airport infrastructure and domestic aviation market regulation can lead to the entry of low cost carriers that would make use of secondary airports. The benefits of secondary airports translate into faster travelling time, benefiting commerce and industry.
In addition, the benefit to society is shorted travelling time and stronger social bonds between families and communities. The entry of low cost carriers, means that domestic tourism will enter a new growth trajectory. The attraction of flying schools to Botswana would be necessary, considering that South Africa cannot be dependent on. The Chinese are buying out privately owned flying schools, to supply exclusively the Chinese aviation market that is growing around 100%. These are other pressing investments that the private sector needs for tourism to grow, and the spirit of collaboration must triumph between the public and private sector.
- Unathi Sonwabile Henama teaches tourism at the Tshwane University of Technology and writes in his personal capacity.
Botswana has introduced the Tourism Development Levy (TDL) despite resistance from the Hospitality and Tourism Association that resulted in its withdrawal last year.
The Ministry of Environment, Natural Resources Conservation and Tourism, through the Botswana Tourism Organisation (BTO) last week announced that it was introducing the levy to raise funds for conservation and national tourism development.
Effective June this year, all non-Sadc visitors entering Botswana will be required to pay $30 tourism levy at the point of entry. “The levy is purposed to support the growth of the industry and broaden the tourism base,
resultantly improving the lives of the people of Botswana,” BTO said in a statement.
The Tourism Statistics Annual Report for 2015 shows that from the 1,661 million visitors who entered Botswana in that year, 11.4 percent (190 000) were from non-Sadc countries. A back of the envelope calculation shows that at $30 per person government is likely to accrue around $5.7 million (P60 million) per annum through the levy. According to BTO, non-Sadc visitors can pay the levy at the point of entry through electronic payment machines, cash, debit or credit card.
“After payment, a special receipt corresponding to the passport will be automatically generated. The receipt should then be presented to immigration officials and the passport and receipt will then be handed to the traveller. “The receipt is valid for a 30 days period and can be used for multiple entries. The funds will be used to develop more tourism products,” BTO said.
Tourism is Botswana’s second largest foreign exchange earner and contributes significantly to employment and economic growth.
Source: The Chronicle
Botswana is the most attractive economy for investments flowing into the African continent, according to the latest Africa Investment Index 2016 by Quantum Global’s independent research arm, Quantum Global Research Lab.
According to the Index, Botswana scores highly based on a range of factors that include improved credit rating, current account ratio, import cover and ease of doing business.
Commenting on the Index, Prof Mthuli Ncube, Head of Quantum Global Research Lab stated: “Despite considerable external challenges and the fall in oil prices, many of the African nations are demonstrating an increased willingness to achieve sustainable growth by diversifying their economies and introducing favourable policies to attract inward investments. Botswana is a case in example - its strategic location, skilled workforce and a politically stable environment have attracted the attention of international investors leading to a significant influx of FDI.”
According to the report, the top five African investment destinations attracted an overall FDI of $13.6bn. Morocco was ranked second on the Index based on its increasing solid economic growth, strategic geographic positioning, increased foreign direct investment, import cover ratio, and an overall favourable business environment. Egypt was ranked third due to an increased foreign direct investment and real interest rates, and a growing urban population. The fourth country on the list, South Africa, scored well on the growth factor of GDP, ease of doing business in the country and significant population. Whilst Zambia was the fifth country on the list due to its significant domestic investment and access money supply.
Mthuli further commented: “With a population of over one billion people and rapidly growing middle class, Africa clearly offers significant opportunities to invest in the continent’s non-commodities sectors such as financial services, construction and manufacturing amongst others. However, structural reforms and greater private sector involvement are crucial to unlocking Africa’s true potential.”
Over the last three decades there’s been some progress towards institutionalising multiparty democracy in sub-Saharan Africa. Despite this elections in the region rarely result in changes of government.
A recent survey by Afrobarometer – a non-partisan African research network – sheds some light on why this is the case. The survey, which involved 9 500 interviews conducted in 2014/2015 in Botswana, Mozambique, Namibia, South Africa and Zimbabwe, found widespread support for multiparty politics.
But the results also show that opposition parties face major obstacles to winning majority support. These include the fact that they aren’t trusted as much as governing parties and that very often they aren’t seen as a viable alternative to the dominant ruling party.
All five countries are governed by parties that emerged from liberation movements and have been in power for decades since independence. Although some of these incumbents have lost some electoral support in recent years, opposition support has not been high enough to unseat them.
The trust question
The latest findings mirror the results of a survey in 36 African countries in 2014/2015 which found that opposition parties had the lowest levels of popular trust among 12 types of institutions and leaders. While trust in ruling parties was 46%, it was only 35% for opposition parties.
This was an improvement over the situation more than a decade earlier when trust levels in opposition parties was much lower.
Figure 1: Trust in opposition political parties| 5 countries in Southern Africa | 2014/2015
In Namibia and Mozambique levels of trust in opposition parties were found to be at the highest levels ever. But in Zimbabwe trust in the political opposition declined sharply after 2008/2009. Similarly, the proportion of Zimbabweans who said they felt “close to” an opposition party dropped from 45% in 2009 to 19% in 2014.
This dramatic reversal of fortune provides an important lesson for opposition parties in the other four countries. First, the opposition Movement for Democratic Change, led by Morgan Tsvangirai, was unable to leverage its role in stabilising the country when it was part of the Government of National Unity (GNU).
Secondly, infighting and increasing fractionalisation may have further shaped public opinion about its viability as a party.
There’s a much more lopsided distribution of power and resources for opposition parties in countries with dominant governing parties than for those in competitive party systems. This, coupled with a lack of governance experience, makes it difficult for opposition parties to be seen as credible alternatives.
Take the example of Botswana. The Botswana Democratic Party, in power since independence in 1966, is the region’s most enduring dominant party. It has even adopted the slogan “There is still no alternative”. Although the party has been able to maintain a majority of parliamentary seats, its share of the popular vote declined to 46.7% in 2014, the lowest level of any of the dominant parties in the region.
Afrobarometer’s 2014 survey, which took place a few months before the election, showed that 44% of Batswana agreed that the political opposition presented a viable alternative vision and plan for the country (Table 1, below).
Table 1: Perceptions of opposition viability | 10 countries in southern African | 2014/2015
In Botswana’s “winner-takes-all” electoral system, a large part of the opposition’s success in the 2014 election was due to three parties forming a coalition - the Umbrella for Democratic Change (UDC). This reduced vote splitting. A recent decision to expand the coalition to include the country’s remaining major opposition party, the Botswana Congress Party, has led to speculation about the chance of an opposition electoral victory in 2019.
Similarly, in South Africa, the opposition’s strong showing in the 2016 local elections has bolstered its optimism about its prospects in the 2019 national and provincial polls.
This success suggests that confidence in the political opposition may have grown since the 2015 Afrobarometer survey. It could also reflect widespread dissatisfaction with the governing African National Congress and political institutions, leaders and performance on a range of key policy areas.
But public dissatisfaction with government performance doesn’t necessarily translate into perceptions that opposition parties could do a better job, as Figure 2 shows. This is particularly so in South Africa and Zimbabwe. While eight in 10 citizens in the two countries report poor government performance on their top policy priority (unemployment, only 37% say that another political party could solve the problem.
Figure 2: Poor government performance on most important problem and opposition ability to solve problem | 5 countries in southern Africa | 2014/2015
Role of opposition parties
What role should opposition parties play?
Only a minority of citizens in the five southern African countries with dominant parties agree that the opposition’s primary role should be to
monitor and criticise the government in order to hold it accountable.
This is true even among respondents who are opposition party supporters (Figure 3, below). In South Africa there’s even been a decline since 2008/2009 in support for opposition parties playing a “watchdog” role.
Figure 3: Support for opposition ‘watchdog’ role| 5 countries in southern African countries | 2008-2015
This suggests that opposition parties might put off potential voters if they are seen to be constantly criticising the ruling party rather than contributing to the country’s development. Opposition parties might do better if they highlight their policy platforms and gain citizen confidence in their plans and capabilities.
This is a crucial insight for opposition parties in the region as it runs counter to the opposition’s conventional role in Western democracies.
Rorisang Lekalake, Research Fellow at the Centre for Social Sciences Research (CSSR)/Afrobarometer Assistant Project Manager for Southern Africa, University of Cape Town