The 2013 Budget will be presented on
February 4th at a time of considerable economic uncertainty.
International economic prospects are quite uncertain with the IMF having
revised its 2013 global growth forecasts downwards in January. On the positive
side, prospects of a resolution of sovereign debt problems in the Eurozone have
risen, and the US managed to avoid the worst of the “fiscal cliff”. However,
these issues have only been temporarily resolved, and there may well be further
disruptive events during the early months of 2013. Economic weakness in the USA
and Europe, combined with slower growth in India and China, have impacted on
the global diamond market, with lower demand and weak prices throughout much of
2012. These conditions are expected to continue in the first half of 2013,
although there are hopes of improvement later in the year.
These developments will have a major impact
on projected fiscal revenues, with mineral revenues likely to have come in
under-budget in 2012/13 and to show little growth in the new 2013/14 fiscal year.
Recently the over-riding fiscal objective has been to achieve a balanced budget
in 2012/13, and a key test will be to see how close the projected outturn will
be to this. It remains very important to achieve a balanced budget and in due
course to achieve budget surpluses so that the government’s savings can be
re-built – fiscal buffers that served through country well during the global
financial crisis have been drawn down, and now need to be restored as
protection against the impact of possible future crises.
There will be many demands on the spending
side of the budget in 2013/14, including an increase in public sector salaries,
the completion of outstanding government projects (such as the SSKA terminal
building) and new projects, especially given the election coming up in 2014.
Not all of these demands can be met. After years of public sector pay
restraint, there are strong arguments for giving public sector employees a
meaningful pay rise this year – it serves no purpose to force continued
reductions in real wages on government employees when they are required to
deliver quality public services. However, it needs to be understood that given
fiscal constraints, a salary increase for the public sector is dependent upon a
reduction in employment in the public sector.
Finishing off outstanding projects should
also be a priority. It is likely, however, that there will be limited scope to
implement major new projects. In choosing projects, government should focus on
those that will deliver maximum economic returns and will “crowd in” private
sector investment. This also means the proposed projects will need to be
subject to through appraisal beforehand and identification of costs and
benefits, an essential practice that has been absent from government project
selection in recent years.
Government should also aim to use the
private sector to deliver projects and infrastructure wherever possible. The
fiasco of BPC’s non-delivery of power from Morupule B and continued delays in
commissioning, leading to widespread load shedding that has a negative impact
on the economy and on business confidence more generally, shows that government
should use the private sector to generate power (through IPPs, independent
power producers), leaving BPC simply as a distribution company. More generally,
the quality of public sector project management needs to be dramatically
improved, so that the recent experience of poor budgeting, delays, cost-overruns
and non-completion is brought to an end.
Although not strictly a budget issue, much
greater attention needs to be paid to improving the business climate – much has
been said by government on this topic, but often this is just lip-service and
real improvements on the ground are lacking; the private sector continues to be
frustrated by pointless bureaucracy and anti-business attitudes in both central
and local government. Botched reforms of immigration and trade licensing
systems are a case in point.
There is a need for reform of revenue
generation. The proliferation of “off budget” levies is imposing an increasing
tax burden on the private sector, and as well the expenditure of funds raised
through such levies is not subject to the normal scrutiny by parliament. There
is also a need to make it easier to pay taxes by improving efficiency and
competency at BURS and introducing electronic means of filing and paying taxes,
so as to make the time-wasting queues at BURS a thing of the past. The quality
of tax administration at BURS also needs to be improved, as the frequent
mistakes both penalise taxpayers and lose revenue for government.
Finally, there is evidently a crisis in the
country’s education system. This is not seemingly the result of a lack of
resources, given that education continually gets the largest budget share and
per capita spending on education in Botswana is relatively high by
international standards. However, much of the money is spent on expensive “hardware”
(buildings and equipment) while the all-important “software” (teachers,
maintenance, management, curriculum development) is neglected. A rebalancing of
the allocation of resources in education is sorely needed. More generally, the
way in which our education system is designed, managed and implemented needs a
complete overhaul. All of those involved – government, teachers and learners –
have a responsibility to contribute to this.
