By Mpho Tebele
Gaborone - After recording positive growth last year, Botswana’s economy looks sluggish heading into 2019, finance minister Kenneth Matambo warned this week.
Delivering his budget speech to Parliament, Matambo said the poor performance of the mineral sector and low collections of tax were to blame for reversing the country’s economy to rebound from sluggish activities.
Matambo’s announcement comes at a time when the southern African nation intends to open up to holidaymakers in an effort to diversify from diamonds revenue.
According to Matambo, Botswana’s economic growth is projected to slow down to 4.2% in 2019 compared to 4.5% recorded in 2018.
He said: “The implication of the projected growth in the domestic economy is that less revenues will be realised, calling for continued expenditure control in order to ensure that the country remains on a path of fiscal sustainability in the medium term”.
The minister said compared to the original budget of P3.59 billion, the revised budget forecast for 2018/2019 was a deficit of P6.96 billion (R9.09), or -3.5% of GDP.
He said total expenditure and net lending for the 2019/20 financial year was estimated at P67.54 billion (R88.18 billion), while total revenue and grants were estimated at P60.20 billion (R78.46 billion).
Therefore, Matambo said due to forecast underperformance of the mineral and non-mineral income tax revenue items, total revenue and grants had been revised downwards by 12.6% to P58.23 billion (R75.89 billion).
He said in light of the decision by Debswana Diamond mining company to commence the implementation of Cut 9 project at Jwaneng Mine and Cut 3 project at Orapa Mine during the 2019/2020 financial year, financed through forfeited dividends, mineral revenue had also been revised downwards by 17.5%.
“The non-mineral income tax, on the other hand, will underperform by 33.3% against the original budget of P13.36 billion (R17.45 billion), reflecting lower collections by the revenue authority,” said Matambo.
He said the non-mineral income tax was estimated at P11.55 billion (R15.05 billion), while Value Added Tax was expected at P9.12 billion (R11.91).
“However, there are downside risks to these revenue estimates, arising mainly from the continued high volatility of the mineral and customs and excise revenues,” he said.
He said total revenues and grants for the 2017/2018 financial year were at P56.41 billion (R73.66 billion), while total expenditure and net lending amounted to P58.39 billion, resulting in the overall deficit of P1.98 billion (R2.58 billion), or -1.1% of GDP.
Matambo said this negative budget outturn was due to lower tax collections during the year, adding that “efforts will, therefore, be intensified to ensure efficiency in the collection of tax revenues by Botswana Unified Revenue Service through continuous review of tax laws and leveraging on the use of Information and Communications Technology to enhance compliance”.
He added that due to the continued underperformance of the development budget, total expenditure and net lending for 2018/2019 also showed a decrease of P2.68 billion in performance, from the original budget of P67.87 billion (R88.63 billion) to P65.19 billion (R84.94 billion).
To reflect implementation capacity of both the public and private sectors to execute projects, the minister said the development budget for 2018/2019 was revised from the original figure of P19.31 billion (R25.22 billion) to P16.62 billion (R21.7 billion).
Matambo said the contribution of the private sector to the development of the domestic economy is still considered to be below its potential.
“In view of the critical role of the private sector in the envisioned transformation of the economy from the upper-middle-income to high-income status, this government is committed to implement existing and new initiatives to improve the business environment during 2019/2020 and beyond, to ensure that the private sector becomes the effective future engine of growth for the country,” he said.