SACU revenue boosts Bots
Gaborone- The share from the common revenue pool, the Southern African Customs Union (SACU) remains a major revenue source for the Botswana national economy, with the receipts for 2013/2014 financial year contributing immensely to the country’s balance of payments, said Finance Minister Kenneth Matambo.
This rise in the receipts is attributed to an increase in the members’ shares as an adjustment to account for the surplus in the common revenue pool, which was realised in the previous financial year. The union is made of Botswana, South Africa, Lesotho, Namibia and Swaziland.
In his budget speech to parliament on February 2, Matambo said preliminary estimates indicate that the current account of the balance of payments registered a surplus of P13.1 billion in 2014, a moderate increase of 1.5 percent from the P12.9 billion in 2013.
This is attributable to the increase in receipts from (SACU, which increased from P13.8 billion in 2013 to P15 billion in 2014, he said. As a result of the positive current account balance, Matambo said the overall balance of payments is projected to record a surplus of P10 billion in 2014, a significantly higher surplus from the P1.3 billion in 2013.
“The positive overall balance of payments contributed to the increase in foreign exchange reserves. As at the end of December 2014, the reserves amounted to P79 billion, equivalent to 18 months of import cover of goods and services. This is an increase of 16.5 percent from P67.8 billion in December 2013,” said Matambo.
Matambo said real GDP registered a growth rate of 5.8 percent in 2013 compared to the 4.3 percent growth in 2012, which was attributable to both mining and non-mining sectors of the economy.
The mining sector registered a significant growth rate of 10.6 percent in 2013, owing to a strong demand in the global economy for the country’s diamonds, especially in the emerging economies of China and India.
The non-mining sectors collectively registered a positive growth rate of 5.0 percent in 2013, with trade, hotels and restaurants grew at 6.3 percent; social and personal services at 6 percent; while general government and finance and business services grew by 5.5 percent each.
The minister noted that Government’s net financial asset position has improved significantly. As at the end of March 2014, Government’s net financial assets stood at 1.7 percent of GDP, an improvement from the negative 6.9 percent of GDP in March 2013.
This was also due to the fact that Government’s balances at the Bank of Botswana had risen from P20.61 billion to P31.75 billion over the 2013/14 financial year, while Government’s net debt and guarantees had increased only marginally over the same period, from P28.33 billion to P29.52 billion, he said.
“We expect our net position to continue to improve further by the end of the current and coming financial years. However, we need to decrease our net debt and increase our balances in the Government Investment Account, if we are to be in a position to absorb a major external shock of the magnitude we experienced in financial years 2008/2009 and 2009/2010,” said Matambo.
He said despite continued uncertainty over the global economic recovery, the outlook for the domestic economy remains positive
“The prospect of low inflation also has the potential to impact positively on the standard of living of Batswana. Given this conducive macroeconomic environment, we expect the private sector to take the lead in driving economic growth and employment creation,” said Matambo.
To address the development challenges of poverty, unemployment, and income inequality, Matambo said “we need economic growth.”
“Without enlarging the size of the economy, it would be impossible to create jobs that the country desperately needs to address youth unemployment, and generate revenues to support Government’s social welfare programmes. It is for this reason that growth and economic diversification should remain our economic priorities,” he said.
He said a recent challenge to the promotion of growth and economic diversification has been the declining total factor productivity in the domestic economy, especially labour productivity.
“In this regard, Government will continue to put in place measures to promote productivity that include: reforming the country’s education and training system; improving work ethic through training the workforce; as well as reviewing labour legislation; with a view to promoting efficiency in the labour market,” said Matambo. Such labour market reforms, he said, will assist the economy to transit from mineral-led to a knowledge economy.
However, Matambo said the water and electricity sector recorded a negative growth rate of 27.2 percent in 2013.
He said the continued underperformance of the water and electricity sector is of major concern, given the importance of water and power in the economy.
To address the challenges facing this sector, Government continues to undertake regulatory reforms and has allocated the sector a substantial development budget in 2015/2016 financial year.