Dekop revealed this during the 17th Biennial National Business Conference, themed 'Invigorating Economic Transformation through the Private Sector' and organised by Business Botswana last Sunday.
“For 2024, initial projections announced by the Minister of Finance, Peggy Serame, during the 2024–2025 budget speech, indicated an anticipated growth rate of 4.2 percent,” said Dekop. “However, this is unlikely to be realised given measured economic performance so far in 2024. “Thus, the IMF, following their consultation mission in July 2024, now projects the domestic economy to grow by one percent in 2024.”
He added that there are broadly three sources of this lacklustre domestic economic performance.
“The first is the generally muted global economic performance where the recent annual growth rates of just above three percent are below the historical 2000–2019 annual average of 3.8 percent. “The second and, in part related to the first, is the recent decline in the diamond market, therefore, impacting adversely on mining production and trade. “As a footnote and to give context, mining production contracted by 6.5 percent in the year to March 2024 while the whole diamond trading sector activity declined by 42% in the same period. “These first two can be said to be cyclical and would likely in time manifest an upturn, and indeed, being external, there is little we can do about it. “However, the third source of weak economic growth, which I will generalise as domestic structural constraints, is more worrying.
Deliberating about the impact of the weak economic growth, the central bank governor said that there are consequences if the economic constraints are not addressed.
“First, we will continue to be vulnerable to external and global economic cycles and our economic resilience will recede,” he cautioned. “In the past, we had fiscal and external buffers that cushioned us; we no longer have such. “Secondly, we will not improve our international competitiveness, thus unable to penetrate external markets and remain dependent on imports, therefore, prone to shortages of goods and high prices that diminish welfare. “Thirdly, there will be the perpetuation of the social ills of high unemployment, inequality, and poverty; thus, the continuance of a less inclusive economy. “Fourthly, government revenue mobilisation will be constrained, thus, the perpetuation of structural deficits and/or reduced capacity to provide necessary infrastructure and services and facilitation. “Fifthly, and more tellingly, it would be difficult to attain the high-income status by 2036 as envisaged, which requires annual growth rates of 6.7 percent,” said Dekop.
He added: “It is fitting to characterise domestic structural constraints as a prelude to proffering possible responses. “These are continuing infrastructure gaps; challenges in timely reticulation of utilities to users; the need to raise effectiveness in the provision of government services; the still modest technology adaptation and slow pace of innovation; education and skill sets not aligned to immediate enterprise and industrial needs; and some misalignments in financial intermediation (matching of capital and finance to impact growth sectors and inclusivity). “These constraints are not my inventions; they are referenced in successive global competitiveness rankings and reports, as well as internal studies.”
Overall, Dekop continued, these manifest in relatively low productivity and therefore slow pace of industrialisation and related economic diversification and international competitiveness.
The governor said government had tried to respond to the challenges and constraints, most notably in the advent of the COVID-19 pandemic. He said interventions such as the National Transformation Strategy 2023–2030, the Transitional National Development Plan, and the Economic Recovery and Transformation Plan, were evidence of the efforts to address economic challenges.
In addition, overarching campaigns such as the Reset Agenda and Mindset Change indicate the need to change thought processes and approaches to economic expansion, empowerment, inclusion and welfare enhancements, the governor said.
He said these interventions and campaigns are in the context of enduring macroeconomic and financial stability, including broadly supportive fiscal, monetary and exchange rate policies.
That notwithstanding, Dekop noted, it appears that there is suboptimal traction of the government's economic transformation strategies and initiatives and, indeed, substantial financial resource commitments and allocation.
“Thus, the evident continuing modest industrialisation pace and low sectoral growth rates. “Of course, we can surmise that there are lags in fruition. “However, it is important that we hasten to address any evident challenges in the adaptation of these initiatives. “The immediate need is the ability to monitor and evaluate the impact of such initiatives. “Importantly, this requires moving away from, or at least complementing, the measurement of success of initiatives in terms of inputs, in favour of the more relevant measure of outputs. “This behoves the private sector collectively, to contribute towards ensuring positive returns from government support and outlays,” Dekop said.
One of the areas where structural change could begin is within State Owned Enterprises (SOE).
“There is a case for rationalising and enhancing the impact of SOEs,” Dekop said. “In this regard, government has announced some rationalisation initiatives with respect to SOEs and institutions. “This is to reduce costs and duplication of activities, improve coordinated focus and, overall, enhance the impact of their role. “There is also scope to substitute government or SOEs roles with private participation and, therefore, sectoral growth. “Turning over some of the government activity through sale and/or reduction of stake can help augment government’s financial resources and reduce subvention outlays.”
Aligned thereto, the governor added, is the need to enhance and implement the range of public-private partnerships, to address, amongst others, infrastructure gaps and in the provision of social services.
“It is reasonable, in this regard, to expect the private sector to be at the forefront of presenting viable and socially inclusive solutions. “In addition, commercial state-owned enterprises can accelerate and expand the engagement and subcontracting of the private sector for some of their operations to help enhance enterprise opportunities and improve service delivery,” he said.
Dekop also decried the fact that the government is not doing enough in terms of harnessing and beneficiating local resource endowments.
“It is evident that we are not doing enough in terms of value addition, commercialising and monetising our local resources and endowments. “At the same time, this represents significant opportunities in terms of enterprise and business opportunities and monetised branding. “Related thereto is the potential for export markets and integration of local products and services into global production and service value chains. “The Bank of Botswana 2023 Annual Report theme topic explores extensively the beneficiation and product development opportunities with respect to the mining sector,” said Dekop.
He added: “The same applies across the range of physical, cultural and knowledge endowments. It is possible, in this regard, that deliberate linking of schooling, skills development and research and development to beneficiation, product and service development and monetisation could yield long-term beneficial results. “Yet again, there is a role for the private sector in seeking collaboration with tertiary and research institutions towards product development and monetising services.”
