The economy, its performance, its future and what it means to ordinary citizens, has become the central issue for voters in this general election. Mmegi Staff Writers, PAULINE DIKUELO, CHAKALISA DUBE, TIMOTHY LEWANIKA & MBONGENI MGUNI look at the Masisi administration’s economic track record in the President’s first term
For better or worse and with or despite the attendant misinformation, exaggerations and painful home truths, the economy has taken centre stage in the general election, perhaps more powerfully than ever before.
In previous elections, on social media – that imperfect gauge of public sentiment – the economy has been the umbrella concern expressed indirectly through debates over youth unemployment, minimum wage levels, higher allowances for students, the disabled and others, as well the numerous other topics that have gone viral.
This year, the economy came out of the shadows and stood in the middle of the room on its own as the most debated topic, the issue uppermost in voters’ minds ahead of October 30. Batswana from all walks of life have been debating technical issues such as Gross Domestic Product, Government Investment Account, budget deficit, government’s domestic borrowing programme, public finance management and even the Pula Fund.
Maybe the debates have not used the jargon of the Finance Ministry, Bank of Botswana and economists who are the traditional custodians of these issues, but Batswana have, in their own way, expressed their concerns, hopes and fears about the economy and its central place as a voter issue in the election.
Naturally, the debates have been heavily political, tending towards an analysis of President Mokgweetsi Masisi’s track record in his first term in office. Any analysis of his record, though, would of necessity have to begin with the numbers.
The numbers
Gross Domestic Product (GDP), the widely used measure of economic activity, grew by 4.2% in 2018, the first year of the Masisi administration, sinking to a negative 8.7% in the COVID-19 year of 2020 before peaking at 11.9% in the rebound year of 2021.
Over the six years that Masisi has been in office, GDP growth averaged 3.1%, lower than the base case scenario of 4.4% set out in the National Development Plan 11 which ran from April 2017 to March 2023. In fact, the NDP had a “pessimistic case scenario” of 3.2% growth and an optimistic case scenario of 5.1%.
Masisi’s term suffered from a “black swan” event, the COVID-19 pandemic, which upended forecasts under NDP 11, burnt holes in the budget and forced reformulation of economic strategy. Lebanese-American finance professor, Nassim Nicholas Taleb, who coined the expression, says black swan events are “extremely rare with severe consequences,” and cannot be predicted beforehand, “though after the fact, many falsely claim it should have been predictable”.
Due to the black swan event, a fairer assessment of GDP performance under Masisi can be arrived at by analysing the five years prior to his ascension. Between 2013 and 2017, GDP growth averaged 4.6%, peaking at 11.1% in 2013 and reaching a nadir in 2015 at a negative 4.9%.
Masisi’s tenure has underlined a longer term trend that economists have noted in the country, where the boom-bust cycle associated with the heavy dependence on a single commodity, has increasingly been characterised by more frequent busts and shorter-lived booms.
Former President Festus Mogae enjoyed a prolonged boom period during his presidency, with rough diamond production trending above the historic 30 million carat mark between 2003 and 2008, including the all-time peak of 34.3 million carats in 2006. His successor, Ian Khama meanwhile, experienced two recessions during his ten year term, with growth sinking to a historic negative 14.1%.
In both cases, the performance of diamonds was behind the numbers, as has been the case with Masisi, and this year, the economy is expected to either record one percent growth or slip into negative territory as a prolonged slump in the precious stones shows little sign of abating.
The other quite critical numbers in the Masisi presidency have been the budget figures, which continued a trend of deficits seen prior to his ascension, and have only deepened in the six years since. In fact, the fiscus has run budget deficits since the 2017-2018 financial year, essentially meaning that the government has been spending more than it receives or makes. The situation has meant a need for more withdrawals from the reserves housed in the Government Investment Account (GIA), as well as higher borrowings from both the local capital market and external financiers.
The cumulative budget deficits under Masisi’s administration from April 2018 to the current year’s projection are just over P52 billion, resulting from a combination of generally declining mineral revenues and the COVID-19 shock, set against ambitious and expansionary spending plans.
In fact, Masisi has generally has pursued expansionary spending in good times and bad, a fact that can be seen from the country’s increased appetite for borrowing.
In the Masisi term, as in prior administrations, spending has been lifted in each successive budget, while – again like other administrations – efforts to cut wastage and inefficiencies in spending have largely been unsuccessful.
Masisi’s response to COVID-19 involved a doubling down on the Transformation Agenda, meaning higher spending, with the goal of a diversified economy, driven by export-led growth through the private sector.
Unlike his predecessors however, Masisi has had far less room for failure, as the GIA, has been run down to record levels, reaching P2.8 billion in June, before recovering to P6.5 billion in July.
For the ordinary Motswana, inflation – or the movement in the average prices of goods and services – has been a rollercoaster affair during Masisi’s tenure. From the benign levels of inflation during COVID-19 as global economic activity cooled, prices skyrocketed in 2022 after Russia invaded Ukraine causing a global food and energy crisis. Locally prices movements reached 14-year highs, forcing Masisi’s administration to intervene with inflation relief measures, which were then followed up by Value Added Tax removal from several basic commodities.
Since then, inflation has generally remained either within or even below the three to six percent target range set by the Bank of Botswana. However, it is important to understand that even low inflation figures such as September 1.5% still mean that prices are, on average, 1.5% higher than they were in September 2023. The difference is the pace of acceleration in prices, which means from those 14-year highs, while the numbers have fallen, for ordinary citizens, prices are still high – they are just not rising as fast as they did before.
Key Stats
Unemployment 20.7% (Sept 2019) vs 27.6% (March 2024)
Inflation 3.4% (April 2018) vs 1.5% (Sept 2024)
Severe food insecurity 22.2% (2018/19) vs 20.2% (2022/23)
The policies
A hallmark of Masisi’s presidency has been his administration preference for the formulation of policy and strategy, as a method of governance. Mogae’s administration presided over the highest number of parastatals established with at least 12 added to government’s books between the ministries of finance and trade alone between his entry into the Finance Ministry in 1989 and the end of his term as President in 2008. Analysts say this indicates that the former president’s governance approach was from an institution-building perspective.
Masisi’s administration, meanwhile, has arguably rolled out more policies, programmes and strategies than his predecessors, with these cutting across sectors and interests over the years. His proponents say through this approach, budgets, Monitoring and Evaluation and impact, can be better aligned to strategic objectives, rather than leaving the development agenda to the broader NDPs or annual budgets.
Critics, however, say the preference for strategies belies overall administrative tardiness and weakness, where officials believe simply producing a strategy is an achievement on its own. When ordinary Batswana complain about development gaps or needs, the officials point to the sheer existence of a strategy, rather than whether the strategy is delivering.
Under Masisi’s administration, policies, strategies and programmes have included the Economic Recovery and Transformation Plan, the RESET Agenda, Mindset Change Agenda, the National Informal Sector Recovery Plan, Middle-Income Strategy, while updated documents include the Tourism Policy, Energy Policy, Minerals Policy and revised CEDA guidelines.
This is apart from the COVID-year emergency initiatives which included hundreds of millions of Pula towards the Industrial Support Facility, informal sector survival, wage bill support and others.
The past year has seen an acceleration of these policies, strategies and programmes with the initiation of Temo and Thuo Letlotlo, Chema Chema, Meetings, Incentives, Training and Exhibitions (MICE) Strategy, creatives strategy (a la DJ Fresh, Steve Harvey initiatives), eMobility (electric vehicle assembly) and numerous others.
The nature of strategies is that their results tend to be seen in the medium to long-term, a fact that has led to frustration amongst Batswana, particularly as COVID-19 dealt all households a body blow.
One of Masisi’s flagship programmes has been the horticultural import moratorium, aimed at empowering local farmers by reducing the reliance on selected imported fruits and vegetables.
The initiative was designed to strengthen the domestic agricultural sector, ensuring that local farmers could meet the demand for produce within the country.
However, the rollout has not been without challenges, and both farmers and consumers are feeling the effects.
Many consumers have voiced concerns that local farmers are struggling to provide a consistent supply of essential produce such as tomatoes and onions. This inconsistency has led to frustration, as shortages of these everyday items have been common since the moratorium began in January 2022. The reliance on imports for these staples had been deeply ingrained in the market, and the sudden shift to local sourcing is proving to be difficult for both sides of the equation.
From the farmers side, the import ban quickly exposed the supply chain challenges in the country, with the little produce being grown struggling to make it to the shelves. The dominance South African supermarket chains enjoy in the local market has not helped the situation, as many local producers have had to pioneer new routes to market, even to the extent of selling from a vehicle on the roadside.
For consumers, in September, inflation associated with vegetables was measured at 13.8%, the highest of all goods and services tracked by Statistics Botswana to produce the Consumer Price Index. The shortages of products have led to blatant price gouging, with even sharper seasonal spikes in prices around numerous commodities.
Another key issue appears to be the gap in experience and infrastructure. For the ban to be fully effective, local farmers need to adapt quickly, improving their production techniques and understanding consumer needs. Until this happens, the shortage of certain vegetables may continue, leading to dissatisfaction among consumers.
While the horticultural ban is a positive move in terms of promoting local agriculture, it is clear that it will take time for the industry to adjust. Farmers are calling for more support from the government in terms of resources, training, and market access to ensure that the transition is smooth and that they can meet the country's demands for fresh produce.
While the government's intentions are commendable, there is still a long road ahead before the local agricultural sector can fully realize the benefits of the horticultural ban. Both farmers and consumers will need to be patient as the industry evolves to meet new challenges.
The Temo Letlotlo agricultural inputs programme, is another Masisi administration flagship, designed to provide farmers with resources and financial support to boost their agricultural output. So far, the government has spent over P1.5 billion on the programme.
While the programme officially kicked off in 2023, this year will serve as its litmus test, as the first season was blighted by a record drought. This year, with forecasts of normal to above normal rainfall countrywide, farmers will have the opportunity to fully test Temo Letlotlo’s ability to increase yields and boost national food security.
This season the pressure is on farmers to show results and prove that the government's investment has been worthwhile. With increased rainfall and government support, many are hopeful that local farmers will be able to produce sufficient quantities of fruits and vegetables to meet domestic demand, and ultimately reduce the need for imports.
Key Stats
Economic Recovery and Transformation Plan budget - P14.5bn
EMobility Initiative budget – P495 million
Chema Chema beneficiaries – 12,000 as at July
The North
When Masisi took over, the Francistown economy was in shambles. His ascendance to the presidency in 2018 coincided with a time in which the city’s main economic anchor Tati Nickel Mining Company (TNMC) had just gone into liquidation.
Over 700 people lost their jobs at TNMC. Companies that serviced or depended on the mine also closed shop, in the process shedding jobs. The city’s economic woes were then compounded by the outbreak of COVID-19 in 2020. The pandemic saw several businesses in the city experiencing some cashflow problems. Some of the firms later stopped operating.
It does not look like the city’s economic woes will subside any time soon. Early this year, Mupane Gold Mine, one of the city’s biggest employers, ceased operations after succumbing to a prolonged battle with cashflow problems. The development saw over 200 employees under the losing their jobs. Hundreds of those employed by the mine’s service providers also found themselves on the street.
Analysts say what is worrying about Masisi’s administration is that there is no direct plan or unique policy to revive the economy of Francistown. This is in direct contrast to the government's response to economic challenges in Selebi-Phikwe.
The economy of Phikwe also collapsed when BCL Mine closed in 2016. Both TNMC and BCL were owned by BCL group until their closure following the liquidation of the group. Phikwe businesses have benefited from tailored interventions through SPEDU a government backed entity.
For example, businesses that set up in Phikwe or adjacent areas enjoy incentives such as low corporate tax, zero customs duty on imported raw materials, amongst others. Some government tenders are also reserved for companies in the SPEDU region as a way of boosting economic activity in the area.
As a result, Phikwe has seen a major citrus farm established, as well as other businesses such as the Botswana Development Corporation-powered Oxygas firm.
Since 2016 city leaders such as Francistown South Member of Parliament, Wynter Mmolotsi, have been calling for similar strategic support for the second city, to no avail.
A year ago, the Vice President, Slumber Tsogwane, promised that the government would move one of the ministries to Francistown as a way of boosting economic activity in the city. The idea is yet see the light of the day.
Key Stats
BCL employees at closure – 4,287
Tati Nickel employees at closure - =-700
Reported Tati Nickel sale price in 2024 - $15 million
Shining bright?
No analysis of Sisinomics can be complete without mentioning arguably his biggest economic legacy item – the renegotiation of the De Beers sales agreement.
The President has spoken frequently and emphatically about the role he played in securing arguably the most transformative deal with De Beers since the two partners first joined hands 55 years ago.
The sales agreement and associated mining rights between the two partners, is the global diamond industry’s single most important covenant, each year producing the world’s highest production of rough diamonds by value.
While traditionally a closely-guarded affair, Masisi blew the top of the talks early last year, publicly expressing his frustration with the terms of the arrangement, in particular, how it limited Botswana from securing greater value for her stones downstream, in polished diamonds and jewellery.
Cracking his negotiators into line and publicly adopting a hardline against the long-term partner, Masisi was able to secure a greater share of diamonds from Debswana, a P10 billion Diamond for Development Fund, joint exploration agreements and other concessions.
The two partners have signed heads of agreement in principle and more legally binding heads of terms. The new deal, however, is yet to kick in as the two sides finalise what Masisi on Wednesday said were last minute issues.
“We have not finished but it’s just left a little bit more and then we wrap up very soon,” he told a Duma FM live debate.
“What’s good is that the main points that we were talking about have been agreed to.”
The impact of the outcome will become clearer when the revised terms kick-in, as the state-owned diamond trader, Okavango Diamond Company, begins to purchase and independently sell a higher proportion of stones from Debswana.
In his approach to De Beers, Masisi broke from his predecessors’ approach to talks with the diamond giant, while offering historically the most insights Batswana have been gifted with, into the secretive agreement.
Masisi, particularly in the latter part of his term, has pushed to the vanguard of the global diamond industry, in terms of political leaders championing natural diamonds in the existential battle against synthetics.
The president, should he win a second term, is also expected to occupy a central role as Anglo American sells of De Beers, with the possibility that Botswana will exercise its pre-emptive rights and add to its 15%s take.
The future
Masisi ends his first term with an economy fraught with uncertainty. Growth this year is expected to be constrained by the downturn in diamonds, although there are signs that the non-mining sector is providing some useful, albeit limited, help.
The expansionary budget, at P102 billion, is almost certainly expected to be sharply revised next month in Parliament, with some projects suspended, in order to rein in a deficit that analysts have said could spiral up to P17 billion.
But the country is neither broke nor does it have a failed economy. What it has is a financial crunch this financial year, that is again a reminder of the broader need for structural reforms.
Specifically, these reforms are required to increase the private sector’s developmental role in the economy, while government’s financial obligation transforms into a facilitatory one.
The reforms also include right-sizing the civil service, rationalising the suite of 64 parastatals by weeding out duplication of mandates and inefficiencies, granting local authorities greater financial autonomy and others. Tougher initiatives include removing blanket subsidies on health, electricity, education, water and others and replacing these with targetted subsidies where only those who need support, get it.
An even tougher ask is ensuring that every thebe spent in the budget is spent optimally with little inefficiency, corruption and waste and that each economic activity, whether public or private, is more aligned to environmental sustainability and social impact.
For Masisi, should he secure a renewed mandate, his second term will have to initially be one of returning to fiscal stability through tough decisions and, later, ensuring that the plethora of policies, programmes and strategies have a transformational impact in the lives of Batswana.