Old Mutual Botswana’s Group Finance Manager, Ms. Keletso Moswete, gives insights on the 2022/2023 Budget speech delivered by Honorable Minister of Finance and Economic Development Peggy Serame.
Finance Minister Peggy Serame delivered the 2022/23 budget speech on 7th February 2022, and as Old Mutual Botswana, we took the opportunity to share the main highlights and what the budget means for your finances; of note was that Botswana had its first female Finance Minister deliver the speech a welcome development as Botswana continues to make strides with inclusivity in parliament. This year’s budget speech echoes the needs of the times, with the purse strings loosened in critical areas and overall focus on economic recovery as we continue to fight the pandemic.
A quick look at the numbers
COVID19 Pandemic
The COVID-19 pandemic continues to be the Government's top priority. With an estimated P26 billion spent in 2020 and 2021 for COVID-19 expenses. This year, the Minister presented a budget of P10.01 billion to the Ministry of health and wellness for 2022/2023, the largest allocation compared to all other Ministries. The allocated funds will be used for procurements of supplies and also the opening of manufacturing plants of PPEs and COVID-19 essentials, creating job opportunities for Batswana. The Establishment of the Botswana National Public Health Institute (BNPHI), and a vaccine manufacturing plant to produce advanced COVID-19 vaccines & vaccines for other diseases, will undoubtedly put us at the centre of Biotechnology globally while improving efficiencies in the local health sector.
Infrastructural & Social Developments
The two planned major road projects, Francistown-Nata and Sehitwa-Mohembo, will come as a relief for the Transport and tourism sectors, making the journey to these areas shorter and more enjoyable by road. The Feasibility studies for the Mosetse-Kazungula, Mmamabula-Lephalale, and Trans-Kalahari railway lines are ones to look forward to as Government continues its efforts to improve the rail system after the hit from COVID. Perhaps in the foreseeable future, one would be able to take a rail trip to visit the majestic Makgadikgadi and Chobe areas in addition to the alternative logistics route for imports and exports.
Although the proposed P100 increase for the four social protection schemes, namely; old age pensioners, destitute, and war veterans, may seem insignificant to most, this is a welcome move as the increases signify the Government's commitment to care for and support the elderly and vulnerable segments of the population.
Government Income revenue
The Government's decision not to increase taxes is a relief for consumers and businesses as in the past; the Government had used this to increase its revenues. The focus for the upcoming budget year will be on consolidating the wage bill to reduce reliance on the Government. We will likely see a restructuring process in some departments with increased expectations to maximize revenue collection. It would not be surprising to see budget allocation to collection government sectors like councils reduce year on year.
Recovery of the economy
One of the speech's highlights was the recovery of our economic activity, growing by 13.5 percent year-on-year, compared to negative growth of 10.1 percent in the same period in 2020. The recovery was felt across most sectors of the economy, reflecting the impact of easing travel restrictions on demand, tourism activity, resumption of global trade in diamonds, and the implementation of major infrastructural projects that were on hold in 2020. It is commendable that the budget's focus is a reset agenda supporting the economic recovery plan while addressing diversification issues. The continued vaccine rollout drives global economic recovery and normalization of economic activity as restrictions roll back and travel resumes.
The Education sector
The pandemic had a significant impact on the education sector affecting how teaching is delivered at schools particularly in peri-urban and rural areas. This is one area that needs attention which is possibly why there is a significant growth of P343.66 million over the current year’s approved budget. The proposed budget includes teachers’ salaries, provision for new teacher positions to absorb 3 509 temporary teachers on a full-time basis amongst other costs. The Minister also spoke to a budget allocation under the Ministry of Local Government and Rural Development to cater for the procurement of tablets for Primary Schools, construction and maintenance of Primary Schools, Primary Schools Facilities Backlog Eradication Project, and development of Reception Classes. This will align with Government’s efforts to build a knowledge-based economy and a more digitalized education sector. The Ministry of Education, Research, Science and Technology however received a decline of P1.34 billion over the current year’s approved budget. This could set the tone for year-on-year reduction on government sponsorship for Tertiary education. The earlier Batswana can start investing to have the option to self-sponsor for tertiary education the better prepared once the budget significantly reduces to this area.
What does the budget mean for your money?
Keep your spending tight.
With the recent increase in VAT, electricity, fuel price, and food basket hikes, consumers undoubtedly feel the pinch. Regulars on the A1 road will also be hit by the proposed Toll gates on their favorite route, further affecting consumer pockets. Consumers will need to plan by adding an extra amount to their monthly fuel expenditure or consider car-pooling. Despite the expected recovery, it would be prudent to remain cautious with household spending. Maintain a strict budget to keep a watch over expenses. Any extra income made should be put aside for a rainy day.
Invest Locally
With Botswana coming out of the blacklist by the EU and the global economy with a positive recovery outlook as the vaccine rollouts intensify. Emerging economies like Botswana with a strong Pula tend to be more attractive. The Bank of Botswana maintained the Bank Rate at 3.75 percent. Interest rates are likely to remain low for the foreseeable future. This means borrowing will remain affordable; it is also an ideal time to invest. As long as our currency is strong and our interest rates remain low coupled with contained inflation, our domestic assets should perform well.
Normalize having a side-hustle
Several businesses were forced to close down during the height of the pandemic. However, this was also a period that accelerated digital adoption, including in Government. It has become easier to register a business and open a bank account. The continued focus on improving government efficiency and taking them online will welcome development in supporting local businesses. The best time to start a side business was yesterday; the next is now. Normalize having multiple sources of income to grow your wealth.
Align your business with the economic development plan
One point that stood out form the Minister’s delivery was a focus on improving project management and efficiency in delivering government projects and partnership with the private sector. Several priority projects will be reserved for capable local companies, which presents an opportunity for local business to grow and drive sustainability. Hence, as a supplier, do your research in the national development plan and ensure your business is geared to take advantage of the opportunities to be part of the value chain.
Feedback and comments can be relayed to marketing@oldmutual.co.bw