The Economic Stimulus Package (ESP) has gone a long way in stealing the limelight from this year’s budget speech. Even as the minister read out his speech, many were just waiting for him to get into the finer details of the ESP roll-out as that is what seems to have caught Batswana’s attention.
The development budget, however, seems to be divergent to the goals of ESP. Its proposed spending does not seem likely to stimulate the local economy as the spending is most likely to be on imports. The largest chunk of the budget went to the Ministry of Defence, Justice & Security (P3.59 billion) of which a large portion will go towards the provision of defence equipment, communication equipment and infrastructure.
Seeing that Botswana has no known defence contractors to speak of, it is almost a given that almost all this equipment will be procured from outside hence creating leakages within the local economy. Developed countries are able to use military spending to stimulate their economies as most of the military equipment is manufactured there hence defence spending leads to a trickle-down effect in those respective economies.
Although there is nothing wrong with increasing military spending during peace time we need to ensure that we can defend ouselves if war breaks out and the only way to do that is to increase our defensive capacity.
Emergency power supply has been allocated a budget of P1.35 billion.
Emergency power supply has been allocated a budget of P1.35 billion while Morupule A Power Station refurbishment has been allocated a sum of P135 million which is basically 10 percent of the former. We can almost expect the entire P1.35 billion to go to Eskom thus stimulating the South African economy and only a small portion of it will remain within our economy as the task of refurbishment is likely to be awarded to an outside contractor with all the equipment brought in from outside.
The refurbishment decision is a welcome one in that even though the project has leakages the end product boosts local capacity by way of generating electricity. But the question we should ask ourselves is whether P135 million is sufficient to refurbish a power station or are we just under budgeting to ensure that our books look good. Before long we will be accusing contractors of escalating costs when in actual fact it was evident from the start that more money is required.
The other question that we should be asking ourselves is as to how the purchasing of emergency power supply is a development expenditure when it has been going on and on over the past decade. The ESP should not be made to bear the burden of stimulating the local economy, it should instead supplement the formal budget in doing so. The government should have used this year’s budget to fund projects that are highly labour intensive and make use of local factors of production in order to try and stimulate the economy. If one didn’t know any better they would be excused for thinking that the ESP and the budget were not formulated by the same government
