Thaga Urges Council to Diversify Revenue Streams

District councils in Botswana are facing increasing pressure to diversify their revenue streams, moving away from a heavy reliance on central government grants. This call, highlighted by Serowe District Council chairperson Mr. Atameleng Thaga, stems from declining national diamond revenues and the need for local authorities to achieve greater financial autonomy. The shift necessitates exploring innovative Local Economic Development (LED) projects and establishing independent commercial entities, presenting both opportunities and legal complexities for local governments and their legal advisors. This article examines the statutory framework enabling such diversification, the traditional revenue base, and the challenges and implications for legal practitioners guiding councils through this critical transition.

Botswana's local authorities are at a pivotal juncture, grappling with the imperative to bolster their financial independence. Mr. Atameleng Thaga, the Serowe District Council chairperson, recently underscored this urgency, urging fellow councilors and officers to actively seek alternative revenue streams. This directive is not an isolated plea but reflects a broader national strategy to mitigate the impact of declining diamond revenues and shrinking central government coffers, which have historically been the primary source of funding for district councils.

The current financial model, heavily dependent on central government transfers, has rendered local councils vulnerable to national economic fluctuations and limited their capacity for self-determined development. The call for diversification signals a significant policy shift, encouraging councils to establish independent commercial entities and embark on Local Economic Development (LED) projects. This article delves into the legal framework underpinning local government finance in Botswana, analyzes the avenues and limitations for revenue diversification, and discusses the critical implications for legal professionals advising these evolving local governance structures.

Local government in Botswana operates within a unitary state structure, notably without specific constitutional provision for local government, with its functions primarily defined by statute. The foundational legislation includes the Local Government Act, 2012, which consolidated previous acts like the Local Government (District Councils) Act (Chapter 40:01) and the Townships Act. Historically, district councils have relied on a limited range of own-source revenues, including rates, service levies, user fees such as abattoir fees, trade licenses, beer levies, interest on investments, housing rents, clinic fees, and charges for stray cattle (matimela). Since 2012, property and business taxes have also been applicable to both urban and district councils.

Despite these revenue streams, local governments in Botswana remain overwhelmingly reliant on financial transfers from the central government. Estimates indicate that central government provides an average of 90% of district councils' and 80% of urban councils' recurrent budgets, and fully funds their capital budgets. This profound fiscal dependence has historically constrained the autonomy of local authorities and limited the scope and magnitude of their activities. The national economy's heavy reliance on diamond mining, which contributes significantly to government revenue, has made this central funding susceptible to global market shocks, prompting a strategic national imperative for economic diversification, as articulated in initiatives like Vision 2036 and the Botswana Economic Transformation Program.

The legal basis for district councils to diversify their revenue streams is primarily found within the broad powers granted by the Local Government Act, 2012. Section 9(4) of the Act stipulates that a Council "shall have power to do anything and enter into any transaction which in its opinion is calculated to facilitate the proper discharge of any function conferred or imposed upon it by or under this Act or any other law." Furthermore, Section 9(3) allows a Council to "execute any of the functions conferred upon it through establishment of bodies, trusts, and any other organ that, that Council may consider appropriate for the discharge of its functions." These provisions offer a robust legal foundation for councils to venture into commercial activities and establish entities aimed at generating independent revenue, moving beyond traditional taxes and fees.

In practice, this legal latitude encourages councils to explore various Local Economic Development (LED) projects. Recent examples from the Letlhakeng District Council illustrate this proactive approach, including proposals for establishing solar farms, commercializing agricultural cluster farms, developing modern commercial centers at bus ranks, and outsourcing the management of public facilities like bus rank toilets and market stalls. These initiatives align with the broader national agenda to diversify the economy away from diamonds, focusing on sectors such as services, tourism, renewable energy, and agriculture.

However, the path to diversification is not without its legal and practical challenges. Councils face limitations stemming from a historical lack of financial autonomy and capacity. Studies have highlighted issues such as staff shortages, particularly in financial management and project implementation, which can hinder the effective administration of new revenue-generating ventures. Furthermore, problems with revenue collection and follow-up on defaulters persist, indicating a need for strengthened administrative and enforcement mechanisms. While councils have borrowing powers under Section 67 of the Local Government Act, 2012, past heavy debts and repayment issues have made borrowing virtually non-existent for local authorities, limiting access to capital for new projects.

Any commercial undertakings by councils must also strictly adhere to public procurement laws. The Public Procurement Act of 2021, which repealed the Local Authorities Procurement and Asset Disposal Act, now governs all government procurements, requiring meticulous compliance for any contracts related to new commercial entities or LED projects. The shift towards greater financial independence also necessitates robust financial oversight and accountability mechanisms to prevent mismanagement, a concern that has been raised in past audit reports. The experience of other African jurisdictions, where income-generating enterprises by local governments exist but are increasingly giving way to privatization, offers a comparative perspective, suggesting that the structure and management of such ventures are crucial for their long-term success.

The call for Botswana's district councils to diversify their revenue streams marks a critical evolution in local governance and finance. Driven by the national imperative to reduce reliance on declining diamond revenues and central government grants, this shift empowers local authorities to pursue greater financial autonomy through innovative commercial and Local Economic Development initiatives. The legal framework, particularly the Local Government Act, 2012, provides the necessary powers for councils to establish commercial entities and engage in a broader range of transactions to fulfill their functions.

For legal practitioners, this presents a burgeoning area of practice. Advising councils will involve navigating the intricacies of establishing new commercial ventures, ensuring strict compliance with the Public Procurement Act, 2021, and other financial regulations, and structuring potential public-private partnerships. It will also require a deep understanding of local government finance, capacity building needs, and strategies to mitigate operational and financial risks. As councils embark on this journey, legal professionals will be instrumental in guiding them towards sustainable and legally sound revenue diversification, ultimately contributing to more resilient and self-sufficient local governance in Botswana. Practitioners should closely monitor forthcoming policy developments on decentralization and local economic development, as well as the outcomes of pilot projects, to best serve their local government clients.