Deputy Leader of Opposition in parliament, Ndaba Gaolathe has broken ranks with his admirer, Minister of Finance and Economic Development, Kenneth Matambo over the role of government in job creation.
Matambo has in numerous times made no secret of his admiration of Gaolathe’s keen mind and talents in relation to matters of economics. The latter was schooled at the Ivy League Wharton School of Economics at the University of Pennsylvania in USA. He shares his alma mater with billionaire businessmen such as US president, Donald Trump, Russian-American venture capitalist, Yuri Milner and South African-American billionaire, Elon Musk among others.
Nonetheless, the two economists; Matambo and Gaolathe, on opposing sides of the isle differ on the role and modus operandi of government in job creation. When delivering the National budget this week, Matambo untangled government from the conundrum of job creation, stating and repeating that: “it’s important to clarify that the principal role of government is not to create jobs but to create a conducive macroeconomic environment to facilitate the development of the private sector.”
Matambo noted that as a general principle, economic development and employment creation require rapid economic growth. He further noted that, however, during NDP 10 Botswana’s economy grew on average by about 3.8 per cent. Matambo further revealed that the economy is forecast to grow at an average of 4.4% per annum in NDP 11; a rate he said, is lower than the 7 to 9 per cent of the early 1980s or the SADC regional target of 5 per cent.
He also conceded that “such rates are therefore not sufficient to adequately address development challenges of unemployment, poverty eradication, and income inequality.” Matambo further highlighted that after it is all said and done, it is then for the private sector to take advantage of such an environment to undertake investments, which would contribute to the growth of the economy and create sustainable employment opportunities.
However, in an opposition rejoinder delivered by Gaolathe this Wednesday, the opposition position stood in stark contrast with that of the current government with regards to the extent of governments in the role of job creation. Gaolathe stressed that a small economy such as Botswana needs to do more than just relegating employment creation and economic diversification to the realm of private sector. He further expressed cynicism on the ability of the private sector to be left largely to its own devices.
Stated Gaolathe: “Our idea is that a small country of Botswana’s population and economic history cannot leave it to the markets to diversify the economy or ignite sustainable job creating economic sectors.” He continued: “The notion that government’s role is simply to create an environment in which the entrepreneurial and commercial spirit can thrive is not adequate.”
The American educated politician further stated that other countries have directly participated in employment creation, highlighting that, “most capitalist states do invest in strategic sectors in the same way the United States has invested in Freddy Mae and Freddy Mac”. “Dubai has also successfully run Istithma or Dubai World, the holding company that has invested successfully in non-stock market companies domestically and abroad.” he intoned.
Gaolathe further gave example of an Asian tiger country that has made leaps in direct job creation, noting that: “Singapore also invests its surpluses in and out of Singapore, whose proceeds not only augment government revenue but pay for various social services for citizens.” He further noted that these funds or companies are numerous and are funded through compulsory social security contributions. “Some of the dividends are used to finance the high quality public services including health-care.”
Gaolathe, who is also one of two deputies of Umbrella for Democratic Change coalition, further remarked that apart from government driven investment vehicles, the coalition’s view is that government should sustain a well-coordinated and adequately capitalised ecosystem of public enterprises that support Botswana’s social and economic objectives. He drew parallels between government’s word in regard to job creation and its practice, observing that despite the Botswana government’s stated posture that it is not the role of government to invest in enterprise, its involvement in Debswana is evidence to the contrary.
He further stated that, in recent times, government has reportedly established a series of private companies including Botswana Oil and Mineral Development Company with the intention of making strategic investments but the guidelines of management remain unclear, “breeding real fears that these could be funnels for financial leakage in favour of the political elite.”
Gaolathe further revealed that in 2019, if UDC wins elections, they will propose the establishment of a system of special sector funds to make capital available and attract technical skills to the sectors that are potential economic engines including mineral beneficiation, agriculture as well as meat products and services.
He further argued that the current funding ecosystem that includes CEDA and BDC has to date not created jobs and the scale of industry required to lift Botswana from its unemployment and economic quagmire. “It is strange that the employment and industry targets of these major entities are not known.” he observed.
Mowana Copper Mine in Dukwi will finally pay its former employees a total amount of P23, 789, 984.00 end of this month. For over three years Mowana Copper Mine has been under judicial management. Updating members, Botswana Mine Workers Union (BMWU) Executive Secretary Kitso Phiri this week said the High Court issued an order for the implementation of the compromise scheme of December 9, 2021 and this was to be done within 30 days after court order.
“Therefore payment of benefits under the scheme including those owed to Messina Copper Botswana employees should be effected sometime in January latest end of January 2022,” Kitso said. Kitso also explained that cash settlement will be 30 percent of the total Messina Copper Botswana estate and negotiated estate is $3,233,000 (about P35, 563,000).
Messina Copper was placed under liquidation and was thereafter acquired by Leboam Holdings to operate Mowana Mine. Leboam Holdings struck a deal with the Messina Copper’s liquidator who became a shareholder of Leboam Holdings. Leboam Holdings could not service its debts and its creditors placed it under provisional judicial management on December 18, 2018 and in judicial management on February 28, 2019.
A new company Max Power expressed interest to acquire the mining operations. It offered to take over the Mowana Mine from Leboam Holdings, however, the company had to pay the debts of Leboam including monies owed to Messina Copper, being employees benefits and other debts owed to other creditors.
The monies, were agreed to be paid through a scheme of compromise proposed by Max Power, being a negotiated payment schedule, which was subject to the financial ability of the new owners. “On December 9, 2021, Messina Copper liquidator, called a meeting of creditors, which the BMWU on behalf of its members (former Messina Copper employees) attended, to seek mandate from creditors to proceed with a proposed settlement for Messina Copper on the scheme of compromise. It is important to note that employee benefits are regarded as preferential credit, meaning once a scheme is approved they are paid first.”
A savingram the Ministry of Local Government and Rural Development sent to Town Clerks and Council Secretaries explaining why councilors across the country should not have access to their terminal benefits before end of their term has been revealed.
The contents of the savingram came out in the wake of a war of words between counselors and the Ministry of Local Government and Rural Development. The councilors through the Botswana Association of Local Authorities (BALA) accuse the Ministry of refusing to allow them to have access to their terminal benefits before end of their term.
This has since been denied by the Ministry. In the savingram to town councils and council secretaries across the country, Permanent Secretary in the Ministry of Local Government and Rural Development Molefi Keaja states that, “Kindly be advised that the terminal benefits budget is made during the final year of term of office for Honorable Councilors.” Keaja reminded town clerks and council secretaries that, “The nominal budget Councils make each and every financial year is to cater for events where a Councilor’s term of office ends before the statutory time due to death, resignation or any other reason.”
The savingram also goes into detail about why the government had in the past allowed councilors to have access to their terminal benefits before the end of their term. “Regarding the special dispensation made in the 2014-2019, it should be noted that the advance was granted because at that time there was an approved budget for terminal benefits during the financial year,” explained Keaja. He added that, “Town Clerks/Council Secretaries made discretions depending on the liquidity position of Councils which attracted a lot of audit queries.”
Keaja also revealed that councils across the country were struggling financially and therefore if they were to grant councilors access to their terminal benefits, this could leave their in a dire financial situation. Given the fact that Local Authorities currently have cash flow problems and budgetary constraints, it is not advisable to grant terminal benefits advance as it would only serve to compound the liquidity problems of councils.
It is understood that the Ministry was inundated with calls from some Councils as they sought clarification regarding access to their terminal benefits. The Ministry fears that should councils pay out the terminal benefits this would affect their coffers as the government spends a lot on councilors salaries.
Reports show that apart from elected councilors, the government spends at least P6, 577, 746, 00 on nominated councilors across the country as their monthly salaries. Former Assistant Minister of Local Government and Rural Development, Botlogile Tshireletso once told Parliament that in total there are 113 nominated councilors and their salaries per a year add up to P78, 933,16.00. She added that their projected gratuity is P9, 866,646.00.
A surge in consumer spending is expected to be a key driver of Botswana’s economic recovery, according to recent projections by Fitch Solutions. Fitch Solutions said it forecasts household spending in Botswana to grow by a real rate of 5.9% in 2022.
The bullish Fitch Solutions noted that “This is a considerable deceleration from 9.4% growth estimated in 2021, it comes mainly from the base effects of the contraction of 2.5% recorded in 2020,” adding that, “We project total household spending (in real terms) to reach BWP59.9bn (USD8.8bn) in 2022, increasing from BWP56.5bn (USD8.3bn) in 2021.” According to Fitch Solutions, this is higher than the pre-Covid-19 total household spending (in real terms) of P53.0 billion (USD7.8bn) in 2019 and it indicates a full recovery in consumer spending.
“We forecast real household spending to grow by 5.9% in 2022, decelerating from the estimated growth of 9.4% in 2021. We note that the Covid-19 pandemic and the related restrictions on economic activity resulted in real household spending contracting by 2.5% in 2020, creating a lower base for spending to grow from in 2021 and 2022,” Fitch Solutions says.
Total household spending (in real terms), the agency says, will increase in 2022 when compared to 2021. In 2021 and 2022, total household spending (in real terms) will be above the pre-Covid-19 levels in 2019, indicating a full recovery in consumer spending, says Fitch Solutions. It says as of December 6 2021 (latest data available), 38.4% of people in Botswana have received at least one vaccine dose, while this is relatively low it is higher than Africa average of 11.3%.
“The emergence of new Covid-19 variants such as Omicron, which was first detected in the country in November 2021, poses a downside risk to our outlook for consumer spending, particularly as a large proportion of the country’s population is unvaccinated and this could result in stricter measures being implemented once again,” says Fitch Solutions.
Growth will ease in 2022, Fitch Solution says. “Our forecast for an improvement in consumer spending in Botswana in 2022 is in line with our Country Risk team’s forecast that the economy will grow by a real rate of 5.3% over 2022, from an estimated 12.5% growth in 2021 as the low base effects from 2020 dissipate,” it says.
Fitch Solutions notes that “Our Country Risk team expects private consumption to be the main driver of Botswana’s economic growth in 2022, as disposable incomes and the labour market continue to recover from the impacts of the Covid-19 pandemic.” It says Botswana’s tourism sector has been negatively impacted by the Covid-19 pandemic and the related travel restrictions.
According to Fitch Solutions, “The emergence of the Omicron variant, which was first detected in November 2021, has resulted in travel bans being implemented on Southern African countries such as South Africa, Botswana, Lesotho, Namibia, Zimbabwe and Eswatini. This will further delay the recovery of Botswana’s tourism sector in 2021 and early 2022.” Fitch Solutions, therefore, forecasts Botswana’s tourist arrivals to grow by 81.2% in 2022, from an estimated contraction of 40.3% in 2021.
It notes that the 72.4% contraction in 2020 has created a low base for tourist arrivals to grow from. “The rollout of vaccines in South Africa and its key source markets will aid the recovery of the tourism sector over the coming months and this bodes well for the employment and incomes of people employed in the hospitality industry, particularly restaurants and hotels as well as recreation and culture businesses,” the report says.
Fitch Solutions further notes that with economies reopening, consumers are demanding products that they had little access to over the previous year. However, manufacturers are facing several problems. It says supply chain issues and bottlenecks are resulting in consumer goods shortages, feeding through into supply-side inflation. Fitch Solutions believes the global semiconductor shortage will continue into 2022, putting the pressure on the supply of several consumer goods.
It says the spread of the Delta variant is upending factory production in Asia, disrupting shipping and posing more shocks to the world economy. Similarly, manufacturers are facing shortages of key components and higher raw materials costs, the report says adding that while this is somewhat restricted to consumer goods, there is a high risk that this feeds through into more consumer services over the 2022 year.
“Our global view for a notable recovery in consumer spending relies on the ability of authorities to vaccinate a large enough proportion of their populations and thereby experience a notable drop in Covid-19 infections and a decline in hospitalisation rates,” says Fitch Solutions. Both these factors, it says, will lead to governments gradually lifting restrictions, which will boost consumer confidence and retail sales.
“As of December 6 2021, 38.4% of people in Botswana have received at least one vaccine dose. While this is low, it is higher than the Africa average of 11.3%. The vaccines being administered in Botswana include Pfizer-BioNTech, Sinovac and Johnson & Johnson. We believe that a successful vaccine rollout will aid the country’s consumer spending recovery,” says Fitch Solutions. Therefore, the agency says, “Our forecasts account for risks that are highly likely to play out in 2022, including the easing of government support. However, if other risks start to play out, this may lead to forecast revisions.”