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Botswana working age to increase by 29%

Between now and 2050, the working-age population will increase by 29 percent in Botswana, 36 percent in Lesotho, 53 percent in Namibia, and 43 percent in Swaziland, this is according to a World Bank report titled FOREVER YOUNG? Social Policies for a Changing Population in Southern Africa by Lucilla Maria Bruni; Jamele Rigolini; and Sara Troiano.

The report suggests that in South Africa the percentage figure will be lower, 28 percent, yet representing an increase of almost 10 million people. But even now, before these increases occur, unemployment is endemic.

According to the report, “Between a third and half of Southern Africa’s young males are looking for work but can’t find it. Many more, although not studying, are simply idle and out of the labour force. Employment prospects for young females are even dimmer.”

It further indicates that these unemployment and inactivity rates are high by international standards. In most low-income countries, unemployment is low—especially for males. In the OECD, only 20 percent of working-age males and 40 percent of females of that group are out of the labour force.

“Having so much of Southern Africa’s population (in some cases, the majority of the working-age group) out of the workforce hinders economic growth, equity, and poverty reduction. The economy is underutilizing a valuable resource—labour—while at the same time it needs to provide for a large number of dependents. And unemployment among youth means a double loss: the economy is forgoing not only the economic benefit of more workers, but the benefit of the very cohort that has achieved historically high levels of education.”

The World Bank report states that if unaddressed, this employment will soon turn into a full-fledged jobs crisis with long-lasting consequences. It says if youth do not find stable and well-paid employment, they will not be able to provide for themselves and their families.

“They will be unable to save for old age. And they will likely pass their precarious conditions on to their children, generating a vicious intergenerational cycle of poverty and vulnerability. This means long-term ramifications, spanning from social (poverty and vulnerability), to economic (low-productivity workers and low savings rates) and fiscal challenges (lower tax revenues and added demands on social assistance).

For young people now completing their educations, active labour market policies (ALMP), such as job intermediation and retraining services, can facilitate school-to-work transitions and ensure a better match between what workers can offer and what employers are looking for. For youth with gaps in technical expertise and “soſt skills” such as working within a group, dedicated training and job insertion programs can make a crucial difference.”

According to Bruni, Rigolini and Troiano, Southern Africa also needs action to improve the human capital of the many workers who have already leſt the education system.  They point out that the countries now have 40 million people of working age and many of them lack the skills for a growingly sophisticated global economy. Bolstering the employability of these workers will be a long-term challenge, demanding continuous and remedial education, labour insertion programs, and social assistance.

Invest in Youth’s Human Capital – Starting from the Early Ages

The report says tackling high youth unemployment and low productivity will require serious improvements in the coverage and quality of education. Fortunately, the dramatic fall in fertility rates will open up the fiscal space to invest more in the human capital of the country’s soon-to-be fewer children and its gradually shrinking youth cohort.

“In recent years, all countries in Southern Africa have made great strides in improving coverage of basic schooling. Most have achieved close to universal primary completion rates, but there remain important gaps in coverage at the secondary level. Currently, only between 20 and 50 percent of people born in the late 1990s manage to complete Grade 12. In South Africa, only 60 percent of the group born in 2010 are expected to complete that grade—and Lesotho will need to wait until the 2030 cohort to achieve that level. Making secondary completion universal will require continued investments for decades to come.

Addressing coverage alone will not suffice, however: all Southern African countries also score below international averages in measures of educational quality (Figure VIII). Lesotho, Namibia, and South Africa have among the lowest educational quality scores as measured by the imputed PISA metrics. Creating a solid human capital base requires years, if not decades of investment in education. It starts with building strong foundations for learning through early childhood development (ECD) services, which currently are offered in very few parts of Southern Africa. It continues with basic education that provides solid cognitive and socio-emotional skills. Later on, education curricula must provide the more specialized skills that the labour market will seek. While enrolment in the region’s tertiary institutions— colleges and universities—is relatively low by international standards, it is steadily growing, and it is important to lay down ahead of time institutional bases that will bolster this sector and guarantee the quality of the education it offers. It will be much more difficult and costly to improve badly performing tertiary institutions, than to get them right from the beginning.”

Southern Africa’s Epidemiological Profile

In the next decades, the demographic transition in itself will not much affect Southern Africa’s epidemiological profile, its unique mix and incidence of the various diseases and conditions that undermine public health. This is mostly because the aging of the population will proceed at a slow pace, the World Bank report suggests.

“As the simulations show, even if the spending profile across age groups were to rise to the levels of OECD countries, overall health care expenditures would increase only moderately. This does not imply, however, that the health sector will face no challenges. Changing lifestyles are adding new diseases that the health sector will have to confront. It will also need to keep up with old ones, which are not likely to fade out soon,” narrate the authors of the report.

The report further indicates that Non-communicable diseases (NCDs) are becoming a growing cause of years of life lost in Southern Africa, while chronic malnutrition and communicable diseases (CDs) such as HIV/AIDS continue to afflict millions of people (Figure IX).  It notes that young people are disproportionately at risk. New HIV/AIDS cases, for instance, are concentrated among this group, in large part due to continuation of unsafe sex practices. Redirecting the public health system will be no easy task. The service delivery model to tackle NCDs is very different and more expensive than the one used against CDs.

Rebalance Social Assistance across the Life Cycle

The World Bank report notes that countries in Southern Africa have generous and comprehensive social assistance systems. It says fiscal resources allocated to these programs are high in comparison with most emerging economies. ‘This is consistent with explicit policy priorities of the sub-region’s governments to assist poor and vulnerable people to achieve more equitable societies.’

“Social assistance is heavily geared towards supporting the elderly: resources per individual in the 65plus age group are four and a half times higher than those available to people aged 0-19 in Botswana and six times higher in South Africa. The ratio increases to 12 in Lesotho, 30 in Swaziland, and 38 in Namibia.”

The World Bank report further deducts that the lower resources allocated to children and youth help explain why cash transfers are too small to have much effect on poverty among the younger generations.  Apart from in South Africa, the impact on the nonelderly remains negligible. The “trickle down” effect of old-age pensions to younger household members is oſten called an important indirect benefit of pensions, suggests the report.

According to the report, “Overall, Southern Africa’s social assistance systems are geared towards a protective role and may miss an equally important role of promoting the human capital development of the younger generations. Well-designed cash transfers to children and youth can boost use of crucial health services such as growth monitoring checkups for infants, assuring healthier childhoods, and at later ages can help reduce school drop-out rates, in particular among the poor and vulnerable. ALMPs and continuous education programs can help vulnerable youth find places in the job market. Yet in Southern Africa these programs are rare.”

“What few of the countries have are often implemented in isolation from one another, which prevents tailoring assistance to the specific needs and vulnerabilities of each individual and following that person across the life cycle. Integrating social assistance programs into a well-articulated national system could bring significant gains in reach and efficiency. For vulnerable youth, social policies should go beyond the labour market to address the main threats to their welfare. These include unwanted pregnancy, HIV/AIDS, and low-quality education,” reads the report.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020
Botswana-on-high-alert-as-AML-joins-Covid-19-to-plague-mankind-

This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.

The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.

He was speaking in  Parliament on Tuesday delivering  Parliament’s Finance Committee report after assessing a  motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.

The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.

The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.

The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.

This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.

Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.

Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.

However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.

Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.

When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.

This  as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.

The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.

Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.

In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.

Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.

Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.

Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.

Acknowledging the need to draw down from GIA no more, current Minister of Finance   Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”

He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”

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