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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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Business

Diamond industry crises not over yet – De Beers Chief

13th January 2021
De Beers Group Chief Executive Officer: Bruce Cleaver

Following a devastating first half of the year 2020 due to COVID-19, the global diamond industry  started gaining  positive momentum towards the end of the year as key markets entered into  thanks giving and holiday season.

However Bruce Cleaver, Chief Executive Officer of De Beers Group cautioned that the industry is not out of the woods yet, citing prevailing challenges ahead into 2021.

The first half of 2020 was characterized by some of the worst challenges in history of global diamond trade.

The midstream, where rough diamonds are traded in wholesale and bulk to cutters and polishers, was for the most part of second quarter 2020, suffocated by international travel restrictions as countries responded to the contagious Corona Virus.

This halted movement of buyers and shipment of  the rough goods , resulting  in unprecedented decline of sales, in turn  ballooning stockpiles as the upstream  operations produced with little uptake by the midstream.

The situation was exacerbated by muted demand in the downstream where jewelry industries and tail end retailers closed to further curb the spread of COVID-19.

However towards the end of third quarter getting into the last quarter of the year, demand in both midstream and downstream started to steadily pick up as countries relaxed COVID-19 restrictions.

De Beers, the world’s largest diamond producer by value started reporting significant recovery in sales in the sixth and seventh cycle, figures began to reflect an upswing in sentiment as well as increase in uptake of rough goods by midstream.

Sales for the sixth cycle amounted to $116 Million, following a sharp downturn in the previous cycles, significant jump was realized during the seventh cycle, registering $320 million, an over 175 % upswing when gauged against the proceeding cycle.

De Beers noted that diamond markets showed some continued improvement throughout August and into September as Covid-19 restrictions continued to ease in various locations.

“Manufacturers focused on meeting retail demand for polished diamonds, particularly in certain product areas, accordingly, we saw a recovery in rough diamond demand in the seventh sales cycle of the year, reflecting these retail trends, following several months of minimal manufacturing activity and disrupted demand patterns in all major markets,” said De Beers Chief Executive, Bruce Cleaver in September last year.

The diamond mining behemoth continued to register impressive sales in the eighth and ninth cycle signaling the industry could end the year on a positive note.

The momentum was indeed carried into the last cycle of the year. The value of rough diamond sales (Global Sightholder Sales and Auctions) for De Beers’ tenth sales cycle of 2020 amounted to $440 million, a significant increase from the 2019 tenth sales cycle value.

Against what seemed like a positive year end that would split into the New Year Bruce Cleaver, CEO, De Beers Group, however warned the industry not to count eggs before they hatch.

“Positive consumer demand for diamond jewellery resulting from the holiday season is supporting the continuation of retail orders for polished diamonds from the diamond industry’s midstream sector. This in turn supported steady demand for De Beers’s rough diamonds at our final sales cycle of 2020,” Cleaver had said in December.

In caution the De Beers Chief noted that “While the diamond industry ends the year on a positive note, we must recognise the risks that the ongoing Covid-19 pandemic presents to sector recovery both for the rest of this year and as we head into 2021.”

All segments of the supply chain were severely impacted by the global lockdown measures introduced in response to the Covid-19 pandemic in the first half of 2020.

After a strong US holiday season at the end of 2019, the rough diamond industry started 2020 positively as the midstream restocked and sentiment improved.

However, from February 2020, the Covid-19 outbreak began to have a significant impact on diamond jewellery retail sales and supply chain, with many jewelers suspending all polished purchases and/or delaying payments to their suppliers.

Rough diamond sales were materially affected by lockdowns and travel restrictions, delaying the shipping of rough diamonds into cutting and trading centers and preventing buyers from attending sales events.

These resulted in significant decline in total revenue for the business in the first six months of 2020. Total revenue decreased by 54% to $1.2 billion from $2.6 billion registered in the prior half year period ended 30 June 2019.

For the entire first six (6) months of the year 2020 De Beers Rough diamonds sales fell drastically to $1.0 billion from $2.3 billion in the prior H1 period ended 30 June 2019. Sales volumes decreased by 45% to 8.5 million carats compared to 15.5 million carats registered in the prior period.

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Business

Gov’t coffers depleting to record low levels 

13th January 2021
Dr Matsheka

Next month Minister of Finance & Economic Development, Dr Thapelo Matsheka will face the nation to deliver Botswana‘s first budget speech since COVID-19 pandemic put the world on devastating economic trajectory.

The pandemic that broke out in late 2019 in China has put the entire world on unprecedented chaos ,killing over P1 million people across the globe , shattering economies and almost rendering  the year 2020 – a 12 months stretch of complete setback.

The 2021/22 budget speech will come at time when Botswana’s economy is still trying to emerge out of this.

National lockdowns and local travel restrictions have hit small medium enterprises hard, while international travel restrictions halted movement of both good and people, delivering by far some of the heaviest and worst catastrophic blows on the diamond industry and tourism sector, the likes of which this country has never seen before on its largest economic sectors.

As Minister Matsheka faces parliament next month, the reality on the ground is that Botswana’s national current cash resource, the Government Investment Account (GIA) is depleting at lightning speed.

On the other hand the COVID-19 economic mess is  prevailing,  the virus is reported to have taken a new dangerous shape of a deadly variant, spreading like fueled veld fire and causing some of the world’s super powers back to tough restrictions of lockdown.

According official figures released by Bank of Botswana, in October 2020 the GIA was running at P6 billion compared to the P18.3 billion held in the account in October 2019.

However reports indicate that the account could be currently holding just about P3 billion.  The draw down from the GIA has been by exacerbated by declining diamond revenue, the country‘s largest cash cow. The sector was experiencing significant revenue decline even before COVID-19 struck.

 

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

Taking into account the COVID-19 economic mess in 2020/21 financial year, the budget deficit could add up to P20 billion after revised figures.

Drawing down from government cash balances to finance these budget deficits meant significant withdrawals from the Government Investment Account, hence the near depletion of this buffer.

Meanwhile  should Botswana’s revenue streams completely dry up to zero levels; the country would only have 11 months, before calling out for humanitarian  aids and international donors, because  foreign reserves are also on slow down.

During 2019, the foreign exchange reserves declined by 8.7 percent, from Seventy One Billion, Four Hundred Million Pula (P71.4 billion) in December 2018 to Sixty Five Billion, Three Hundred Million Pula (P65.3 billion) in December 2019.

The reserves declined further in 2020, falling by 2.3 percent to Sixty Three Billion, Seven Hundred Million Pula (P63.7 billion) in July 2020.  This was revealed by President Masisi during State of the Nation Address in November last year.

The decrease was mainly due to foreign exchange outflows associated with Government obligations and economy-wide import requirements.

However latest statistics(October 2020)  from Bank of Botswana reveal that Botswana’s foreign reserves are estimated at P58.4 billion, with  government’s share of these funds significantly low.

Government has since introduced several measures to contain costs and control expenditure with the most recent intervention being the halting of recruitment in government departments and parastatals.

Furthermore, Value Added Tax has been signaled to go up  from 12% to 14% in April this year with more hikes and service fees anticipated as government embarks on unprecedented domestic revenue mobilization.

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Business

Cresta signs lease agreement for Phakalane golf estate hotel. continues with growth agenda despite covid-19 impact

13th January 2021

Botswana Stock Exchange listed hotel group Cresta Marakanelo Limited (“CML” or “the Company”) announced the signing of a lease agreement for Phakalane Golf Estate Hotel & Convention Centre, which will see CML extend its footprint by adding the 4 star Gaborone property to its already impressive portfolio.  The agreement is subject to regulatory approvals therefore the effective date of the transaction is expected to be 1 February 2021.

 

CML brings a wealth of expertise to the lease and despite the difficult year for the tourism and hospitality industry, due to the impact of the COVID-19 pandemic, CML remains confident in the recovery of the sector and the need to invest in expanding the Company’s footprint.

CML Managing Director, Mr Mokwena Morulane commented: “Our continued efforts to improve our offerings, understand the market dynamics and modern day trends in the face of global challenges, means we are ready for the changing face of tourism and international travel, and this addition to the Cresta portfolio signals our confidence in the future.  

 

“Despite the headwinds faced in 2020, Management has continued to focus on projects that enhance CML’s product offering such as the refurbishments at Cresta Mowana Safari Resort & Spa in the tourism capital Kasane and the ongoing refurbishment of Cresta Marang Residency in Francistown. The signing of the lease for the 4 star Phakalane Golf Estate Hotel & Conference Centre is a great addition to the Cresta portfolio and will unlock shareholder value in the future.

 

“We remain vigilant to value-enhancing opportunities including acquisitions or leases, after having reconsidered our pipeline against current and expected market conditions.”  

 

Commenting on the lease agreement, the Chief Executive Officer, Mr S Parthiban, speaking on behalf of Phakalane  noted; “No hotel chain holds as much expertise in the region, understands our local culture and tastes and what hospitality is about better than Cresta Marakanelo Limited. We believe that the renovations done to the property has made Phakalane Hotel and Convention Centre a unique product in Botswana and at par with international facilities.  We believe that this lease will benefit not only us as Phakalane , but the market in general as Cresta has run hotels successfully in Botswana for over 30 years and is therefore expected to bring new offerings that appeal to the local and international markets as well as the residents and visitors to the Golf Estate. We look forward to a long mutually beneficial relationship with Cresta.” 

 

CML like the rest of the tourism and hospitality industry and the entire value chain was hard hit by lockdowns  with the surge of COVID-19. By investing during the low period, the company hopes to realise the future value of spending time in preparing for the new consumer dynamics and behaviour.  Despite business interruptions as a result of a six-month long state of emergency and several lock-down periods declared by the Government of Botswana to limit the spread of COVID-19, the Company is starting to record an increase in occupancies, which bodes well for the recovery of the industry and the Company’s future prospects.

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