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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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Debswana-Botswana Oil P8 billion fuel partnership to create 100 jobs

18th May 2022
Head-of-Stakeholder-Relations

The partnership between Debswana and Botswana Oil Limited (BOL) which was announced a fortnight ago will create under 100 direct jobs, and scores of job opportunities for citizens in the value chain activities.

In a major milestone, Debswana and BOL jointly announced that the fuel supply to Debswana, which was in the past serviced by foreign companies, will now be reserved for citizen companies. The total value of the project is P8 billion, spanning a period of five years.

“About 88 direct jobs will be created through the partnership. These include some jobs which will be transferred from the current supplier to the new partnership,” Matida Mmipi, Head of Stakeholder Relations at Botswana Oil, told BusinessPost.

“We believe this partnership will become a blueprint for other citizen initiatives, even in other sectors of the economy. Furthermore, this partnership has succeeded in unlocking opportunities that never existed for ordinary citizens who aspire to grow and do business with big companies like Debswana.”

Mmipi said through this partnership, BOL and Debswana intend to impact citizen owned companies in the fuel supply value chain that include transportation, supply, facilities maintenance, engineering, customs clearance, trucks stops and its support activities such as workshop / maintenance, tyre services, truck wash bays among others.

“The number of companies to be on-boarded will be determined by the economics at the time of engagement,” she said. BOL will play a facilitatory role of handholding and assisting emerging citizen-owned fuel supply and fuel transportation companies to supply Debswana’s Jwaneng and Orapa Letlhakane Damtshaa (OLDM) mines with diesel and petrol for their operations.

“BOL expects to increase citizen companies’ market share in the fuel supply and transportation industries, which have over the years been dominated by foreign-owned suppliers. Consequently, the agreement will also ensure security of supply for Debswana operations, which are a mainstay of the Botswana economy,” Mmipi said.

“Furthermore, BOL will, under this agreement, transfer skills to citizen suppliers and transporters during the contract period and ensure delivery of competent and skilled citizen suppliers and transport companies upon completion of the agreement.”

Mmipi said the capacitating by BOL is limited to providing citizen companies oil industry technical capability and capacity to deliver on the requirements of the contract, when asked on helping citizen companies to access funding.

“BOL’s mandate does not include financing citizen empowerment initiatives. Securing funding will remain the responsibility of the beneficiaries. This could be through government financing entities including CEDA or through commercial banks. Further to this, there are financial institutions that have already signed up to support the Debswana Citizen Economic Empowerment Programme (CEEP),” Mmipi indicated.

While BOL is established by government as company limited by guarantee, it will not benefit financially from the partnership with Debswana, as citizen empowerment in the petroleum value chain is core to BOL’s mandate.

“BOL does not pursue citizen facilitation for financial benefit, but rather we engage in citizen facilitation as a social aspect of our mandate. Citizen facilitation comes at a cost, but it is the right thing to do for the country to develop the oil and gas industry,” she said.

Mmipi said supplying fuel to Debswana comes with commercial benefits such as supply margins. These have traditionally been made outside the country when supply was done by multi-nationals for a period spanning over 50 years. With BOL anchoring supply for Debswana, this benefit will accrue locally, and BOL will be able to pay taxes and dividends to the shareholders in Botswana.

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VAT in Africa Guide 2022 – Africa re-emerging

18th May 2022

PwC Africa has presented the eighth edition of the VAT in Africa Guide – Africa re-emerging. This backdrop of renewal informs on the re-emergence of African economies and societies which have been affected by the COVID-19 pandemic.

In this edition, which has been compiled by PwC Africa’s indirect tax experts, covers a total of 41 African countries. It is geared towards sharing insight with our clients based on the constantly changing tax environments that can have a significant impact on business operations.

Within Africa, governments continue to focus on expanding the tax net by improving revenue collection through efficient compliance systems and procedures. PwC Africa has observed that revenue authorities also continue to take a keen interest in indirect taxes as part of revenue mobilisation initiatives.

Maturing VAT system and upskilling SARS 

“In South Africa, VAT is becoming more relevant as a revenue source for the government,” says Matthew Besanko, PwC South Africa’s Indirect Tax Leader. “Strides have been made to upskill South African Revenue Service (SARS) staff and identify VAT revenue leakages, particularly in respect of foreign suppliers of electronic services to people and businesses in South Africa.”

Broadening the tax base and digital economy

In the past year, South Africa, Mozambique and Zimbabwe saw updates to their VAT legislation, or introduced specific legislation targeting electronically supplied services (ESS), which is in line with the global trend of attempting to tax the digital economy. “The expectation is that Botswana will also introduce VAT legislation in due course, while the National Treasury in South Africa has also made mention of revising the rules to account for further developments in the digital economy,” Besanko says.

South Africa’s National Treasury has also drafted legislation with the intention to introduce a reverse charge on gold, which is expected to come into effect later in 2022. While in Zimbabwe, revenue authorities have introduced a tax on the export of raw medicinal cannabis ranging between 10% and 20%, which came into effect on 1 January 2021.

ESG and carbon tax 

Key strides have also been made within the Environmental, Social and Governance (ESG) space. “ESG leadership, strategising and reporting is essential now for organisations that wish to flourish and remain relevant,” Kabochi says. He adds that companies need to consider how ESG and tax intersect, since tax is a significant value driver when businesses need to deliver on their ESG goals.

In South Africa, a carbon tax regime, which is being implemented in three phases, has been adopted. The second phase was scheduled to start in January 2023, however phase one was extended by three years until 31 December 2025.

Until then, taxpayers will enjoy substantial tax-free allowances which reduce their carbon tax liability. At the beginning of 2022, the South African government increased the carbon tax rate to R144 (about US$9), which is expected to increase annually to enable South Africa to uphold its COP26 commitments.

With effect from 1 January 2023, carbon tax payers in South Africa will also be required to submit carbon budgets and adhere to the provisions of the carbon budgeting system which will be governed by the Climate Change Bill. Where set carbon budgets are exceeded, the government plans to impose penalties. “At PwC, we are continuously focused on our renewed global strategy, ” The New Equation,” Kabochi says. “Through this strategy, a key focus area for PwC Africa is to support clients in adding value to their ESG ambitions and building trust through sustained outcomes.”

The New Equation is also an acknowledgement of the fundamental changes in the business environment in which PwC’s clients and other stakeholders operate. PwC continues to reinvent and adapt to these changes as a community of problem solvers, combining knowledge and human-led technology to deliver quality services and value.

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Economists project lower economic growth for Botswana

18th May 2022
CBD

Local and international economists have lowered their projections on Botswana’s economic growth for 2022 and 2023, saying the country is highly likely to fail to maintain high growth rate recorded in 2021 hence will not reach initial forecasts.

Economists this week lowered 2022 forecasts for Botswana’s economic growth rate, from the initial 5.3% to 4.8% and added that in 2023 growth could further decline to 4.0%. The lower projections come on the backdrop of an annual economic growth that recovered sharply in 2021 with figures showing that year-on-year real Gross Domestic Product (GDP) growth increased to 11.4%, up from a contraction of 8.7% in 2020.

Economists from the local research entity, E-consult, this week stated that the 2021 double digit growth that exceeded projections made at the time of the 2022 budget may be short lived due to other developments taking place in the global economy. E-consult Economist Sethunya Kegakgametse stated that the war in Ukraine has worsened supply problems in the global economy and added that before the war, macroeconomic indicators were seen as improving and returning to pre-COVID levels.

According to the economist the global economy was projected to improve in 2022 and 2023. Recent figures show that global growth projections have been revised downwards from the initial forecast of 4.9% in 2022 with the World Bank’s new estimate for global growth in 2022 at 3.2%.

The statistics also shows that International Monetary Fund revised their growth projections for 2022 and 2023 down by 0.8% and 0.2% respectively, falling to 3.6% for both years. “The outbreak of war has severely dampened the global recovery that was under way following the COVID-19 pandemic,” said the economist.

She stated that despite Botswana being geographically removed from the conflict, the country has not and will not be exempt from the disruptions in the global economy. “The disruptions to global supply chains resulting from the war will have a negative effect on both Botswana’s growth and trade activities.

The economic sanctions against diamonds from Russia will add uncertainty to the market which will have knock on effects to Botswana’s growth, exports, and government revenues,” said the economists who added that the disruptions are driving prices up and result with very high inflation in the local economy.

Kegakgametse projected that in an attempt to limit inflation Bank of Botswana will be forced to raise interest rate “Should the sharp increase in both global and local inflation persist, Bank of Botswana much like other central banks around the world will be forced to raise interest rates in a bid to control rising prices. This would mean an end to the expansionary monetary policy stance that had been adopted post COVID-19 to aid economic growth,” she said.

In the latest projections, the UK based economic research entity Fitch Solutions lowered 2022 real GDP growth forecast for Botswana from 5.3% to 4.8% “In 2023, we see economic growth rate decelerating to 4.0%,” said Fitch Solutions economists who also noted that the 2022 and 2023 economic growth projections may come out lower than the current forecasts, as it is possible that new vaccine-resistant virus variants may be identified, which could result in the re-implementation of restrictions. “In such circumstances, we cannot rule out that Botswana’s economy may post weaker growth than our baseline scenario currently assumes,” said the economists.

According to the projections, Fitch Solution stated that there is limited scope for Botswana government to increase diamond production and exports, following the economic sanctions imposed on Russian diamond mining companies operating in Botswana. The research entity added that De Beers is unlikely to scale up diamond output from Botswana in order to prop up diamond prices.

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