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Job creation: Masisi pledges budget, political will

Botswana’s government is committed to creating jobs particularly through the private sector, Vice president Mokgweetsi Masisi told the participants of the first annual Job Summit, adding that if sufficient jobs are not created, the blame should lay with the private sector.


“The private sector should be able to create decent jobs, we have enabled a conducive environment for that.” At the same time, Masisi, who also is mandated with job creation strategies, said that the government does not intend on creating jobs in the government, instead the private sector should create more jobs.

He acknowledged that there are still challenges such as overcoming bureaucracy but the government is committed to removing barriers that hinder the participation of the private sector.


The vice president called on the private sector to be more innovative in their approach instead of franchising existing businesses.

“Franchising leads to dependency syndrome,” he warned, asserting that job creation is made even more possible by home grown businesses that could train their employees. He reasoned that “skilled manpower creates jobs.” He decried that the youth are mostly affected by unemployment, and if the situation continues, the rate of unemployment will keep on increasing.


Masisi also shed light on the intended objectives of the envisaged Economic Stimulus Package. He said that the package will have impact everywhere, “Nobody will be left out” he emphasised. Furthermore, the success of the stimulus package will be measured on the number of jobs created in each sector as well as the number of new businesses created per sector. So far the identified sectors are construction, tourism development, manufacturing and agriculture.


The upbeat message from the vice president did not cease other panellists from assessing the country’s challenges and prospects. Bogolo Kenewendo, an economist with the Ministry of Trade in Ghana, pointed to the slow economic growth as a hindrance to job creation.

Kenewendo advised the government to shift from being an export dependent economy to a non-export economy. She also took issue with the lack of comprehensive data, especially that of labour market force, before dropping a bombshell that Botswana’s unemployment rate could be hovering around 40%, “using the narrow definition of unemployment.”

The official unemployment rate is somewhere around 20%. On the supply side of things, Kenewendo had this to say, “Is there a mismatch? Are our people skilled or educated?” This comes against the backdrop of employers complaining about the competence of some job seekers.


Dr Joel Sentsho, Trade Policy Advisor in the Ministry of Trade and Industry, said that job creation will flourish in a diversified economy. While admitting that Botswana’s economy is not diversified, he was upbeat about future prospects.

“Institutions are drivers of Botswana’s industrial development agenda,” Sentsho said, explaining that development of high priority and high impact sectors were key to job creation.

Moreover, he added that the Ministry of Trade and Industry is committed to ensuring that the industrial development policy, trade policy and special economic zones are a success that will result in job creation. He cited the proposed leather park in Lobatse as an example of economic diversification and job creation, “When completed, the project will create more than a thousand jobs.”

Dr Sentsho implored the government not to throw money at unemployment but rather come up with strategies to create jobs, “Industrial development, economic diversification and job creation require a combination of both the brain and resources,” he advised.


Professor Brothers Malema, an associate professor of Economics at the University of Botswana, confirmed that Botswana’s economy has been experiencing jobless growth.

“The economy is growing but the job creation is minimal,” he said. Malema attributed this to nature of the capital intensive production of mining which drives the economy, adding that labour suffers as a result.

“Capital intensity of mining is well documented, prospects for jobless growth will continue unabated,” he emphasised. To effectively deal with the increasing unemployment rate, we need to deal with underlying problems, he argued.

“Botswana was one of the fastest growing economies but house income disparity has been rapidly increasing over the years.” He said given the growing income inequality, he wonders if allocative efficiency is in the best interest of society or just a few.


The panellists called for accountable and transparent government institutions, greater collaboration between private sector and government in job creation as well as increased productivity in the private sector and civil service. Other key recommendations were tackling corruption, better project management and sound investments with tangible returns, improving the ease of doing business in Botswana.

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Business

New study reveals why youth entrepreneurs are failing

21st July 2022
Youth

The recent study on youth entrepreneurship in Botswana has identified difficult access to funding, land, machinery, lack of entrepreneurial mindset and proper training as serious challenges that continue to hamper youth entrepreneurship development in this country.

The study conducted by Alliance for African Partnership (AAP) in collaboration with University of Botswana has confirmed that despite the government and private sector multi-billion pula entrepreneurship development initiatives, many young people in Botswana continue to fail to grow their businesses into sustainable and successful companies that can help reduce unemployment.

University of Botswana researchers Gaofetege Ganamotse and Rudolph Boy who compiled findings in the 2022 study report for Botswana stated that as part of the study interviews were conducted with successful youth entrepreneurs to understand their critical success factors.

According to the researchers other participants were community leaders, business mentors, Ministry of Trade and Industry, Ministry of Youth, Gender, Sport and Culture, financial institutions, higher education institutions, non-governmental institutions, policymakers, private organizations, and support structures such as legal and technical experts and accountants who were interviewed to understand how they facilitate successful youth entrepreneurship.

The researchers said they found that although Botswana government is perceived as the most supportive to businesses when compared to other governments in sub-Saharan Africa, youth entrepreneurs still face challenges when accessing government funding. “Several finance-related challenges were identified by youth entrepreneurs. Some respondents lamented the lack of access to start-up finance, whereas others mentioned lack of access to infrastructure.”

The researchers stated that in Botswana entrepreneurship is not yet perceived as a field or career of choice by many youth “Participants in the study emphasized that the many youth are more of necessity entrepreneurs, seeing business venturing as a “fall back. Other facilitators mentioned that some youth do not display creativity, mind-blowing innovative solutions, and business management skills. Some youth entrepreneurs like to take shortcuts like selling sweets or muffins.”

According to the researchers, some of the youth do not display perseverance when they are faced with adversity in business. “Young people lack of an entrepreneurial mindset is a common challenge among youth in business. Some have a mindset focused on free services, handouts, and rapid gains. They want overnight success. As such, they give up easily when faced with challenges. On the other hand, some participants argue that they may opt for quick wins because they do not have access to any land, machinery, offices, and vehicles.”

The researchers stated that most youth involved in business ventures do not have the necessary training or skills to maintain a business. “Poor financial management has also been cited as one of the challenges for youth entrepreneurs, such as using profit for personal reasons rather than investing in the business. Also some are not being able to separate their livelihood from their businesses.

Lastly, youth entrepreneurs reported a lack of experience as one of the challenges. For example, the experience of running a business with projections, sticking to the projections, having an accounting system, maintaining a clean and clear billing system, and sound administration system.”

According to the researchers, the participants in the study emphasized that there is fragmentation within the entrepreneurial ecosystem, whereby there is replication of business activities without any differentiation. “There is no integration of the ecosystem players. As such, they end up with duplicate programs targeting the same objectives. The financial sector recommended that there is a need for an intermediary body that will bring all the ecosystem actors together and serve as a “one-stop shop” for entrepreneurs and build mentorship programs that accommodate the business lifecycle from inception to growth.”

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Business

BHC yearend financial results impressive

18th July 2022
BHC

Botswana Housing Corporation (BHC) is said to have recorded an operating surplus of P61 Million, an improvement compared to the previous year. The housing, office and other building needs giant met with stakeholders recently to share how the business has been.

The P61 million is a significant increase against the P6 million operating loss realized in the prior year. Profit before income tax also increased significantly from P2 million in the prior year to P72 million which resulted in an overall increase in surplus after tax from P1 million prior year to P64 million for the year under review.

Chief of Finance Officer, Diratsagae Kgamanyane disclosed; “This growth in surplus was driven mainly by rental revenue that increased by 15% from P209 million to P240 million and reduction in expenditure from P272 million to P214 million on the back of cost containment.”
He further stated that sales of high margin investment properties also contributed significantly to the growth in surplus as well as impairment reversals on receivables amounting to P25 million.

It is said that the Corporation recorded a total revenue of P702 million, an 8% decrease when compared to the P760 million recorded in the prior year. “Sales revenue which is one of the major revenue streams returned impressive margins, contributing to the overall growth in the gross margin,” added Kgamanyane.

He further stated professional fees revenue line declined significantly by 64% to P5 million from P14 million in the prior year which attributed to suspension of planned projects by their clients due to Covid-19 pandemic. “Facilities Management revenue decreased by P 24 million from P69 million recorded in prior year to P45 million due to reduction in projects,” Kgamanyane said.

The Corporation’s strength is on its investment properties portfolio that stood at P1.4 billion at the end of the reporting period. “The Corporation continues its strategy to diversify revenue streams despite both facilities management income and professional fees being challenged by the prevailing economic conditions that have seen its major clients curtailing spending,” added the CEO.

On the one hand, the Corporation’s Strategic Performance which intended to build 12 300 houses by 2023 has so far managed to build 4 830 houses under their SHHA funding scheme, 1 240 houses for commercial or external use which includes use by government and 1 970 houses to rent to individuals.

BHC Acting CEO Pascaline Sefawe noted that; BHC’s planned projects are said to include building 336 flat units in Gaborone Block 7 at approximately P224 million, 100 units in Maun at approximately P78 million, 13 units in Phakalane at approximately P26 million, 212 units in Kazungula at approximately P160 million, 96 units at approximately P42 million in Francistown and 84 units at approximately P61 million in Letlhakane. Emphasing; “People tend to accuse us of only building houses in Gaborone, so here we are, including other areas in our planned projects.”

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Business

Commercial banks to cash big on high interest rates on loans

18th July 2022
Commercial-banks

Researchers from some government owned regulatory institutions in the financial sector have projected that the banking sector’s profitability could increase, following Bank of Botswana Monetary Policy Committee recent decision to increase monetary policy rate.

In its bid to manage inflation, Bank of Botswana Monetary Policy Committee last month increased monetary policy rate by 0.50 percent from 1.65 percent to 2.15 percent, a development which resulted with commercial banking sector increasing interest rate in lending to household and companies. As a result of BoB adjustment of Monetary Policy Rate, from 1.65 percent to 2.15 percent commercial banks increased prime lending rate from 5.76 percent to 6.26 percent.

Researchers from Bank of Botswana, the Non-Bank Financial Institutions Regulatory Authority, the Financial Intelligence Agency and the Botswana Stock Exchange indicated that due to prospects of high inflation during the second half of 2022, there is a possibility that the Monetary Policy Committee could further increase monetary policy rate in the next meeting in August 25 2022.

Inflation rose from 9.6 percent in April 2022 to 11.9 percent in May 2022, remaining above the Bank of Botswana medium-term objective range of 3 – 6 percent. According to the researchers inflation could increase further and remain high due to factors that include: the potential increase in international commodity prices beyond current forecasts, logistical constraints due to lags in production, the economic and price effects of the ongoing Russia- Ukraine conflict, uncertain COVID-19 profile, domestic risk factors relating to possible regular annual administered price adjustments, short-term unintended consequences of import restrictions resulting with shortages in supplies leading to price increases, as well as second-round effects of the recent increases in administered prices “Furthermore, the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices could add upward pressure to inflation,” said the researchers.

The researchers indicated that Bank of Botswana could be forced to further increase monetary policy rate from the current 2.15 percent if inflation rises persistently. “Should inflation rise persistently this could necessitate an upward adjustment in the policy rate. It is against this background that the interest rate scenario assumes a 1.5 percentage points (moderate scenario) and 2.25 percentage points (severe scenario) upward adjustment in the policy rate,” said the researchers.

The researchers indicated that while any upward adjustment on BoB monetary policy rate and commercial banks prime lending rate result with increase in the cost of borrowing for household and compnies, it increase profitability for the banking sector. “Increases in the policy rate are associated with an overall increase in bank profitability, with resultant increases in the capital adequacy ratio of 0.1 percentage points and 0.2 percentage points for the moderate and severe scenarios, respectively,” said the researchers who added that upward adjustment in monetary policy rate would raise extra capital for the banking sector.

“The increase in profit generally reflects the banking industry’s positive interest rate gap, where interest earning assets exceed interest earning liabilities maturing in the next twelve months. Therefore, an increase of 1.5 percentage points in the policy rate would result in industry gains of P71.7 million (4.1 percent increase), while a 2.25 percentage points increase would lead to a gain of P173.9 million (6.1 percent increase), dominated by large banks,” said the researchers.

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