An innovative use of pension and provident funds and innovative tax incentives to release capital for private and social investments, promotion of co-operatives, mainstreaming of youth bias in job creation, incentives for skills export to create high end job opportunities, job retention strategies and for employment intensive macro-economic policy framework are collectively, a panacea for making more and better jobs possible in Botswana, according to BOPEU.
Speaking on behalf of BOPEU President, Andrew Motsamai, BOPEU’s Edward Tswaipe told the just ended Annual Botswana Job Summit that government must abandon its conservative macro-economic policy and utilize a handsome portion of the P50 billion worth of pension funds held by Botswana Public Officers Fund (BPOPF) must be utilized locally through government borrowing to finance infrastructure and large scale investment projects to create decent jobs through deepening of the domestic capital markets.
Serious consideration could also be given to implementing the recommendations of the 2008 study conducted by Keith Jefferies for Finmark Trust that a statutory consolidation of private sector retirement industry funds would yield huge benefits to the economy in terms of expanding domestic financial markets, guaranteeing social protection for all; and reducing the burden of private insurance firms which are already contributing to private pension funds for their employees. The study further recommended that firms’ mandatory contributions to social insurance be diverted to a broad based pension scheme covering the whole private sector.
BOPEU is further advocating for mandatory workers’ insurance, compulsory pension funds and other mandatory employment benefits, such as maternity benefits that are to be consolidated into a National Social Security Fund (NSSF) contributed by employers, employees and government, which in 20 years could worth well over P100-P200 billion in pension and workers’ insurance fund.
The fund could also include paternity allowances and unemployment benefits. Government was hypocritical by not borrowing funds from pension fund to finance infrastructural development and it was wrong for her to lead a Fund belonging to workers while denying them as rightful owners the right to influence investment decisions on how their money is used.
There was need for targeted and creative use of tax incentives and youth job subsidies to sentivitise youth employment creation since tax credits are increasingly being adopted by most countries to promote both investment and entrepreneurship and at the same time tackle the challenges of unemployment and sluggish economic growth.
Two similar programmes (NIP and GVS) are wrongly conceptualized as youth empowerment schemes rather active labour market policies because they lack the tax element embedded in their design.
Youth wage subsidies and tax credits are used worldwide as a means to increase absorption of young people into the labour market and are supported by the ILO. However, there was a danger that such subsidies could be abused and suffer the disadvantage of becoming part of the labour market flexibility and vulnerability challenges. Employers tend to use young entrants as cheap labour to displace other workers and avoid associated mandatory labour costs.
Tax incentives are also demand driven and do not adequately address fundamental causes of structural unemployment such as poor skills, limited experience and so on and points to education as the only sustainable means to labour market absorption.
The problem of youth unemployment was structural and a function of the failure of the education system to produce adequate, appropriate skills(supply) and insufficiency of labour demand due to low growth, high skills, productivity requirements and high wage expectations.
Similarly no consideration has been made to capitalise on non-Profit Organizations such as trade unions, co-operatives and NGOs as potential job creators and no comprehensive study with the exception of that of Kalusope (2013), was ever conducted on the financial and fixed asset holdings of trade unions.
Yet, the total trade union asset holding may be in excess of P300 million with possible monthly subscriptions of more than P10 million, excluding the income from their profit making investment arms.
Co-operatives also have a similar pattern of assets and income generation, especially the Savings and Credit Coops (SACCOS) but tend to remain stuck in marketing, multipurpose cops and SACCOS. NGOs also handle massive donor funding which could be better managed and controlled.
BOPEU is advocating for a deliberate policy mainstreaming skills development in public investment contracts in the manner of the 1070s localization policy, youth bias in job creation in the way of affirmative action, deliberate massive investment in industry relevant TEVET programmes.
The rationale for this is that in the long run, a demand relevant TEVET programme would position young people competitively for sustainable absorption and recommend that programme design should go beyond youth empowerment schemes to into ALMPs linked to the education system. Sustainability would require integration into the overarching development strategy such as industrialization strategy and not in mere disbursement of funds.
Botswana should also look into exporting skills of its technicians and professionals where it is experience an excess in supply but who are in short supply in other countries because while there are shortages in some areas there are excess in others, rather than to retrain and accept misallocated employment and underemployment.
The strategy to create jobs without an accompanying strategy to retain them is an evidence of unsustainability and BOPEU recommends job retention as an innovation embedded and mainstreamed in all job creation strategies.
Retention should be about strengthening labour market regulation and integrating industrial relations into the job retention strategy. An issue of concern is job losses due to retrenchments where the Commissioner of Labour issues a certificate upon mere pleading of bankruptcy or weak financials.
Instead it should be that a company that seeks to retrench workers should be subjecting itself to further scrutiny to substantiate its claim. A law should create a Commission made up of industry and financial experts to investigate operational requirements and report to the Commissioner before any large scale redundancy could be considered.
Part of the job creation strategy should also entail reclaiming jobs being lost to other countries through hosting o management decisions and hubbing of activities where for instance, in the banking industry, a hub is created elsewhere in places like Kenya, Zimbabwe or South Africa, yet the company would be making its biggest profits from Botswana.”Common sense dictates that the hub should be where the business is, unless there are compelling reasons otherwise”.
In the case of retailing, local managers are being subordinated to lower ranking supervisors in Johannesburg or Cape Town for the most mundane of decisions, while in the tourism industry, group bookings to the Okavango delta are made from Johannesburg or London and payments made into foreign accounts before accessing the service in Botswana.
BOPEU wants the review of employment intensity of growth and investment and recommend the dominance of bias in monetary and fiscal policy towards more and better jobs, where employment is the means to translate growth in a sustainable route out of poverty and inequality. A long delayed National Employment Policy (NEP) should be brought to parliament as promised with targets has to integrated into National Development Plans, with decent work as a cross cutting theme.
Policy makers must jettison the misconception that to create jobs less attention should be paid to decent work and the quality of those jobs including tenure, decent wages, compliance with labour standards, social security, job retention, minimum wages, collective bargaining, EPL and mandatory benefits should be part of the equation.
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.”