WeekendPost caught up with information from the government enclave, trade unions and the labour department corroborating that more than 400 and counting (the last number confirmed recently was 410) companies have officialised an intent to purge jobs so that they remain viable in this dire economic times of dealing with a highly infectious pandemic to ever touch mankind.
This publication understands that this week on Tuesday leadership of trade unions and employers met with Minister of Employment Labour Productivity and Skills Mpho Balopi at Avani Hotels & Resorts in Gaborone to discuss the issue of companies registering for mass retrenchments.
On 21 March 2020 a Tripartite agreement was entered into between the Government of Botswana, Business Botswana and Trade Unions which was against any form of laying off employers or cutting of jobs amid Covid-19 struggles.
Employers are now going to the department of labour to show their lack of capacity in holding up to the few jobs they have absorbed in a country whose unemployment rate is already high. The latest statistics by Statistics Botswana of Botswana unemployment rate growing slowly from 22.2 percent in fourth quarter of 2019 to 23.2 percent in the first quarter of 2020, companies could make this numbers to grow albeit not being the wish.
Botswana Federation of Trade Unions (BFTU)’s submission to the envisaged Post Covid-19 Economic Stimulus Programme said with the advent of “total shutdown of economic activities and lockdowns,” unemployment increased to unprecedented levels. The federation stated that most of the unemployed before the Covid-19 pandemic were young people under 35 years.
Recently, Section 25 letters from companies, which are notices to terminate contracts, are said to be piling up on Commissioner of Labour Goitseone Kokorwe’s office. Section 25 of the Employment Act which falls under “Redundancy” provides that when an employer wants to reduce his work force, he shall do so, wherever reasonably practicable, in accordance with the principle commonly known as first-in-last-out.
Labour expert Thabiso Tafila five years ago wrote that retrenchment could be defined as the process whereby the service of an employee or employees is/are terminated by the employer due to the alleged financial/economic viability of the enterprise.
The Emergency Powers Act which puts a country under the Executive rule of six months sought to protect jobs. When announcing State of Emergency President Mokgweetsi Masisi talked about his intentions to support workers and that, “government will provide a wage subsidy for citizen employees of businesses mostly affected.”
Also, business stabilization was also attempted where companies were given some cash-flow relief Government by offering guarantee loans by commercial banks to businesses mostly affected by Covid-19.
Firms, according to the June Business Expectations Survey, had expected cost pressures to fall significantly in the third quarter of 2020, mainly reflecting the anticipated reduction in costs of wages. This was because of the wage subsidy which the “majority” of companies benefited from, but the same survey also concluded that, “only a few had also benefited from other relief measures such as tax concessions; value added tax (VAT) refunds; loan repayment holiday; expedited government purchase orders; and Government loan guarantees with commercial banks.”
Also, according to Business Expectations Survey of June, this year businesses have shown to be now shy to borrow as commercial banks borrowing to businesses declined from 1.7 percent in June 2019 to 0.6 percent in the corresponding period in 2020. Furthermore the survey shows that credit growth decreased in June 2020. Commercial bank credit slightly decelerated to 6.4 percent in June 2020, from 6.5 percent in the corresponding period in 2019.
Firms further perceived access to credit to be tight in the second quarter of 2020, and this is despite expecting interest rates lower after Bank of Botswana reduced the Bank rate in April to encourage credit accessibility.
This is the reason why First National Bank Botswana economists Moatlhodi Sebabole and Gomolemo Basele last month said they hope the last Monetary Policy Committee decision should have cut the Bank rate deeper to make firms to borrow more. Because, “Botswana GDP registered 2.6% y/y in 1Q20 (compared to 4.2% in 1Q19) – the disruptions caused by covid-19-related containment measures are likely to undo this positive growth, leading to a 10.5% contraction over 2020,” they said.
According to the pair, unless an extraordinary stimulus package that prioritises job creation and productivity is proposed, it could take up to three years for Botswana to regain its 2019 economic value in Pula terms.
Did Gov’t fail in job security endeavor?
Maybe some firms did not benefit or government subsidies were not enough. Amid the wage subsidies given to companies, some companies were already feeling nauseated by jobs. That time this publication saw letters of “Retrenchment Package” before “finalizing the exit package for retrenched employees” from Lucara mine partner Trollope Botswana to its workers. Ericsson Botswana was also said to be retrenching that time.
Jobs now seems to be on the throats of many companies and these firms want to puke them out for better business viability. The State of Emergency is the only reason muzzling companies to vomit these jobs. The State of Emergency is expected to end its 6 months period next month and companies are targeting this October deadline to purge jobs immediately to save businesses who have been hit hard by Covid-29.
A lot of observers expect the State of Emergency to extend. Sources suggest the proposal is already before the Executive to increase the State of Emergency and this is because the number of Covid-19 infections are not going down.
One senior minister who has Masisi’s ear told this publication he was not ready to divulge whether the State of Emergency will be extended, but he did not rule out the likely possibility. A legislator said the extension will be wise looking at the numbers of the infections soaring, he admitted jobs will be saved.
Tafila said the purpose of retrenchment should be to reduce labour costs in order to safeguard the survival of the organization. He further said the assumption is that if business improves, those retrenched could be offered re-employment in their previous positions.
Botswana economy is between a rock and a solid surface with companies loosing grip on the economy while government tries to save jobs or livelihoods. A huge economic dilemma as the country has already spend P1.5 billion of the COVID-19 Relief Fund since April this year.
According to Permanent Secretary in the Ministry of Finance and Economic Planning Dr Wilfred Mandlebe who was appearing before the Public Accounts Committee (PAC), majority of the funds (70 percent) going towards health related expenditure as well as the wage subsidy. He further said COVID-19 Relief Fund is now left with P629 million (29.6 percent).
The COVID Relief Fund contributions were that government contributed P2 billion while the rest of the contribution totaling P125 million was made by various organizations and individuals making the fund to be P2.125 billion.
Mandlebe said most of the money was used to cushion the impact of Covid-19 on labour and to help businesses that is why government guarantee insurance. But, “we are not yet out of the woods as we are no longer looking at stabilization but recovery,” he said, that is why they are making request for supplementary funds at parliament. This could be the hope for business and jobs to be saved, but the economy is still compressed.
BFTU proposed for establishment of an Unemployment Insurance Fund or a Retrenchment Fund to government. The federation says Unemployment Insurance Fund will provide a buffering mechanism that protects workers’ income against unforeseen future external shocks.
“The form of the fund should be contributory with government, business and labour. Botswana can benchmark with other countries in order to establish a sustainable and well-rounded Unemployment Insurance Fund,” suggested BFTU.
Botswana has made improvements on preventing and ending arbitrary deprivation of liberty, but significant challenges remain in further developing and implementing a legal framework, the UN Working Group on Arbitrary Detention said at the end of a visit recently.
Head of the delegation, Elina Steinerte, appreciated the transparency of Botswana for opening her doors to them. Having had full and unimpeded access and visited 19 places of deprivation of liberty and confidentiality interviewing over 100 persons deprived of their liberty.
She mentioned “We commend Botswana for its openness in inviting the Working Group to conduct this visit which is the first visit of the Working Group to the Southern African region in over a decade. This is a further extension of the commitment to uphold international human rights obligations undertaken by Botswana through its ratification of international human rights treaties.”
Another good act Botswana has been praised for is the remission of sentences. Steinerte echoed that the Prisons Act grants remission of one third of the sentence to anyone who has been imprisoned for more than one month unless the person has been sentenced to life imprisonment or detained at the President’s Pleasure or if the remission would result in the discharge of any prisoner before serving a term of imprisonment of one month.
On the other side; The Group received testimonies about the police using excessive force, including beatings, electrocution, and suffocation of suspects to extract confessions. Of which when the suspects raised the matter with the magistrates, medical examinations would be ordered but often not carried out and the consideration of cases would proceed.
“The Group recall that any such treatment may amount to torture and ill-treatment absolutely prohibited in international law and also lead to arbitrary detention. Judicial authorities must ensure that the Government has met its obligation of demonstrating that confessions were given without coercion, including through any direct or indirect physical or undue psychological pressure. Judges should consider inadmissible any statement obtained through torture or ill-treatment and should order prompt and effective investigations into such allegations,” said Steinerte.
One of the group’s main concern was the DIS held suspects for over 48 hours for interviews. Established under the Intelligence and Security Service Act, the Directorate of Intelligence and Security (DIS) has powers to arrest with or without a warrant.
The group said the “DIS usually requests individuals to come in for an interview and has no powers to detain anyone beyond 48 hours; any overnight detention would take place in regular police stations.”
The Group was able to visit the DIS facilities in Sebele and received numerous testimonies from persons who have been taken there for interviewing, making it evident that individuals can be detained in the facility even if the detention does not last more than few hours.
Moreover, while arrest without a warrant is permissible only when there is a reasonable suspicion of a crime being committed, the evidence received indicates that arrests without a warrant are a rule rather than an exception, in contravention to article 9 of the Covenant.
Even short periods of detention constitute deprivation of liberty when a person is not free to leave at will and in all those instances when safeguards against arbitrary detention are violated, also such short periods may amount to arbitrary deprivation of liberty.
The group also learned of instances when persons were taken to DIS for interviewing without being given the possibility to notify their next of kin and that while individuals are allowed to consult their lawyers prior to being interviewed, lawyers are not allowed to be present during the interviews.
The UN Working Group on Arbitrary Detention mentioned they will continue engaging in the constructive dialogue with the Government of Botswana over the following months while they determine their final conclusions in relation to the country visit.
Standard Chartered Bank Botswana (SCBB) has informed the government that it will not be accepting new loan applications for the Government Employees Motor Vehicle and Residential Property Advance Scheme (GEMVAS and LAMVAS) facility.
This emerges in a correspondence between Acting Permanent Secretary in the Ministry of Finance Boniface Mphetlhe and some government departments. In a letter he wrote recently to government departments informing them of the decision, Mphetlhe indicated that the Ministry received a request from the Bank to consider reviewing GEMVAS and LAMVAS agreement.
He said: “In summary SCBB requested the following; Government should consider reviewing GEMVAS and LAMVAS interest rate from prime plus 0.5% to prime plus 2%.” The Bank indicated that the review should be both for existing GEMVAS and LAMVAS clients and potential customers going forward.
Mphetlhe said the Bank informed the Ministry that the current GEMVAS and LAMVAS interest rate structure results into them making losses, “as the cost of loa disbursements is higher that their end collections.”
He said it also requested that the loan tenure for the residential property loans to be increased from 20 to 25 years and the loan tenure for new motor vehicles loans to be increased from 60 months to 72 months.
Mphetlhe indicated that the Bank’s request has been duly forwarded to the Directorate of Public Service Management for consideration, since GEMVAS and LAMVAS is a Condition of Service Scheme. He saidthe Bank did also inform the Ministry that if the matter is not resolved by the 6th June, 2022, they would cease receipt of new GEMVAS and LAMVAS loan applications.
“A follow up virtual meeting was held to discuss their resolution and SCB did confirm that they will not be accepting any new loans from GEMVAS and LAMVAS. The decision includes top-up advances,” said Mphetlhe. He advised civil servants to consider applying for loans from other banks.
In a letter addressed to the Ministry, SCBB Chief Executive Officer Mpho Masupe informed theministry that, “Reference is made to your letter dated 18th March 2022 wherein the Ministry had indicated that feedback to our proposal on the above subject is being sought.”
In thesame letter dated 10 May 2022, Masupe stated that the Bank was requesting for an update on the Ministry’s engagements with the relevant stakeholder (Directorate of Public Service Management) and provide an indicative timeline for conclusion.
He said the “SCBB informs the Ministry of its intention to cease issuance of new loans to applicants from 6th June 2022 in absence of any feedback on the matter and closure of the discussions between the two parties.” Previously, Masupe had also had requested the Ministry to consider a review of clause 3 of the agreement which speaks to the interest rate charged on the facilities.
Masupe indicated in the letter dated 21 December 2021 that although all the Banks in the market had signed a similar agreement, subject to amendments that each may have requested. “We would like to suggest that our review be considered individually as opposed to being an industry position as we are cognisant of the requirements of section 25 of the Competition Act of 2018 which discourages fixing of pricing set for consumers,” he said.
He added that,“In this way,clients would still have the opportunity to shop around for more favourable pricing and the other Banks, may if they wish to, similarly, individually approach your office for a review of their pricing to the extent that they deem suitable for their respective organisations.”
Masupe also stated that: “On the issue of our request for the revision of the Interest Rate, we kindly request for an increase from the current rate of prime plus 0.5% to prime plus 2%, with no other increases during the loan period.” The Bank CEO said the rationale for the request to review pricing is due to the current construct of the GEMVAS scheme which is currently structured in a way that is resulting in the Bank making a loss.
“The greater part of the GEMVAS portfolio is the mortgage boo which constitutes 40% of the Bank’s total mortgage portfolio,” said Masupe. He saidthe losses that the Bank is incurring are as a result of the legacy pricing of prime plus 0% as the 1995 agreement which a slight increase in the August 2018 agreement to prime plus 0.5%.
“With this pricing, the GEMVAS portfolio has not been profitable to the Bank, causing distress and impeding its ability to continue to support government employees to buy houses and cars. The portfolio is currently priced at 5.25%,” he said. Masupe said the performance of both the GEMVAS home loan and auto loan portfolios in terms of profitability have become unsustainable for the Bank.
Healso said, when the agreement was signed in August 2018, the prime lending rate was 6.75% which made the pricing in effect at the time sufficient from a profitable perspective. “It has since dropped by a total 1.5%. The funds that are loaned to customers are sourced at a high rate, which now leaves the Bank with marginal profits on the portfolio before factoring in other operational expenses associated with administration of the scheme and after sales care of the portfolio,” said the CEO.