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Civil service drives inequality in Botswana

Civil service

A new study by the United Nations Development Plan (UNDP) office in Botswana has revealed that employment in the public sector is driving inequality in Botswana, making it an unequal country in the world.  

UNDP commissioned the study to assist Botswana in understanding the drivers of inequality beyond income. The study also sought to help Botswana achieve its SDG 10 targets.
The report says that “It is perhaps not surprising that employment in the public sector is among the household characteristics that contribute the most to inequality,” adding that “It is also shown to contribute to higher expenditure.”

A descriptive analysis of wages “by employment sector reveals that the average last salary obtained by individuals in the public sectors BWP 8.754 in 2015/16, compared to BWP 3674 for private-sector employees,” the report says.

The report says that Botswana faces challenges that limit this achievement despite the former development plan, Vision 2016, which envisioned a high-quality education system able to meet the information age and transition the country into the current era and the high level of spending on this item.

The analysis also shows that certain ethnic groups dominate employment in public administration (i.e., Mosubia, Shekgalagadi, and Tswana). The role of tertiary education as a significant contributor to inequality is also clear from the findings presented in this report. Individuals with university-level education, primarily English-speaking and non-nationals (34% of non-nationals have a university degree, compared to 18% of non-nationals), show much higher consumption expenditure levels.

According to the UNDP analysis, Sesarwa and Seyeyi also show the highest level of unemployment among household heads (45% and 405 percent respectively) together with the Sembukushu language. The analysis shows that the dominant language, Setswana, presents a share of unemployed household heads of 31%.

“Our analysis also shows that the Sesubiya (Mosubiya ethnic group) language has the highest percentage of heads employed in the public administration, (21%) followed by the Shekgalagadi, (16%) and Setswana (14%) languages. The researchers said these findings could safely conclude that differences exist in educational attainment and labour force participation depending on the language spoken (and, most probably, ethnicity).

‘The most penalized groups appear to be those that speak Sesarwa (residing mostly in the Ghanzi) and Seyeyi (residing mostly in Ngamiland). The region these groups reside in is the poorest and most rural of the country, which could explain the high level of unemployment of ethnicities leaving (sic) within their borders,” the report says.

In the study, researchers analyzed inequality in Botswana at a national and subnational level, disaggregated its components, and tried to identify its causes and drivers. The report says inequality remains alarmingly high to the extent that Botswana is one of the most unequal countries globally (ranking 8th in the world, according to the most recent figures).

The report shows that the costs of sending children to school, both direct and indirect, are consumption) for rural and less affluent households, and become prohibitive the higher the level of education. Key informants reported that current grant programs for less wealthy students are not functioning correctly and leave many without the possibility of receiving a proper education.

“Different inequalities overlap and intersect with different groups leading to the most severe forms of exclusion. We investigated disparities between groups defined according to nationality, ethnicity, gender, and disability. Interestingly, we observed substantial differences among non-nationals between high-paid foreigners and low-skilled migrants, who are among the most vulnerable,” the report says.

The report says more populated and urbanized districts, as South East, Kgatleng, and Central, display the highest level of inequality. The South-East district – home to the capital Gaborone – hosts approximately 10% of the total population, the country’s financial centre, and most top-performing businesses. On the other hand, the Central district hosts essential diamond mines, including the Orapa mine. Districts where the soil is less fertile and where the population (and urban centres) are sparse, like Ghanzi, show lower levels of consumption expenditures as well as lower inequality, the report says.

An examination of the contribution of each district to overall inequality shows that wealthier districts with high consumption inequality, such as South East and Central, contribute the most to imbalance at a national level. Findings confirm that these districts’ contribution to inequality has increased over time, indicating that inequality is widening in the districts with the highest consumption inequality.

The report says disaggregation by economic sector shows that between 2009/10 and 2015/16, the importance of mining to the economy has waned, ceding its position to the hospitality and trade sectors and FIRE sector.

“More recent figures also confirm these trends on value-added by each sector. Data from 2019/20 indicate that the trade and hospitality sector is now the largest economy, contributing approximately 20% of added value, with mining relegated to fourth place. The last two decades have witnessed the tertiarization of the economy of many developing countries,” the report says.
However, the report says the services, trade, and financial sectors are characterized by high-income inequality, explaining the recent increase in inequality.

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Mowana Mine to open, pay employees millions

18th January 2022
Mowana Mine

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.”

Negotiated estate is P35, 563,000

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Councilors’ benefits debacle-savingram reveals detail

18th January 2022

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.

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Households spending to drive economic recovery

17th January 2022

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.”

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