Fears of a global double dip recession are already diminishing prospects of a public sector salary increase in the coming financial year (2012/13).
The fears come at a time when the civil service has gone without a salary increase for a solid three years, save for a three percent hike implemented this month (October) following an unprecedented two months strike in the first half of the year.
The civil service has had to bear the brunt of an eroded purchasing power as the cost of living continued to maintain an upward trajectory.
In an interview with Sunday Standard, independent economist and Econsult Managing Director, Dr Keith Jefferis, admitted that the prospects of a public sector salary increase were diminishing on the back of a threatened double dip global economic recession.
“The threatened double dip global recession is, of course, diminishing prospects of a public sector salary increase. The government salary hike depends on the budget situation. What we saw in the first half of 2011 was that the budget situation was quite favourable because diamond prices rose rapidly. That helped to boost government revenues and reduce the deficit. However, in the last few weeks the international economy has deteriorated. Global economic growth has slowed down and there are fears of a double dip recession or a major economic crisis caused by problems in the Euro Zone,” said Jefferis.
He added that commodity prices were already falling and the diamond market prices have also been dropping, thereby affecting government revenues and balance of payments.
“That means government has less money to finance public sector salary increase,” said Jefferis.
The same sentiments were echoed by University of Botswana Dean of Social Sciences, Professor Happy Siphambe, who explained that government had struggled to raise the three percent hike that was awarded the civil service this month.
“The feared double dip recession presents a serious problem. It is quite obvious that it (double dip recession) would diminish prospects of a civil service salary increase in the coming financial year,” said Siphambe, adding that he had not anticipated that a recession would come this fiscal year.
He said if the developed economies stopped buying Botswana’s diamonds, it then means that there is a serious problem because the country has failed to diversify the economy and rather relied on a luxurious commodity for its revenue generation.
“The economic diversification issue is a major policy issue that we have failed to address. There is not much action on the diversification drive and this puts us in a quandary in times of a global economic recession,” said Siphambe.
Finance and Development Planning Minister, Kenneth Matambo, has said the level of the global economy is still recovering although fragile on the back of what is happening in the Euro Zone.
“There is fear of a global double dip recession. Things are just woolly. It is not clear whether the world economy is headed for another recession or not. As for Botswana, we will be affected if there is a recession. We will have to continue to be cautious,” said Matambo, adding that Botswana faced a fragile economic recovery.
The minister said fears of a double dip recession notwithstanding, Botswana’s diamonds sales were currently doing well.
However, University of Botswana economics lecturer Gaotlhobogwe Motlaleng holds a different view saying the apprehended recession will not be severe because most economies are readying themselves for any eventuality, unlike in the past recession when the world was caught napping.
He explained that the three affected countries in the Euro Zone (Greece, Italy and Portugal) are not a major market for Botswana exports unlike America.
“If it was America we would definitely be affected. What links do we have with those countries or economies? Most of our exports do not go to the Euro Zone, especially the affected countries. If they were our major market we would be affected. But they are not and they are not even big economies in the Euro Zone. Further, are they major donors to Botswana? No. So the impact would be minimal,” said Motlaleng.
The academic added that even in terms of tourism the three countries are not a major market for Botswana unlike America and some big economies in the Euro Zone.
Trade union movements are equally worried by the unfolding global economic events which have the potential to increase the financial woes of their members if they are not awarded a salary increase in the coming financial year.
National Amalgamated Local and Central Government Workers Union (Manual Workers Union) national organizing secretary, Johnson Motshwarakgole, said they will always be concerned when the world is hit by negative economic developments.
He, however, maintained that the biggest problem in Botswana is that there is no social dialogue on such issues.
“The problem is governance and prioritization. If there are problems, the public should be informed so that they also have ownership of the problem. The same goes for the workers. The biggest problem is lack of consultation. This is just a democratic country without a social dialogue forum,” said Motshwarakgole.
The unionist observed that while it is clear that some of these problems are not human made, there must be meaningful engagement with those who are affected and in this case the workers.
“We will continue to blame government because even if there is an economic recovery they do not take workers’ issues seriously. We are currently informed that the economy has grown by 9.6 percent in the first half of the year. The factors that could undermine economic growth have not been made public and explained,” argued Motshwarakgole.
He added that it is a pity that the government is not engaging the workers and informing them about the reality of the global economic situation.
“If there was dialogue, we would have suggested that Ipelegeng money be diverted to fund the workers’ increment as well enhance concerted efforts on cost recovery to mitigate the negative impact. It is important for all of us to come together and dialogue on such economic issues. Government should also change tact and attract serious investors in order to develop the economy meaningfully,” said the labour activist.