Stanbic Investment Management Services (SIMS) said Friday there is a need for a sea-change in the labour laws aimed at encouraging retirement savings for multitudes of working people with a view of reducing the level of poverty and the burden placed on government.
SIMS’ chief executive officer, Leina Gabaarane, said the current labour laws, which encourage severance benefit, are not supportive of savings, especially among the lowly paid employees.
The move came at a time when only 110 000, out of the estimated 375, 000 employed people in the country, have pension plans currently valued at P 25 billion. The bulk of those people are in the civil service whose pension fund stands at P 20 billion.
“The current labour laws are not supportive and protective of the employees and my feeling is that savings must be made mandatory. I know that some people would say that saving is an individual initiative, but we have to be realistic about the situation,” said Gabaarane. “Whilst saving is an individual responsibility, government must come to the party because at the end of the day it is government’s responsibility to take care of these people upon their retirement.”
He said a move towards mandatory savings would ultimately reduce pressure on government on destitute claims at a future date.
“We are not saying that everybody should have a permanent and pensionable job. What we are saying is that everybody must have a pool which is accessible at retirement. For instance, if one earns P10, you give him P 9 at the end of the month and save P 1.00 for him every month until he retires.
That money will enjoy growth and interest in the capital markets over the period,” he said.
Speaking at the same occasion was Stanbic Retail Investor’s director, Peter Hansen, who said Botswana urgently needed to diversify its economy as diamond production has a reached plateau. As such, he said, the growth rates are generally expected to slow-down and what remained daunting were the high interest rates that ruled over the economy for some time.
“ Economic diversification is essential for the long term growth of Botswana, but, the problem is that interest rates are high, especially for start up businesses,” he said.
Hansen said that one of the good things which was happening was that government had realised that it needed to trim down to allow the participation of the private sector by privatizing Air Botswana and Botswana Telecommunications.