Saturday, October 24, 2020

Do we still need to heavily rely on FDI to create jobs for our people?

Once again we are forced to revisit this rather emotional topic of unemployment amongst our populace. The commentary is motivated by the recent Bank of Botswana annual report under the theme: Employment opportunities, productivity and competitiveness as contributors to sustainable economic growth. 

As reported elsewhere before, unemployment in our country is deemed to have reached crisis proportions with 61 percent of youth aged 15 ÔÇô 29 unemployed and other statistics indicating a youth to adult unemployed ratio of three (1:3). Further pronouncements indicate that the face of unemployment in our country is youthful and female. Sad isn’t it? 

A quick desk top research shows that from 1991 until 2010 Botswana unemployment rate averaged 18.10 percent, reaching an all-time high of 23.80 percent in December of 2006 and a record low of 13.90 percent in December of 1991. 

The latest figures from Statistics Botswana show that the country’s unemployment rate is at 20.0 percent, while poverty levels are estimated at over 20 percent, together with high income inequality.

Given this stats we need to grow faster than the rate of growth of unemployment in order to reduce levels of unemployment.  Not only that, we must simultaneous address the income inequalities.  

Like the Bank of Botswana has rightfully said in its report, key factors explaining Botswana high unemployment remains relatively undiversified economy, our large and unproductive public service (that may be crowding out the growth of the private sector). Another key factor that has since emerged is a labour force that is inadequately trained and has low motivation. The Botswana Government has spent heavily towards achieving universal basic education. The key question is why are we not ripping out something from that heavy investment in the of sustainable job creation? Are we too reliant on having foreigners come to our shore to create jobs for us? We should state here that there is nothing wrong with luring foreign companies to our shores. Such moves will not only boost our economy but also help in the much needed skills exchange between foreign employees and our people. 

We also should state that we strongly believe that have been an independent state for the past 50 years our days of having to heavily rely on Foreign Direct Investment (FDI) should be bearing their death-bed. 

While not so long ago countries used to put foreign investors at the very centre of national economic strategies and employment creation, recent developments signal that such a way of doing things may no longer be tenable. Not only are foreign investors hard to come by, they are also unpredictable as to be outright costly in certain instances.

The bottomline to always bear in mind in our quest to attract foreign investors as part of solution to the high unemployment crisis is that investors do not set up here because they want to help us as a country to create employment. They come here because they look around and see real chances of making good returns on their investment. That is why it is never too difficult to close shop at any given time for them. That is why it is so easy for them to repatriate all their profits to their home countries and leave not a single Thebe to reinvest in this peace loving and democratic country. 

In the past many potential investors who were weighing their options of settling in our country always complained of high costs of such things as water and electricity. To date there is no certainty that such utilities will be available for a foreseeable future. Not just that, most businesses 

The Bank of Botswana is right to say the impact of the current regulatory environment on business operations and economic activity is reflected in the outcome where Botswana ranks relatively poor in terms of comparative attractiveness of the country in relation to inward investment. The rankings suggest a need to remove impediments and work towards a more conducive operating environment.

There is no doubt that a fragile confidence among local businesses on the domestic economy, could constrain activity in the private sector. This could mean more of such businesses either downsizing, closing shop or paying our people low wages like they have always done. 

The truth of the matter, just like BoB noted is that our country impressive track record of economic growth, averaging 6.3 percent per annum between 1981 and 2013, should ideally have been accompanied by meaningful employment creation and broad-based improvement in living standards. However, the sad and unfortunate reality as depicted by BoB data and other official statistics that job creation in Botswana has lagged far behind GDP growth. This has of course resulted in chronically high unemployment concentrated primarily among our youth. The question that remains to be answered is whether we will turn such opportunity into a demographic dividend or we would rather risk and let the demographic time bomb hit on us. 

The #Bottomline however is that there is need to reduce the gap between knowledge generated in the educational system and the skills demanded by employers. Such change will enhance future growth prospects thus strike down unemployment figures in the short to medium term.

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