Botswana which is faced with soaring unemployment among its young population is considering introducing an unemployment benefit scheme and reviewing income taxes.
The diamond dependent economy has been experiencing weakened economic growth, averaging 3 percent in gross domestic product(GDP) rate in the last six years, a not enough pace for the economy to create jobs for the country’s ever-growing unemployment roll.
A blueprint for the economic in the next two years, the Economic Recovery and Transformation Plan (ERTP), drawn up by officials from the finance ministry, central bank and the nation premier institutions University of Botswana has hinted at government plans to introduce unemployment benefits.
The ERTP will require at least P40 billion in government expenditure, spread over covering budget deficits and financing new developmental projects that are expected to spur the economy. The funding of the ambitious plan will see the government take on more debt and cutting back on some subsidies and subventions.
Despite the dwindling revenues amid widening budget shortages, the promoters of the plan say there is scope to implement further reforms to support the economy that may have a fiscal cost.
“These may include introducing an unemployment benefit scheme. This could be on an insurance basis, funded by deductions from pay and employer contributions or from taxation or both,” the advisors said.
Unemployment benefits or insurance is a welfare program that provides cash benefits to eligible workers who are unemployed through no fault of their own.
Furthermore, the government might review personal income tax income bands and address bracket creep, which would improve the consumption spending power of tax-paying households. At the moment, people who earn below P3,000 are exempted from paying tax, and it is anticipated that this will be raised to a higher bracket, so some people are excluded from paying tax, though it will affect government revenues.
Statistics Botswana’s latest quarterly Multi-topic Survey, which covered 2019’s fourth quarter showed that unemployment rate jumped from 20.7 percent to 22 percent. The most affected has been the young people, accounting for nearly 30 percent of the unemployed cohort. Average earnings have also dropped P4,818 to P4,989.
According to the International Labour Organisation (ILO), Botswana’s high youth unemployment rate places it in the tenth position of countries hard hit by unemployment.
The poorly diversified economy could find itself with a crisis in the next ten years as the future supply of labour continues increasing. According to the labour survey, about 30.6 percent of the economically inactive population is made up of students who are going to need jobs later. Furthermore, the 22 percent unemployment rate does not include discouraged job seekers, which are estimated to be above 100,000.
With a growing Gini Coefficient, which measures inequality, Botswana is counted among the top three most unequal countries when it comes to income and opportunities, a situation which has been made worse by the declining standards of education.