Sunday, April 21, 2024

NBFIRA cautions Botswana on demographic dividend


There is demographic shift that is taking place in Botswana, and this does not only offer opportunities for economic growth, but also calls for reflection and changes to the country’s pension policy, revealed Non-Bank Financial Institutions Regulatory Authority (NBFIRA) in its latest research report.

According to the report released on Wednesday, Botswana like other African countries is going through the demographic dividend period ÔÇô where the country’s economically active population is increasing at a faster rate compared to the dependency population. An economically active age refers to the proportion of either the population that is employed or actively seeking employment, while dependency population is those that are not part of the labour force, made up of people below the age of 15 and over the retirement age of 65.

According to NBFIRA’s data, with an estimated population of 2.3 million in 2017, Botswana has a youthful population as only 9.5 percent of the labour force was over 55 years while 33 percent were under 15 years, leaving about over 53 percent as economically active. The research data puts the country’s dependency ratio at around 65 percent in 2011, and attributed this to the tight job market that has seen fewer young people entering the labour market.

With people living longer, and a bulging youthful population that cannot find jobs, NBFIRA has suggested that the country has to put together policies that are in cognisant of the demographic dividend – especially the pensions sector that will have to deal with retirees who are living longer against a job market that is not absorbing new entrants at a faster pace.

“Pension systems reforms policy becomes very relevant, mostly because pension funds in this country are employer based and will be directly affected by the changes in the economically active population. Furthermore, Botswana has a universal pension system funded fully by government. An increase in the number of workers will ultimately translate to an increase in the number of retirees in future, and an increase in the number of dependent under this scheme,” writes Bopelokgale Soko and Dimpho Selema in the NBFIRA research report.   

Already, the change in age structure of the population have a huge influence on the pension fund system, therefore the period of demographic dividend present an opportunity for pension funds to build robust pension systems which will provide sustainable and adequate income to its retired member, says the report. Moreover, the pension system should be structured in such a way that they will be able to ‘harvest’ as much contributions from the working population as possible.

“Factors such increasing life expectancy has generally led to increased old age dependency ratio which calls for an increased benefit bill for the country. Increasing the retirement age is one of the most promising method to improve the sustainability of pension systems. In effect, it combines raising contributions and lowering benefits,” reads part of the report.

“Workers who work longer contribute more to the system and take out less, since they will be receiving the benefits for a shorter period. Whether such approaches are taken or not, it still remains that changes should be made otherwise expenditures will continue to rise because traditional pension systems do not take into account events such as demographic shifts”.   

While NBFIRA mostly relied on 2011 data for its research, recently updated data suggest things could be worse than presented. The Botswana Multi-Topic Household Survey (BMTHS) Report 2015/2016 released in December 2018 reveals that the country’s population that is above 15 years is 1.3 million, made up of 836,734 of economically active people, a 62 percent representation. Among those eligible to work, only about 71 percent or 689,528 were employed, leaving about 147,206 or 15 percent scrambling for the elusive jobs.

On the other hand, the report found out that about 512,274 or 38 percent were classified as being economically inactive population. Of this group, 27.4 percent were students, followed by discouraged job seekers at 133,276 or 26 percent, and those who were sickly to work coming at 21 percent or 107,580.

In a startling discovery, 25.7 percent of salaried workers earn between P1001 to P2000, followed by 24.9 percent of employees who earn in the range of P501 to P1000, while about 14.9 percent fall in the earning bracket of P2001 ÔÇô P4000. The data from Statistics Botswana paints an unsettling picture: around 83 percent of employees earn less than P10,000.

The report shows that of the 510,953 employees, 74.2 percent are in formal employment, and it is this group that on average earns higher salaries compared to the informal sector. At the time of survey, average earnings for citizens stood at P4,501 for all employees in their main activity and for secondary activity the average earning was P1,681.

The BMTHS 2015/16 report found that about 280,482 people were unemployed, and of these, 147,206 or 52.5 percent were actively seeking work and 133,276 or 47.5 percent were discouraged job seekers. Statistics Botswana put the official unemployment rate at 17.6 percent, but added that if you include the discouraged job seekers in the calculations, then the unemployment rate is as high as 33.5 percent.

The report discloses that the most affected by unemployed is young people, with 48.1 percent of people aged between 18 ÔÇô 19 desperately looking for jobs, followed by the 20-24 age group at 37.3 percent while the 25 ÔÇô 29 group was at 23.2 percent.


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