Thursday, October 28, 2021

Public servants salary adjustment, a non event

The Botswana government’s recently announced public servants salary adjustment will do little to help the lowly paid employees.

The disposable income of the large crowd at the government enclave continue to be under pressure as barrage of cost push inflationary pressures comes their way.

The announcement by government of the 3 percent inflationary adjustment across board is largely seen as a non-event considering the price increases that have been coming thick and fast.

While inflation rate is currently at 3.2 percent, economists who spoke to Sunday Standard reveal it is only a matter of time before inflation shoots up given the increase in prices of certain goods and services.

The salary adjustment comes at a time when consumers are grappling with price hikes on several fronts. Consumers will face immense pressure from an increase in public transport fees, and other inflationary pressures coming from the VAT increase in the country’s biggest trade partner, South Africa. Furthermore, the Botswana government last week announced that electricity tariffs will go up by 10 percent. The adjustment applies to all consumer categories and is already in effect since the beginning of this month.

“The government calls it an inflationary adjustment but it does not address the inflationary expansions that we have been witnessing recently,” said Sekai Botlhale, one of the economists interviewed.

Botlhale expects an uptick in inflation but says it will continue to be within the 3-6 percent medium term objective range as set by Bank of Botswana. However, the economist cautioned that while the inflation rate forecasts might appear as slight increase, the impact is heavily felt by low income earners and erodes their little savings.

“Prices of goods and services have been increasing, keep on increasing, and then there are utility tariffs like water and electricity, of which most people cannot escape from,” he said. “It is also unfortunate that this 3 percent adjustment will also increase some workers’ tax obligations.”

The plight of lowly skilled employees came to the spotlight two weeks back when one of the leading consumer retailer was accused of paying the basic minimum wage which barely met the workers’ cost of living. Moreover, the World Bank says Botswana has the third highest inequality rate in the world.

With the electricity tariffs increased, it is expected that business costs will go up; forcing the businesses to increase the prices they charge customers to offset the costs.

“We will have no choice but to increase prices for our products because we are operating in a challenging environment right now. It is really tough in the fast moving consumer goods (FMCG) sector because our margins are already thin,” a person with knowledge of the matter said.

The local FMCG industry has been facing sustained attacks ranging from intense competition, decreasing spending power due to stagnant wages, and increasing unemployment. This has forced many retailers to compete for customers by keeping their prices as low as possible.

“With the power tariffs going up, i just don’t see how we can avoid the impending costs. It is just unfortunate that some of these costs are going to be passed to consumers, and it will be a double whammy for them,” the person said.

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