Sunday, October 25, 2020

Stalling the inevitable, mounting job losses on the horizon

As the lethal coronavirus continues to ravage the world, infecting millions and killing hundreds of thousands of people, measures put in place by various countries to impede the spread of the virus have slowed economic activities. For countries like Botswana, some of the interventions to limit the economic damage can only hold on for so long, delaying the inevitable job losses. 

Before Covid-19, the disease caused by coronavirus, became a global pandemic, Botswana’s narrow economic base dependent on diamonds for over four decades was already facing its own pressures; widening budget deficits, rising unemployment figures and the increasing inequality gap. 

In fact, earlier this year when the virus started gaining trajectory, the country’s finance authorities proposed an economic transformation agenda, promising an economy that will be weaned off diamonds, with a leaner and efficient government that will slash wasteful expenditure, and allow the private sector to take a central role in driving the economy. 

Hardly a month after the lofty ambitions, the severity of the virus reverberated across the world, forcing countries to impose tough restrictions aimed at curtailing the spread of the disease that has since infected over 2 million and killed nearly 300,000 people. In April 2, Botswana placed its nearly 2.4 million population under a nationwide lockdown, restricting movements and closing businesses considered non-essential.

Fearing a possible economic fallout, the landlocked country best known for its high value diamonds and picturesque safaris, unravelled plans to inject P2 billion to keep the economy engine humming, geared at supporting affected businesses through various concessions and subsidies, with the government shouldering much of the economic costs. 

President Mokgweetsi Masisi in April, the month that marked the second year of his presidency, took an extraordinary measure, imposing a state of emergency(SOE) which was ratified by parliament after a protracted debate, allowing the SOE to run for six months. Reasons advanced by President Masisi was that the fight against the virus required certain provisions that can only be implemented using presidential emergency powers.

Now known as the Covid-19 Emergency Powers, the president has used his sweeping powers to bar companies from retrenching or dismissing workers during the course of the SOE. Instead, the Masisi administration advised companies in distress to apply for part of the P2 billion relief package. Even still, businesses that cannot withstand the pressure of the slowed economic activities, can close down but should not retrench employees during the six months period. 

In the most apparent sign to date of how the lockdown imposed by the government has affected businesses, the Commissioner of Labour and Social Security received notice of intention from 53 companies to retrench. The number of affected employees was not availed. However, in a flurry of behind the scenes negotiations between companies and government officials, the number of companies that had planned to retrench has now shrunk to 23 companies. 

Kabelo Ebineng, the permanent secretary at Employment, Labour Productivity and Skills Development, said there are ongoing discussions with companies to agree on employee retention strategies, further discussing how wages can be structured, ranging from full pay, half or quarter pay, and even taking paid or unpaid leaves, depending on certain facts. 

“These facts may include, but not be limited to the financial status of the business, and the packages on offer by the Botswana Government,” said Ebineng, who added that the regulation to bar employers from dismissing workers during SOE is to allow the employer and employee to engage and conclude on how to separate. 

“What is outlawed is dismissal, or a retrenchment on the basis of and during the state of emergency,” he said in a media address last week. 

“The effect of this would be for both parties to agree to suspend their employment contract on account that their contractual obligations are frustrated by temporary circumstances, which neither of them could foresee, and cannot control,” said Ebineng.

He said under the circumstances, parties could mutually agree to suspend their relationship, until things return to normal, and then resume on the same terms as existed before.

Already, more than 5,000 businesses have applied for the wage subsidy offered by the government under Botswana Unified Revenue Services, in which the tax collector will assess application by the companies, and offer wage subsidies from P1,000 to a maximum of P2,500. 

The senior official said the government has since ratcheted up the P2 billion Covid-19 fund to come up with a P5 billion package, which is  2.5 percent of the Botswana’s almost P200 billion gross domestic product(GDP). The billions will be used in the coming months to provide wage relief and other concessions such as tax and cashflow support to companies to remain afloat, protecting jobs.

With a cure for the disease yet to be found, and infections still rising, there is no clear indication when the measures imposed by the government will be lifted. But what has become clear is, the government can only seek to stall the loss of jobs for the next six months, but what happens after that will be a bloodbath of massive job losses, as businesses count their losses, while still facing the challenges that existed prior to the Covid-19 pandemic.

In the last two years, the Commissioner of Labour and Social security was already inundated with companies seeking approval for retrenchments, citing the tough operating environment. From April 2018 to January 2019, 30 companies retrenched 399 workers, with the fledgling manufacturing industry emerging as the hardest hit, bleeding about 212 jobs.

Three months later, Employment, Labour Productivity and Skills Development ministry said it received further intentions to retrench from over 100 companies. It is not clear how many of those companies went ahead and retrenched as the government does not publicly publish this information. 

Botswana has been grappling with the increasing unemployment roll, which was exacerbated by the 2008 financial crisis which affected the country’s diamond sales, stalling planned government projects, thus limiting job opportunities. Further compounding the situation, the country has been battered by a spate of job losses.

Minister of Employment, Labour Productivity and Skills Development, Mpho Balopi, in February told parliament that 6,314 jobs were lost between 2014 and 2018 when 155 companies retrenched workers. However, Balopi’s figure  was quickly dismissed by legislators, who questioned the accuracy of the numbers given past events in which massive job losses were reported, citing the closure of BCL mines in 2016, estimated to have shed over 6,000 jobs on its own.

Statistics Botswana’s most recent available labour market data, the quarterly labour force survey results for July to September 2019, show an unemployment rate of 20.7 percent for that quarter. The government data agency estimates the official unemployment rate at 17.6 percent, but added that if you include the discouraged job seekers in the calculations, the unemployment rate could be as high as 33.5 percent.

The International Labour Organisation (ILO) has placed Botswana in the top ten of countries in the world with the worst youth unemployment rate. The organisation which defines labour as any work carried out by any economic active person aged between 15 and 24 years says with Botswana’s youth unemployment rate at 37.1 percent, the country falls in the tenth position of countries hard hit by unemployment.

Economists and other experts agree that after the coronavirus pandemic, millions of jobs will be lost and may never be recovered. Countries like Botswana which are resource dependent might bear the full brunt of it, with the economy taking longer to recover as the government emerges from one of its biggest spending sprees, all in attempts to save the economy that was already bleeding jobs. 

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