The effects of the global crunch started to hit hard on the Botswana economy this week as Debswana mines were positioned for a shut-down by Wednesday as analysts ascribed the move to the impact of Wall Street to the man on the dusty streets of Botswana.
All four Debswana mines in the country are due to shut-down Wednesday after a last ditch effort between the union and management got deadlocked after midnight on Thursday.
“I think the big impact from Wall Street is now going to be felt by the man on the street,” Leutwetse Tumelo, head of Capital Asset Management, said Friday.
According to a position paper leaked to Sunday Standard — prepared by Balisi Boyongo on behalf of management, all the mines, including Jwaneng and Orapa, will shutdown on Wednesday and miners will be put on a two-months forced leave out of which they will equally share the sacrifice.
Further, all employees who have reached the age of 50 years and above will be put on forced early retirement. They will also be a voluntary special leave to the end of the year in which those who opt for it will get a retainer equivalent to 30 percent of their basic salary.
The company, which accounts for 33 percent of the GDP and 70 percent of exports and which has put Botswana on the world map as the biggest diamond producer, said it is responding to the current international demands.
“This is going to hit hard on consumer spending. Consumer spending will fall drastically, especially in Jwaneg and Lethakane townships. And other people are going to have problems in meeting their loan obligations,” he said.
His concerns were shared by Geoffrey Bakwena, the chief executive officer of Stockbrokers Botswana, who said, “This is certainly going to affect government revenue and it now means government will have to dig deeper on exchange foreign reserves and also look at borrowing.”
The Government, caught up between the global economic crunch and electioneering year, opted to hike spending that will result in a budget deficit to the tune of P 13 billion. The move has unnerved an international credit rating agency, S &P, which said this week that though it retains the country’s rating, the long outlook was shifted from “stable to negative.”
“We also expect the (equity) market to remain depressed further as some people will now turn on their investments to finance their life style. Certainly, there is going to be a lot of selling pressure,” Bakwena added.
“Some people have been depending on house rentals to the employees of the mine and it is going to be really difficult for them to survive. And that will have a very bad impact on people and their families,” he added.
“Most of the businesses in the mining towns will be faced with hard choices of either retrenching or closing down because the townships are going to be turned into ghost towns,” Bakwena said.
“What we are now seeing is the ripple effect of Wall Street and it is hitting hard on the man in (dusty) street. People have financial commitments and banks are either going to take a knock or restructure the loans,” Tumelo said.