The agriculture, retail, and manufacturing industries will be most affected by the proposed minimum wage increase, experts say.
Analysts say the increase will impact factory industries, the largest employer of blue-collar workers. The sector, analysts say already grapples with high production costs and narrow profit margins.
This concern was highlighted during a high-level panel discussion at the recent Business Botswana Minimum Wage Symposium, where representatives from critical sectors raised alarms about the potential challenges posed by the proposed wage increase.
Business Botswana, which recently conducted a comprehensive survey to assess the private sector’s preparedness for the proposed minimum wage hike, organised the symposium to discuss preliminary findings and allow stakeholders to voice their concerns.
Tecla Evans, Chairperson of the Manufacturing Sub-Sector Committee at Business Botswana, expressed particular concern for the manufacturing sector, which struggles with low efficiency and high production costs. Unlike advanced manufacturing industries in countries such as South Africa and China, Botswana’s manufacturing sector lacks technological advancements that could help offset increased wage costs.
Evans highlighted that many manufacturing firms could face severe difficulties maintaining profitability if the minimum wage increase is implemented without corresponding improvements in productivity and work ethic among the labor force.
“If efficiencies remain low while labor costs rise, these companies will struggle to remain sustainable,” she said.
Furthermore, the seasonal nature of many businesses within the sector, with periods of minimal income, could make the P4,000 minimum wage unfeasible for many companies.
She recommended structural improvements in the manufacturing industry, including technology adoption and enhanced productivity, to make it more competitive and profitable. Evans suggested that manufacturers might turn to automation and artificial intelligence as survival strategies if wage hikes are implemented.
Vikash Ponangi, Chairperson of the Trade & Industry Sector at Business Botswana, noted that large retailers, particularly those listed on the stock exchange, might have the financial capacity to implement the minimum wage increase. However, the cost would likely be passed on to consumers, potentially driving inflation and eroding purchasing power.
The biggest challenge, he emphasised, lies with small retailers, most are struggling to stay afloat. Ponangi highlighted the growing anxiety among Small, Medium, and Micro Enterprises (SMMEs) within the retail space regarding the minimum wage. Many of these businesses are still recovering from the economic impact of COVID-19, which severely reduced consumer spending.
According to Ponangi, many small-scale businesses are on the verge of breaking even and may be forced to consider drastic measures such as retrenchments, restructuring, or even closure. The wholesale and retail trade sector is the second-largest employer in Botswana after public administration, accounting for 15.7 percent of the workforce, according to a Quarterly Market Survey by Statistics Botswana.
“It comes down to this: if they could, they would. But if they should, can they?” Ponangi questioned.
Ponangi added that previous wage hikes have already raised costs significantly in the retail sector. In December 2023, the former Minister of Labour and Home Affairs, Anna Mokgethi, announced adjustments to the minimum wage, effective from February 1, 2024. This included an initial one-off increase of 12.75 percent, adjusting hourly rates from P6.51 to P7.34, followed by a subsequent 23.5 percent increase across various sectors.
He argued that instead of a blanket wage increase, parallel policies to reduce the cost of living should be considered.
“If essentials such as food, housing, and transport are more affordable, workers would not need such a drastic wage increase,” he suggested.
The agriculture sector, represented by Mogomotsi Moatswi of the Botswana Horticultural Sector (BoHoCo), also faces significant challenges in light of the proposed wage increase. This sector, which employs 9.6 percent of the workforce according to Statistics Botswana, is already burdened by high production costs and the uncertainty of temporary markets. Moatswi noted that while the horticulture sector has the potential to pay higher wages, the business environment must improve to support such changes.
“Improve the economics of farming, and farmers will be better able to sustain those who depend on them,” he appealed.
According to Moatswi, many farmers are already operating at a loss and cannot afford to increase wages without a corresponding rise in productivity. He predicted that employment in the sector could decrease as farmers turn to automation and machinery to reduce wage costs.
“Where one used to employ four people, you may now have to employ two to provide them with a decent living wage,” he explained.
Happy Siphambe, a professor of labour economics at the University of Botswana, shared his insights on the potential impact of the minimum wage increase. Professor Siphambe raised critical questions: Can Botswana’s economy afford the proposed wage increase, or should it be delayed until the economy is better positioned? He also questioned the rationale behind the specific figure of P4,000, suggesting that a more balanced figure might better meet the needs of workers while ensuring business sustainability.
“Maybe a figure can be reached that is more reasonable for businesses, while still affording workers a decent living wage,” Prof. Siphambe proposed.
