A nation in economic ruin!

The end of President Masisi’s State of Emergency in 2021 poses a second wave of economic impact which will be labour-related as businesses buckle under pressure. But unemployment will not be Masisi’s only headache. Investors are elusive. The looming increment in taxes and utility tariffs will pile more pressure on household income. In 2021, Masisi will face a nation in distress

A nation in economic ruin!

Disappointed by the stinting response of the private sector to the appeal for donations to the COVID-19 Relief Fund last April, President Mokgweetsi Masisi spoke of unworthy ingrates who had come to Botswana with nothing but were now rich beyond measure and vowed to get even with them.

But in a country where the private sector is synonymous with foreigners, Masisi was soon backtracking - most likely because of an unintended tinge of xenophobia in his outburst - but now faces the scourge of COVID-19 and a dearth of sources of revenue for the public treasury caused by the pandemic. It must be tight rope to walk for a man embattled on almost all fronts.

 

 

"Re buile le dikompone gore selo se ke seru se se wetseng lefatshe lotlhe, mme bangwe ba bone ba re swabisitse. Ke bua ka batho ba ba tsileng ba rwala bo rampeechane mme gompieno ke bahumi ba dinaledi. ba re bontsha gore ga ba kgathale ka Batswana. Mme re tla’ ba bontsha gore rona re Batswana. Ka July ke batla go baya monwana molao wa Citizen Economic Empowerment," President Mokgweetsi Masisi was quoted by one of the local radio stations soon after the advent of COVID-19 in Botswana.

Perhaps the president had just gotten wind of threats by businesses to either cut jobs or salaries, owing to the impact of COVID-19. Masisi was reportedly bothered by a number of letters threatening to terminate jobs which surfaced on social media.  It was believed the president was referring to foreign investors whom he felt were mishandling solutions to the crisis that was unfolding before the world.

As patriotic as some thought he was in these remarks, there was consternation over his choice of words. Those on the supporting side felt the president has the duty of being on guard for Batswana. However, aggrieved investors who spoke to this publication on condition of anonymity worried that a president can publicly utter such statements that are loaded with hints of xenophobia.

When a disgruntled ATI broadcast his visit to the auto showroom of Satar Dada, treasurer of the Botswana Democratic Party (BDP), and threatened to wreak havoc the millionaire’s operations, there was concern that Masisi’s comments may have had an influence on the entertainer’s behaviour.  Dada, a Motswana of Indian descent, was recognised by Forbes as one of Botswana’s five richest men in 2018. A number of videos threatening similar action on foreigners were also posted by ATI on his social media page. Grievances aired by the “Stimamollo” hit-maker included unemployment and poverty.

Some weeks down the line, in a live television broadcast, President Masisi called on his fellow citizens to respect foreigners. He swore that recent incidents could sow seeds of division in the country, saying Botswana was accommodating to every investor no matter the colour. Many saw this statement as hypocritical after his earlier utterances.

Investors had been paying attention to these remarks, including the State Of Public Emergency (SoPE) which some thought was unnecessary.  Masisi sought the SoPE citing health implications associated with the COVID-19 crisis.  The motion succeeded by virtue of the ruling party’s majority in Parliament, giving the President more powers in the advent of then a little understood virus. One of the key reasons advanced was the President barring businesses from retrenching during the entire period of the SoPE.  In other words, the President sought emergency powers to protect jobs when businesses may want to streamline their operations and retrench.

Economists argue that SoPE has the potential to dampen investor confidence. Some say investor risk aversion has been elevated and that the most risk-averse investors may reconsider leaving Botswana after the SoPE ends while those with a stronger risk appetite will remain. Observers argue that if the President doesn’t manage the SoPE right, Botswana will lose in competition for foreign direct investments. Arguably, investor confidence has been measured by which country is open for business and what assurances government gives.

Botswana inherited much of what it has by natural positioning. There were fears that it would have devastating repercussions for the economy to lose these advantages. Economists say the country needs to be mindful of the fact that economies takes long to recover. Therefore, the longer the SoPE is in force, the more devastating it will be for the economy.

Gomolemo Basele, the Quantitative Analyst at First National Bank Botswana (FNBB), says the economic impact of the COVID-19 crisis is widespread, disrupting both the supply and demand side.  Global trade operations were negatively affected by travel restrictions and lockdown measures the world over. Local businesses have not been spared from the disorder, as reflected by various indicators, including Botswana’s 2Q20 GDP, Basele points out.  However, because of the SoPE, businesses hesitated to reduce their workforce in line with their cost of operations in these difficult times.

While Masisi’s desire was to protect jobs through the SoPE, it is noteworthy that he used these powers to fire certain top government officials. Masisi abruptly dismissed the permanent secretary of the Ministry of Health and Wellness Solomon Sekwakwa and his deputy Dr Morrison Sinvula, giving no explanation. Many theories emerged after the dismissals, with some saying that the two men did not agree much with the way things were being done by the COVID-19 Task Force.

Experts are still wary of an impending second wave economic impact which will be labour-related as some businesses buckle under the pressure. The expectation was that when the SoPE ended after the first six months, the country would go down the job losses road. Just this week, the largest trade union federation called a press conference where it warned Batswana of massive retrenchments after the SoPE. Addressing the media on Tuesday, the Secretary General of Botswana Federation of Public and Private Sector Unions (BOFEPUSU), Tobokani Rari, dismissed government’s current recovery plan as merely a repetition of National Development Plans (NDP). “We have companies whose businesses have shrunk and are not making any profit,” he said. “We are going to see workers being thrown onto the streets.”

Rari’s fears are shared by a number of local economists who preferred anonymity. They say unemployment numbers will go through the roof after the SoPE. Botswana is already grappling with a high unemployment rate, which is over 21 percent, according to data from Statistics Botswana. Economists predict that the rate will rise, driven by retrenchments at parastatals like Air Botswana and Botswana Meat Commission and Civil Aviation Authority Botswana (CAAB). The private sector, which has been hard hit by the pandemic, is also looking to retrench. According to those in the know, the tourism and hospitality sector is just waiting for the end of the SoPE to embark on massive retrenchments. Around 15 000 Batswana are estimated to be employed in the tourism and hospitality space, but a significant number of those jobs are hanging by a thread.

The Masisi administration will face increased frustrations as a result of these job losses. But looming retrenchments are not Masisi’s only problem. The cost of living in his country is high and rising. In this coming year, President Masisi and his crew will approve increments in taxes like VAT, which will affect the prices of food and other commodities and erode the 3 percent salary adjustment approved by government earlier this year. As if it is not enough, quasi-government utility companies are hiking tariffs significantly. Just this week, Rose Seretse, Chief Executive Officer (CEO) at Botswana Energy Regulatory Authority (BERA), defended Botswana Power Corporation’s (BPC) decision to hike tariffs by 22 percent. BERA has also given BPC the greenlight to effect a 10 percent increase in tariffs annually. Water Utilities Corporation (WUC) is also increasing water tariffs. “Chances are that we will see these being implemented,” says one economist. “The government will not be diversifying but it will just be increasing revenues from those old sources at the expense of ordinary citizens.”

According to this economist, the government has been wary of the fact that any upward increase in these tariffs would affect the quality of life of its own people. However, with its traditional sources of revenue in decline, government is driven by necessity to raise revenue anywhere. But wages and salaries in Botswana are among the lowest in southern Africa, with average earnings of around P5300, according to Statistics Botswana. If VAT goes up, says this economist, prices of basics like food will increase and impact the inflation rate that the Bank of Botswana has managed for keep within its 3 to 6 percent range for some time. Further, the UB don worries that Covid-19 has affected household incomes and that increased taxation would worsen things.

A few days ago, Masisi gazetted a notice limiting the amount to charge for testing for Covid-19 to P500. Diagnofirm, which is owned by Mohammed and Waheeda Chand, reacted by saying the cost of the price to perform ‘sa PCR test exceeds the maximum amount permitted by the President regulation. “As such, in these circumstances, Diagnofirm regrettably can no longer offer its facilities for the conduct of PCR until further notice,” the firm said in a statement. Government then backtracked on its decision, giving the testing centre a free hand in what it may charge for testing for Covid-19.