- Mulls phasing out scarce skills allowance
Botswana’s cash and jobs crisis is expected to worsen following a proposal by government to freeze hiring of new civil servants for the 2022/23 financial year.
This emerged from a proposal paper that was submitted by government during the just concluded negotiations on salaries and other conditions of employment of civil servants. Government had proposed a three percent salary increment in response to a demand for 11 percent by public sector unions. In the end, the two parties agreed that salaries would be increased by five percent.
In its proposal paper, government also proposed to freeze public services recruitment for the 2022/23 financial year and withdraw the financial equivalent of P500 million attached to vacancies from Ministries, Departments and Agencies (MDAs). Government also proposed the phasing out of retention and attraction (scare skills) allowance, with a view to migrating towards a clean pay. Further, government plans to phase out commuted overtime allowance and payment of overtime, cease provision of pool housing and rental subsidies for public officers and review human resources polices during the financial years 2022/23, 2023/24 and 2024/25. Government’s position is that despite an anticipated economic recovery, the trajectory in revenues has been on a downward trend and is likely to continue for some time.
“While the Russian-Ukraine war presents an opportunity for the mining economy through higher diamond prices, this is likely to be short-lived. As such, we need to be careful about using the windfall from higher diamond prices on recurrent expenses that will have long term effects on budget,” argued government. The state further warned about the likelihood of elevated debt levels as a result of salary adjustments that fall outside the affordability limit.
“The materialisation of this risk can result in among others Botswana being downgraded by international rating agencies. Higher deficits could induce imposition of more taxes or levies to raise revenue, which is undesirable in the current state of affairs as it will affect the general populace,” said the government.
Higher deficits would compel the state to increase its sovereign borrowing, thus reducing the headroom offered by the statutory legal limit. In this case, said government, borrowing would be for consumption purposes, which would compromise deployment of budget allocations to productive sectors that have potential to grow the economy.
The government proposal paper also stated that higher deficits would result in progressive depletion of fiscal buffers such as the Government Investment Account (GIA), which would render the country significantly vulnerable to future economic and financial shocks. Government underscored that the review of salaries and conditions of service for public officers was taking place at a time of uncertainties in the global and domestic economies; further calling for salary proposals to be premised on affordability and sustainability.
“Furthermore, there is need to ensure that any collective labour agreement that is concluded does not breach the fiscal deficit target of four percent of the GDP,” said government. Beyond the salary adjustments, government has lobbied for a more progressive public service remuneration system that embraces principles such as total rewards compensation.