The working class in Botswana earn paltry salaries. Food, accommodation and transport prices are on the rise, while government levies are remain contentious and unaccounted for. With government reluctant to review minimum wages, experts argue that Batswana will remain trapped in poverty.
Recently, government through the Minister of Employment, Labour Productivity and Skills Development, Tshenolo Mabeo announced that there is no need for government to review minimum wages to match the rising costs of living and a few months ago parliament rejected a motion to introduce a decent living wage in the country, a motion brought by Shaun Nthaile, an opposition member of parliament.
Nthaile presented that the living wage will allow people to lead decent lives as it makes provisions for day to day living. While minimum wages are laid down in law and enforceable, living wages are excluded. The motion received support across political divides but what they differed upon was its urgency and implementation. Minister Mabeo said the issue of minimum wages and living wages is before the Ministry of Finance and Economic Development, which is currently researching the matter. However, he stressed government is comfortable with the status quo, ruling out chances of a reviewing in the near future.
Botswana remains heavily dominated by the public sector which accounts for more than 40 percent of all formal sector employment in the country. This is exacerbated by low growth in employment opportunities to absorb labour leaving rural area as well as new graduates.
As such, the country’s overall unemployment has been persistently high over the past 15 years at over 20 percent with an unemployment rate of about 40 percent amongst the youth. Government has been reluctant to significantly increase salaries, despite please from trade unions and the constant threat of civil disobedience. Annually, civil servants were given a 3 percent increment, which analysts classify as an inflationary adjustment.
“It means that civil servants do not feel the increment because it is absorbed by inflationary pressures,” argued Garry Juma at Motswedi Securities. While employees have not had an increment in a long time, costs of living are on the rise, leading to many household falling into to debt to finance escalating costs of living.
As at September 2017, overall credit extension to Gross Domestic Product (GDP) was estimated at 30, 6 percent, statistics compiled by the central bank show. Of the combined estimate, household credit to GDP was 18, 5 percent while the business estimates sits at 12.1 percent, according to data availed by Bank of Botswana.
Analysts have observed that household debt-to-GDP remained below 20 percent over-time, with consumption as a percentage of GDP ranging between 48 percent and 52 percent in the past 5 years. This suggests that Botswana is a consumer-led economy. Bank of Botswana (BoB) data indicates that Botswana’s household sector is highly indebted, gobbling up over half of over P25 billion in outstanding loans from commercial banks.
During the budget speech, Minister of Finance and Economic Development Kenneth Matambo said that his ministry will, “adjust various taxes, levies and review some tax expenditures such as VAT exemptions.” There were food items, mostly staples which were exempted from tax in Botswana but under the new tax reforms new essential items will possibly be taxed, taking more money from the impoverished households.
Juma said that VAT which affects most food items will hit Batswana very hard. “So if there is going to be VAT increase for example, it means the cost of consumable goods will go up.” Of interest, public corporations like the Water Utilities Corporation (WUC), Botswana Power Corporation (BPC) and Botswana Public Officers Medical Scheme (BPOMAS) have in the past systematically eroded the increased disposable income by hiking tariff fees. Government will also do the same by taxing all licences and introduce property rates in rural areas where poverty is at its highest.
“When your income is stagnant and your expenditure is growing, you start to live from hand to mouth,” he said.
According to Matambo, property rates in rural areas are aimed at ‘utilizing resources within those areas to spearhead development. Basically, poverty stricken Batswana in rural settlements who own a house or plot will now be taxed, just for owning that property, failing which penalties will be felt.
If government digs deeper into the pockets of taxpayers then their share of take home income will dwindle. Botswana is amongst the lowest paying countries in Southern Africa, with average earnings of around P5000, according to Statistics Botswana, 12 percent of which is eroded by income tax or Pay As You Earn (PAYE) as it is know and loathed. Further, Statistics Botswana says transport takes up at 23.9 percent of total earnings in Botswana, while expenditure to housing costs and food was at 17.8 percent and 12.8 percent respectively. This means that over half of earnings in Botswana are blown on food rent and transport.
According to the 2017/18 minimum wage is P3.21 per hour and P5.79 per hour at the highest. The minimum wage guide shows that the domestic services sector is the lowest paying, with which government has set its minimum wage at P3.21 per hour, an equivalent of P25 per day, or P564 every month.
Government has set that those employed under retail, distribution and trade, the likes of Choppies and Shoprite, should earn a minimum of P904 (P41 per day) monthly. The highest paying sectors, manufacturing, hotels and construction pay P5.79 per hour, an equivalent of P1000 every month. These are the minimum monthly salaries, which Minister Mabeo says are ‘working for government’.
Interestingly, the paltry paid in Botswana make up a bulk of Botswana’s employment figures, which simply means that the majority in Botswana are paid, at most, a minimum wage of P1000 per month.