High unemployment; need to speed up economic diversification

Botswana is experiencing high unemployment rates. With over P80 billion in foreign reserves, Gazette Business asks why the country does not invest the funds to stimulate economic growth so as to create the much needed jobs.

The Botswana AIDS Impact Survey (BAIS) III, conducted almost seven years ago, puts it at 19.8 percent. Some experts have argued that unemployment may have grown higher than the 19.8% since the BAIS III study was conducted seven years ago. They have argued that over the seven years, a lot of companies have closed doors, especially in the diamond cutting and polishing and the mining sector. These closures have rendered a lot of people unemployed.
The economic think tank, E-consult estimates that 20 000 people graduate each year from local colleges and universities. Only 5000 of these graduates, according to E-consult, are absorbed into formal employment, leaving 15 000 to roam the streets. Over the last seven years, these numbers may have swelled.
Professor Emmanuel Botlhale, a Public Finance expert at the University of Botswana explained that foreign reserves are not funds lying around to be used for anything, rather for import cover. When asked why Botswana opted to save, rather than spend, he responded, “Due to the global economic downturn which necessitated dissaving, foreign exchange resources have shrunk. At the end of December 2014, the reserves amounted to P79.0 billion, equivalent to 18 months of import cover of goods and services. It is notable that in November 2008 when global economic crisis hit, foreign exchange reserves translated into 28 months of goods and services therefore, there is need to replenish the foreign exchange reserves account with any surplus money that the economy can save.”
This publication asked the Botswana Investment and Trade Centre (BITC), government parastatal mandated with attracting Foreign Direct Investment (FDI), how they are doing and if any of the FDI they attracted has reduced unemployment. Director of Corporate Communications, Kutlo Moagi said they were performing well and that their efforts continue to yield results through targeted inward and outward efforts to attract FDI to Botswana.

“BITC surpassed its FDI target during the 2014/15 financial year, reaching P1.5 billion,” said Moagi, who added that they were in discussion with several countries which want to establish operations in Botswana. According to Moagi, the companies cut across sectors which include manufacturing, financial services, and retail.

Moagi said their work was not without challenges. She decried a small population and high cost of doing business as disabling factors. Asked what the BITC was doing to get around the obstacles, she responded, “Every country has enablers and limitations to effective attraction of FDI, Botswana is no exception. What we require is compelling country value preposition. We have developed a number of selected priority sectors for Botswana which are quite useful in providing potential investors with a clear guidance of why to invest in Botswana, how Botswana compares with other competing countries and what challenges the investor can expect and how they are surmounted.”

Quizzed on strategies they employ to effectively attract sizeable FDI to the country, Moagi said they continue to drive a reform agenda to improve competitiveness. “Our key strategy is the introduction of Special Economic Zones (SEZ) which offer vastly improved and competitive investor friendly environment with fast tracked and streamlined authorizations to attract both FDI and Domestic Investment in designated zones across the country,” she explained.

Professor Botlhale had a few words of advice for the country going forward; “Enabling factors for FDI have to be taken in mind. A big market and access to the sea are beyond control of the Government of Botswana. However, factors under the control of Government should be fully exploited like competitiveness, ease of doing business, and Private Public Partnerships (PPP).” The Professor emphasized the need for accelerated FDI attraction to improve the pace of economic diversification. He advised against poor work ethic and a nascent and government dependent private sector. Professor Botlhale urged the private sectors to challenge itself to grow and deliver.