The financial sector: a solution to Botswana’s growing unemployment problem?
Botswana is celebrating 49 years of nearly consistent growth, yet unemployment and critical skills shortages remain a problem, despite tertiary education reforms. The thriving finance sector is bucking the trend. Botswana is one of Africa’s most respected democracies. It boasts Africa’s longest continuous multi-party democracy, and does not seem to suffer the same level of corruption as many of its neighbours. After independence, its human rights record also remained free of the stains that trouble many other African countries.
So why does the country still battle a high unemployment rate? According to the central statistics office (Statistics Botswana), unemployment in Botswana increased to 20 percent in 2013 from 17.80 percent in 2010. It continues to hover at around 19 percent. Youth unemployment in the country is the second-highest among the world’s middle-income countries, after Namibia.
Some critics have cited restrictive laws that inhibit entrepreneurship amongst the youth as a factor. Indeed, the latest Global Entrepreneurship Monitor (GEM) on the state of entrepreneurship in Sub-Saharan Africa finds that youth in Botswana have the second lowest rate of entrepreneurship in the region (South Africa has the lowest). Others have argued that there is simply inadequate job creation.
In the early 2010s, government was the country’s largest employer, and formal sector employment growth slowed to just 2.7%. There are, however, also more complex factors at play: a presentation at the 12th National Business Conference noted that youth do not always qualify for the credit needed to start or expand their own businesses; and in other instances interns emerge from placements having been mentored inadequately or not having developed marketable skills. Education also plays a role. Botswana’s primary and secondary education facilities have improved drastically since independence: literacy levels jumped from below 20% at independence to above 80% in 2003, but there are still significant gaps in tertiary education. A revealing study by Dr Patrick Molutsi, Acting Chief Executive Officer of the Human Resource Development Council, provides a nuanced insight into some of the issues. Although Botswana has one of the highest education budgets in the world, and much of it has been dedicated to somewhat successful tertiary education reforms over the years, these reforms have managed to address some, but not all, of the country’s skills deficits.
Molutsi, speaking of tertiary reform strategies, puts it thus: “The first strategy was to tailor training to key services by establishing a number of semi-tertiary institutions intended to train primary and secondary school teachers; agricultural demonstrators; nurses and paramedics; artisans and technicians; police, army and prison officers; and wildlife game wardens. “The second strategy was to ensure that the focus…was on programmes to produce teachers and administrators; rather than [professions that] would take longer to train and require much larger investment.” He explains that at the University of Botswana, for instance, most programmes were directed towards the humanities and education rather than medicine, engineering, accounting and business. Now, he writes, that imbalance has created the need for new reforms. Molutsi adds that the third strategy was to sponsor significant numbers of citizens to study outside the country, which proved to be expensive and unsustainable. The fourth and final strategy, also expensive and unreliable, has been Botswana’s significant dependence on imported foreign skilled workers. “Botswana continues to be dependent on foreign skilled personnel in the technical areas of, among others, medicine, engineering and technology, accounting and business, [and] finance…” he writes.
Let us focus, for a moment, on Molutsi’s two key points: firstly, that there is shortage of skills in, among other areas, finance, business and accounting, and secondly, where knowledge of these key disciplines is required, students are either exported to study in other countries or skills are imported, which is expensive and unsustainable. The situation prompted finance minister Kenneth Matambo last February to admit that the country’s unemployment rate represented an underutilisation of Botswana’s human capital. It is clear that Botswana needs to invest in its human capital and develop essential skills to further its growth, and universities may not yet be the ideal places to get them. Not surprisingly, there has been a rise in vocational training in these critical skills areas – recent years have seen a concerted campaign, for instance, from the Botswana Institute of Chartered Accountants (BICA) to encourage more people to consider accounting as a profession and the government too has invested in more opportunities for youth to gain financial acumen.
Why the emphasis on financial acumen and accounting skills in particular? It is because these skills are the key to unlocking further growth in the country. The Global Entrepreneurship Monitor report notes that lack of access to finance, as well as lack of financial knowledge and skills is a key factor in the low entrepreneurship rates in Botswana. Indeed knowledge of finance and accounting equips an entrepreneur in any field to be more successful. This does not only apply to using money more prudently, but also more efficient record-keeping and management of tax and applications for credit, should one wish to expand one’s business. Creditors require meticulous financial records, and a sound knowledge of accounting is advantageous to any entrepreneur. Additionally, financial savvy also assists entrepreneurs in managing both debts and capital. On another level, the finance sector is also hungry for more skilled personnel. In a country where unemployment is high, the finance sector is one of the most stable, even during the global economic crisis of 2008, Botswana’s finance sector, although affected, was somewhat cushioned by government’s prudent fiscal policies. Making Finance Work 4 Africa notes, “Botswana has a small but thriving financial sector that has experienced significant growth in the past decade, primarily a reflection of the substantial accumulation of national resources and the associated high degree of liquidity.”
The government is actively supporting further growth and development of the financial sector, having identified it as a key area of activity to promote economic growth and diversification. If the sector is to grow, so too must the number of qualified people who work in it. The banking sector alone has grown at roughly twice the rate of the overall GDP and the finance sector as a whole is a notable player in the economy. A report on the finance sector by Eco Consult says that it “plays a very important role in the Botswana Stock Exchange (BSE), where it dominates market capitalisation and has been a driving force in the growth of the BSE in recent years.” A further benefit from investing in financial skills is the opportunity to even the playing field in terms of gender. Botswana, on average, has more unemployed women than men year on year. And although women’s participation in tertiary education is stronger than in most African countries, in many institutions they still account for less than half of registered students. Yet accounting qualifications are proving popular with women. According to data from BICA, almost two thirds of enrollments on some of its courses are women. These facts and numbers paint a very clear picture: there is growth and opportunity in the finance sector that the country would do well to capitalise on.
As Botswana turns to face its next century of independence, it needs to do so on a different footing; with a population that is empowered to build and grow an economy and where unemployment is a thing of the past. Investing in the finance sector is a good place to start.
*Mark Farrar is CEO of the Association of Accounting Technicians, which in association with BICA, is Botswana’s leading qualification and professional body for vocational accountants.