Botswana: Economic Disaster

27 January 2021

Looming massive job cuts by one of Botswana's largest employers Kgalagadi Breweries Limited (KBL) due to the ban on alcohol sale is expected to plunge the s economy further into dire straits.

The suspension of operations at KBL, anticipated to have collateral damage down the value chain, came in the same week as the second largest employer in Botswana after the government, Debswana Diamond Company announced termination of the Majwe Mining Cut-9 project contract. Experts say the recent developments could iopen floodgates of retrenchments and massive job losses throughout different sectors of the economy.

President Mokgweetsi Masisi has his job cut out and will have to dig deep to attain economic recovery for Botswana anytime soon. The growing Covid-19 infections locally adds to the pressure of government to balance between sustaining the economy and surviving the pandemic, which has already claimed 105 lives, with the numbers growing.

Botswana's alcohol industry which involves a number of players in the value chain suffered huge losses throughout 2020 due to the alcohol sales ban enforced to curb the spread of Covid-19.

Starting tomorrow (January 25), KBL will completely suspend its operations. The company also said in the process it will suspend payments to supplies and workers will also be given unpaid leave with the move sparking fears that hundreds of employees will lose jobs.

In an interview, Economist and Managing Consultant at SPECK Dynamics, Sennye Obuseng said the latest developments at Majwe Mining and KBL will plunge the country into a serious crisis. He noted that it is very unfortunate for the alcohol ban to have impacted KBL operations in a manner that has pushed one of the country's biggest employers to cease production operations. The alcohol ban, he said, could have been avoided if in the first place government could have taken a decision that alcohol be bought for home consumption to avoid gathering at restaurants.

According to Obuseng, the alcohol ban was predictable as the cases were surging but if it persists for a longer time it would finish off the economy, which is already devastated by Covid19. "There is a big litmus economic recovery test that awaits Masisi and his government. The economy is a very sensitive thing and its needs extra caution. Post Covid19, the situation of our economy will be bleak even for foreign investors. KBL closure will harm economy," he said.

The veteran economist further said there is no confidence from the government regarding the economic recovery plans or responses hence predicting that Botswana may be soon a beggar. He observed that the thinking capacity of the task force is strained in dealing with the disease. This, he said, it could be due to the political influence therefore politics wont bear in mind the negative impact of some of the decisions taken unilateral amidst crisis can destroy an economy.

Private sector

Effective 4th January 2021, Debswana has given Majwe Mining JV three months to wind up business after terminating their multi-billion pula Cut-9 contract. Although Debswana did reveal much about Cut 9 project going forward, experts say the termination will still lead to job losses in a number of companies that provided services Majwe.

Secretary General of Botswana Federation of Trade Unions (BFTU), Thusang Butale said the current KBL and Majwe Mining developments paint a bleak future for the private sector. He noted that BFTU as a federation that represents the private sector workers is worried that existing high unemployment would be exacerbated with private sector feeling more job losses. "The alcohol ban's pinch is felt by the private sector. The sector employs quite number of lot of people from the distributors, wholesales, bars and most importantly at the KBL plant. We are happy that KBL is also consulting with the alcohol workers union on this matter," said Butale.

Butale also said it was important for government to cushion the alcohol industry with the wage subsidy following the latest alcohol ban adding that this could be by tapping into the alcohol levy. He noted that companies in tourism sector continues to issue retrenchment letters to workers.

"The budget speech is also likely to announce increment on electricity and water tariffs. Taxes are likely to be increased and this would severely affect the private sector as some of workers are already earning half salaries. The private sector businesses will close in large numbers," he said.

State of Emergency

Obuseng further said the State of Emergency (SOE) has done no good but more harm to some companies. He said it does not make sense that Masisi can order companies not to retrench workers during the period of pandemic but government offers nothing in return.

According to Obuseng, government should have extended the wage subsidy beyond its three (3) months from April to June 2020, noting that it would have helped companies to withstand impacts. "Government should know that private sector businesses are profit making. There has been a lot of lockdowns and now curfew is finishing off some of businesses. Companies have endured lot of losses and they will retrench as they don't have money to pay employees," he buttressed.

Asked on the possibility of another lockdown, Obuseng said it will kill off the economy but on the other hand the disease has gone out of control hence the health sector overwhelmed too. "Our economy is very small and it cannot withstand impact of hard lockdown. If a very big and industrialized economy like South Africa opted for less harsh measures like curfew that is good. Botswana depends on South Africa and we have to play our cards well to avoid disaster," he said.

Efforts to reach Ministers of Trade and Finance and Economic Development, Peggy Serame and Dr Thapelo Matsheka proved futile as they didn't answer their phones at time of going to print.

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