Salary increase? No way!

Four years after recession and shrinking disposable income, Batswana can no longer take a dose of another bad news. So the news that the International Monetary Fund (IMF) has revised growth forecast to 4 percent from Finance Minister, Kenneth Matambo’s ambitious 4.4 percent is unlikely to sway the public and businesses into believing that there is light at the end of the economic tunnel next week as Matambo presents his budget in parliament.

There is a reason to be optimistic. Post-recession challenges are giving way; real GDP (year-on-year) grew 5.7 percent in the third quarter of 2012 and is expected to grow further in line with recovery in demand for other commodities, especially red metals in Asia.

The non-mining sector too, continues to show resilience while the US economy and Eurozone are showing signs of life. Despite shockingly wrong figures from Statistics Botswana (GDP Q3: 2012) a diamond sales squeeze may however present a slight challenge to the Massachusetts-educated minister on Monday. There is glimmer of hope that recovery in the manufacturing and tourism sectors may offset downbeat diamond sales in Q4 2012 and Q1 2013.

Manufacturing recorded a growth of P1.3 billion in Q3: 2012 with factory activities jumping by over three percent quarter on quarter (q/q) when compared to Q3: 2011 statistics, prompting employers to concede that factories were generally busier than expected between October and December 2012.  

“There is a future and it is looking good,” declares Esther van Wyk of Emerald Solutions, a chemical manufacturing company in Commerce Park. Emerald is trying to figure out the future as it exports sulphuric acid and other toxic chemicals to South Africa. The company is on an expansion drive and has been on a hiring spree.

But manufacturing ebullience faded somewhat as major sectors join the fray. The mining sector struggled to beat the P2.8 billion recorded in Q3: 2011 as it remained subdued at P2.1 billion.

Led by diamond mining, the sector shrank 24 percent, which tends to display an inverse correlation to mining optimism considering that the sector grew 52 percent in Q1: 2010 and 25 percent in Q3: 2010, while construction grew by six percent.  “There is a lot of hope,” declares Killion Mokwete, a University of Botswana lecturer in the Department of Architect.

Also an independent consultant, he hopes that this year “things will be different.” The difference he is hoping for is to see government unbundling major projects and entrusting them with local contractors.
Almost exclusively controlled by spring-walking Chinese, the construction sector contributed 4.4 percent to the national output in 2011 and is forecast to exceed 5 percent in 2012.

“Smaller firms are getting laid off. I have friends who are losing their jobs,” he says. The construction sector is a P30 billion money spinning industry largely controlled by multi-nationals. When government decided to cut down on spending the sector was the first to be affected. But others are not so optimistic.

“I don’t see a salary increase for civil servants this year,” adds Martha Moeng an MBA student at the University of Botswana. Her prediction is not largely unexpected. The IMF believes the civil service is too large and bloated. In October 2012, civil servants got a shot in the arm when government settled for a three percent salary hike.

Moeng thinks this was a joke. The Bargaining Council - a supposedly independent body that negotiates salaries and wages for civil servants - is largely a talking shop that president Ian Khama overlooks at whim.

Danger still lurks on the road to recovery. The challenge is also not helped by the central bank governor who still clings to a misguided economic objective, that inflation will decline within a range of three – six percent in the medium term. Economists think this is ambitious. “She needs to think again.

You can not set an inflationary target in a developing country like ours that relies on South African imports,” says Douglas Okiwe, a macroeconomist at one of the local banks. The taxman, Ken Morris is also musing over deteriorating Southern African Customs Union (SACU) kitty, thanks to the impending review of the thorny Revenue Sharing Formula.