Mmegi

Businesses plead for phased minimum wage increase

Bulders. PIC MORERI SEJAKGOMO
Bulders. PIC MORERI SEJAKGOMO

Businesses have pleaded with government to introduce the P4,000 minimum wage in a phased manner over several years, arguing that most of them do not have ability and are not prepared for higher payouts to workers.

At a meeting that grew tense in parts on Thursday in Gaborone, Business Botswana members pushed back against plans for a higher minimum wage, suggesting instead that increases of between five and ten percent per annum be made to eventually reach the P4,000 desired by government.

The meeting, which was packed to capacity and featured the Labour and Home Affairs minister,(Ret) Major General Pius Mokgware, is the highest-level engagement held so far on the new administration’s plans for a higher minimum wage.

Ahead of the meeting, Business Botswana, the country’s largest business lobby group representing employers in the economy, conducted a survey of its members on the minimum wage.

“There’s a consensus that we need to improve in terms of the wage level but the P4,000 is steep to be implemented at a go,” said Mpaphi Tsholofelo, Business Botswana’s head of Policy & Research. “However, this varies across sectors and sizes. “There are costs and risks that are too important to be ignored. “The survey results show that there is need for proper consideration of competitiveness; how do you remain competitive and not affect our export sectors or exchange rate?”

He said businesses are also proposing that in the consultations with government going forward, the minimum wage debate should consider the sensitivities of individual sectors, rather than an industry-wide application.

“There’s still a lot of work to understand, like how many people are non-minimum wage earning, the implications on inflation and others. “There has to be continuous engagement and respect for standing procedures on these types of initiatives,” Tsholofelo said.

Small business owners at the meeting expressed concerns that their businesses would not be able to afford the proposed minimum wage.

“For some of us, our turnover won’t allow us to pay that P4,000, while others would manage if it is done gradually. We want to understand if we are all required to pay employees that amount,” one representative said.

The minimum wage debate, spurred by the election manifesto pledges of the new government, is a highly emotive issue in one of the world’s most unequal countries in terms of incomes. A previous report by the World Inequality Lab estimated that the richest one percent of people in Botswana earned more than 20 times the average income of the rest of Batswana in 2021.

Several studies indicate that the COVID-19 pandemic and associated irregular procurement, contributed to widening the gap between the rich and the poor. New World Wealth’s Africa Wealth Report indicated that 200 more people in Botswana became US dollar millionaires in the country during the COVID-year of 2020.

The results of listed companies, which are made public due to the Botswana Stock Exchange listing rules, also indicate perennially super-profits from sectors such as banking and the broader financial services. Tourism groups, which run high-end Okavango Delta camps and earn US dollar revenues, are also back in the top earning companies in the country, after their margins were squeezed during the pandemic.

Meanwhile, ordinary Batswana have questioned the previous government’s commitment to securing a better wage deal for them with business. Unions and activists have accused the private sector of violating the fair wage principles and the previous government of entrenching abuse of workers through the pursuit of ruthless capitalist policies.

Speaking at the meeting on Thursday, Labour and Home Affairs minister, Pius Mokgware, issued a stern warning to large corporations that the government would not tolerate businesses riding on the concerns of smaller enterprises to evade paying the proposed minimum wage.

He stressed that it is unreasonable for companies reporting massive profits to claim they cannot afford wage increases.

"I was hoping there would be conversations about dividing businesses according to their scale because we won't allow businesses that are making millions in profits to claim they can't increase the minimum wage," Mokgware told the meeting.

He continued: "Imagine reporting to have made P600 million in profits and still claiming you cannot afford the proposed minimum wage. “What is the appropriate profit for you? Some of these businesses do business with the government and are making millions. “Yes, there are some who would need a structured approach, but P4,000 is possible for many businesses."

The minister also warned that providing false information to public officers is a criminal offense punishable by up to three years in prison, as he urged companies to be transparent about their financial capabilities.

"It is an offense to give a public officer incorrect information, and one can be sentenced to three years. “So, let us come forward with the correct information," he said.

Mokgware further called on Business Botswana to categorise businesses according to their financial standing and present recommendations to the government.

"We are really interested in employees getting decent wages," he said, reinforcing the government's commitment to ensuring fair labour practices.

Meanwhile, a 2024 study by the International Labour Organisation (ILO) has found that even the current minimum wage is being abused, with 32% of firms not complying with the rates required by the law.

The study found that agriculture, retail trade and domestic services have the highest level of non-compliance with the current minimum wage, while wholesale, manufacturing and construction, have the highest compliance rates.

The ILO estimated that, using the current minimum wage, 36% of employees can be categorised as “low paid”, meaning they earn an equivalent of P1,667 per month. The benchmark of P1,667 represents two-thirds of the median wage for 2024. The median wage is a figure that represents the middle point of all wages earned in various industries in the country, a figure estimated at P2,500 last year.

“On average, female employees are paid 23% less per month than male employees – a difference that cannot be explained by differences in education levels. “The report shows that the current coverage of the minimum wage system is far from being optimal. “Indeed, 59% of employees are not in any of the regulated sectors. “The overwhelming majority or 94% of workers who are not covered are in the services sector and women account for 57%,” the ILO found.

Government is expected to intensify discussions towards a revised minimum wage later this year.

Editor's Comment
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