The new employment act, otherwise known as the Labour Relations Act, is very big on protecting employees’ rights and there is nothing wrong with that. In the process, however, it ignores the price mechanism. It puts ideology over economics and wilfully ignores the fact that labour as an input has a price. As a result, it therefore does little to promote investment and job creation.
You would think that in a country which suffers from chronic unemployment, especially among the youth, we would have a flexible labour market. But the new act does no such thing. Its main thrust is to protect employees, which though emotionally appealing is dangerous for the broader economy.
It also sends the wrong signal that Botswana is not a destination conducive to investment, given the now-rigid labour law.
You know, policymakers are not really focused on economic growth and productivity when they begin to think that there is something intrinsically evil about fixed-term contracts. In their archaic worldview, there is a cap on fixed-term contracts. It is as if people should be on this government-style, permanent, and pensionable stuff.
If you do away with fixed-term contracts, how then do employers hold employees to perform? And the most effective way of doing that is through fixed-term contracts with clear goals and deliverables at the end of which the parties can decide to renew the contract if the deliverables have been met. If not, then the parties can go their separate ways.
And if you lock down employers into permanent contracts, you make it exceedingly difficult for them to restructure. You shackle them and make it difficult to be nimble and agile in how they run their businesses. So by placing a cap on fixed-term contracts, you are introducing an employment risk.
Because the Act makes it difficult to let go of employees, employers become hesitant in their hiring decisions. When that happens, it is the job seekers who bear the brunt of such decisions.
One of the traps that the Employment Act lays for employers is with respect to the documents that need to be submitted to government and unions in the case of layoffs. If a butchery in Bontleng, for example, seeks to lay off workers for whatever commercial reason, such an enterprise must submit annual audited financial statements, a budget, and some bizarre document called a fiscal and costing model. To date, no one has been able to describe what a costing model looks like. The worrisome fact, though, is that if a company cannot submit such a model, it would violate the law.
And these requirements are misplaced. They are based on a misplaced notion that a company that turns a profit must not manage its costs by laying off workers as a part of restructuring. This is an unnecessary trap because it also discourages investment and hiring.
If companies know that once they employ people, it will be difficult to let them go, they will hire fewer. So we have to be careful about this ideological shift in employment law.
The other trap of the Employment Act is that its coverage is wide from big formal enterprises to the informal sector. So the provisions of this law would apply to a small business which as we all know, keeps neither audited accounts nor budgets. So the law effectively criminalises everyone. And that should not be the effect of any law. It is strange that we wish to go through such unintended consequences especially for the unemployed.