15 Mar 2022

Adjustment of  government workers’ payday will not result in injection of capital into the economy, but will change financial flow. 

Previously financial activity within the country was skewed towards the last week of the month, resulting in less monetary activity from the first to the third week of the month. 

Briefing the media Monday, Ignite Wealth Financial Advisor,  Dr Seatla Ratshosa said the trend resulted in a situation where retail outlets and banks experienced rapid congestion during the last week of the month. Dr Ratshosa said as the situation might have been beneficial for banks, but the opposite was felt by local businesses since they went for extended days without trade. 

He said the situation was straining for local businessmen as oftentimes they had to request bank overdrafts to finance daily business activities and errands since there was no cash flow. 

The bank overdrafts came with hefty interest rates that heavily impeded businesses and affected business reserves, he said. 

With weekly-pay structure development, Dr Ratshosa singled out small, micro and medium enterprises as those who would benefit largely from this movement as they were the ones struggling with cash flow as compared to big businesses. 

He stated that big businesses had always been an exception to associated financial turmoil as they managed their cash flow by supplying SMMEs and waiting for their payments, which were often spread over a month. 

As for salaried individuals, he stated that he did not have a firm belief that the development would be beneficial except that it would be just a change in days of pay. 

He said service providers in the financial sector would likely experience challenges in terms of payments done through debit orders as the initial dates of the agreement would be changed. 

He observed that in Botswana there was a serious challenge of financial literacy among citizens which often resulted in people not making payments to the banks and furniture shops etc. on time. 

With the new development, he said there might be further challenges especially in collection of due payments at respective companies. 

As for government employees, he indicated that there would not be much of a problem since government was already doing the collection on behalf of banks. 

He advised that the best practice could be for government to spread payments of salaried employees over two weeks in a month citing, that such would not only stimulate money activity in the economy but also bring essence to issues of adequate budgeting among employees as opposed to waiting for a solid month to earn. ends