Despite introduction of poverty alleviation initiatives in 2010, Statistics Botswana has this week released statistics indicating that poverty has decreased at decreasing rate compared to previous periods.
From the period of 2002/03 poverty to 2009/10 poverty decreased by nearly 10 percent, compared to just 3 percent in the recent survey. There is a decrease however in the number of people who worry about going to bed on an empty stomach or waking up and worrying about not having enough food.
The percentage fell from 42 percent in 2009/10 to 38.9 percent in 2015/16. However, more than half of the population (50.2 percent) in rural areas still worry about not having enough meal. This is compared to only 25 percent of the people in cities and towns, and 37.5 percent in urban villages. The new statistics also show that, with government aid, the number of people within the poverty bracket stand at 337 410, and the number will rise to 503 196 without government aid (nearly a quarter of the total population).
The survey indicates that poverty stricken families in both rural and urban areas are headed by females. The purpose of the survey was to provide a comprehensive set of household level indicators for poverty and the labour market such as the poverty incidence, employment and unemployment levels. The survey forms part of the Multi-Topic Household Survey 2015/16. Results of the economic activity module covering employment rates were released in August.
The survey carried modules on household consumption and expenditure; Education, Health; Access to amenities, Employment; community activities and other information on schools and health facilities. Botswana was one of the poorest countries in 1966 when it gained independence; however that dramatically changed when the country, owing to discovery and prudent management of diamonds moved surged to the upper-middle-class category.
This measurement however Poverty incidence is determined by computing the Poverty Datum Line (PDL), which is based on the cost of a basket of goods and services deemed to be necessary and adequate to meet basic needs for household members. This is based on the basic requirements for; food, clothing, personal items, household goods &services and shelter.
The daily/monthly requirements for PDL basket components differ according to sex and age, consequently the household composition. Poverty datum line is the minimum cost of a defined basket of goods and services necessary to meet the basic requirements for food, clothing, personal items and household goods and services. A poor person/household is, therefore, one whose total consumption (expenditure, aid, wages in-kind, gifts received, school meals) is less than the PDL.
POVERTY PER REGION
Kweneng West is the worst hit by poverty, overtaking Ngamiland which has been most hit in previous surveys. Kweneng is the only region as per survey that has more than 50 percent of its population living under poverty datum line. It is followed by Ngwaketse West, Kgalagadi South, Ghanzi as well as Ngamiland in the worst hit bracket. Meanwhile North East, Gaborone, Jwaneng, Lobatse, Central Boteti as well as Barolong areas are the least affected by poverty.
POVERTY AND HUMAN DEVELOPMENT
The United Nations Development Programme has developed the Human Development Index (HDI) as a metric to assess the social and economic development levels of countries. Four principal areas of examination are used to rank countries: mean years of schooling, expected years of schooling, life expectancy at birth and gross national income per capita. This index makes it possible to follow changes in development levels over time and to compare the development levels of different countries.
It has been observed that Botswana, like any other country experience a link between poverty, and; education and health. School in urban areas, where there are little incidences of poverty do well when compared to their counterparts in rural areas. This means pupils in urban areas have a better opportunity of progressing to the highest education possibly, while those in rural areas are unlikely to reach the top.
This has been supported by by recent PSLE and BGCSE performances where urban schools outclassed rural school, which scores terribly remarks. This has also translated to health due to poor nutrition in poor families as well as the HIV/AIDS which affects poor families in the society. Botswana has one of the lowest lifespan in the world, with a life span of 55 years on average.
POVERTY ERADICATION PROGRAMMES
The decreasing rate of poverty reduction during a period where government had introduced poverty eradication measures indicate that the initiatives where not fruitful. This proposition is in line with the finding conducted by UNICEF jointly with the Botswana Institute of Development Policy Development Analysis (BIDPA), which champions the Ipelegeng programme. The following were the the recommendations of the evaluation:
Ipelegeng objectives must be revised and be aligned to the national objective of poverty eradication. Such an alignment should portray the programme only as a part of a process that seeks to achieve poverty eradication since on its own it cannot achieve that. Such an objective should therefore place emphasis on coordinating and linking the programme with other government programmes with the view to draw maximum synergies with such programmes.
Ipelegeng must be redesigned to be result-based to introduce flexible working schedules where beneficiaries will be assigned work and will work at their own time and pace and be paid on work done instead of time spent at work. Such a change should be done with the view to enable participants to get involved in other productive activities in the spirit of recommendation 12 below. Piece rate and task- based remuneration system as well as flexi-time should be introduced where feasible.
Ipelegeng must introduce a well-structured capacity building component that arms participants with production skills as well as survival skills. Such skills will assist the participants to graduate to better paying jobs.
A strong and clear Communication, Education and Public Awareness Strategy for Ipelegeng must be designed. Such a strategy should place emphasis on ensuring that xxii the programme objectives are clearly known and understood by all stakeholders. The need for participants to graduate must form a central core for such a strategy.
A cost benefit analysis of using a single national Ipelegeng wage rate to achieve self-selection must be undertaken with the view to establish whether different regional factors can be taken into account and hence vary the wage rate regionally.
The Ministry of Local Government should investigate the reasons for Remote areas having displayed very different results from the rest of the groups regarding Ipelegeng Issues. Based on the outcome of this investigation the Ministry will determine if a special Ipelegeng Programme targeting Remote area should be designed and implemented.
The recent study on youth entrepreneurship in Botswana has identified difficult access to funding, land, machinery, lack of entrepreneurial mindset and proper training as serious challenges that continue to hamper youth entrepreneurship development in this country.
The study conducted by Alliance for African Partnership (AAP) in collaboration with University of Botswana has confirmed that despite the government and private sector multi-billion pula entrepreneurship development initiatives, many young people in Botswana continue to fail to grow their businesses into sustainable and successful companies that can help reduce unemployment.
University of Botswana researchers Gaofetege Ganamotse and Rudolph Boy who compiled findings in the 2022 study report for Botswana stated that as part of the study interviews were conducted with successful youth entrepreneurs to understand their critical success factors.
According to the researchers other participants were community leaders, business mentors, Ministry of Trade and Industry, Ministry of Youth, Gender, Sport and Culture, financial institutions, higher education institutions, non-governmental institutions, policymakers, private organizations, and support structures such as legal and technical experts and accountants who were interviewed to understand how they facilitate successful youth entrepreneurship.
The researchers said they found that although Botswana government is perceived as the most supportive to businesses when compared to other governments in sub-Saharan Africa, youth entrepreneurs still face challenges when accessing government funding. “Several finance-related challenges were identified by youth entrepreneurs. Some respondents lamented the lack of access to start-up finance, whereas others mentioned lack of access to infrastructure.”
The researchers stated that in Botswana entrepreneurship is not yet perceived as a field or career of choice by many youth “Participants in the study emphasized that the many youth are more of necessity entrepreneurs, seeing business venturing as a “fall back. Other facilitators mentioned that some youth do not display creativity, mind-blowing innovative solutions, and business management skills. Some youth entrepreneurs like to take shortcuts like selling sweets or muffins.”
According to the researchers, some of the youth do not display perseverance when they are faced with adversity in business. “Young people lack of an entrepreneurial mindset is a common challenge among youth in business. Some have a mindset focused on free services, handouts, and rapid gains. They want overnight success. As such, they give up easily when faced with challenges. On the other hand, some participants argue that they may opt for quick wins because they do not have access to any land, machinery, offices, and vehicles.”
The researchers stated that most youth involved in business ventures do not have the necessary training or skills to maintain a business. “Poor financial management has also been cited as one of the challenges for youth entrepreneurs, such as using profit for personal reasons rather than investing in the business. Also some are not being able to separate their livelihood from their businesses.
Lastly, youth entrepreneurs reported a lack of experience as one of the challenges. For example, the experience of running a business with projections, sticking to the projections, having an accounting system, maintaining a clean and clear billing system, and sound administration system.”
According to the researchers, the participants in the study emphasized that there is fragmentation within the entrepreneurial ecosystem, whereby there is replication of business activities without any differentiation. “There is no integration of the ecosystem players. As such, they end up with duplicate programs targeting the same objectives. The financial sector recommended that there is a need for an intermediary body that will bring all the ecosystem actors together and serve as a “one-stop shop” for entrepreneurs and build mentorship programs that accommodate the business lifecycle from inception to growth.”
Botswana Housing Corporation (BHC) is said to have recorded an operating surplus of P61 Million, an improvement compared to the previous year. The housing, office and other building needs giant met with stakeholders recently to share how the business has been.
The P61 million is a significant increase against the P6 million operating loss realized in the prior year. Profit before income tax also increased significantly from P2 million in the prior year to P72 million which resulted in an overall increase in surplus after tax from P1 million prior year to P64 million for the year under review.
Chief of Finance Officer, Diratsagae Kgamanyane disclosed; “This growth in surplus was driven mainly by rental revenue that increased by 15% from P209 million to P240 million and reduction in expenditure from P272 million to P214 million on the back of cost containment.” He further stated that sales of high margin investment properties also contributed significantly to the growth in surplus as well as impairment reversals on receivables amounting to P25 million.
It is said that the Corporation recorded a total revenue of P702 million, an 8% decrease when compared to the P760 million recorded in the prior year. “Sales revenue which is one of the major revenue streams returned impressive margins, contributing to the overall growth in the gross margin,” added Kgamanyane.
He further stated professional fees revenue line declined significantly by 64% to P5 million from P14 million in the prior year which attributed to suspension of planned projects by their clients due to Covid-19 pandemic. “Facilities Management revenue decreased by P 24 million from P69 million recorded in prior year to P45 million due to reduction in projects,” Kgamanyane said.
The Corporation’s strength is on its investment properties portfolio that stood at P1.4 billion at the end of the reporting period. “The Corporation continues its strategy to diversify revenue streams despite both facilities management income and professional fees being challenged by the prevailing economic conditions that have seen its major clients curtailing spending,” added the CEO.
On the one hand, the Corporation’s Strategic Performance which intended to build 12 300 houses by 2023 has so far managed to build 4 830 houses under their SHHA funding scheme, 1 240 houses for commercial or external use which includes use by government and 1 970 houses to rent to individuals.
BHC Acting CEO Pascaline Sefawe noted that; BHC’s planned projects are said to include building 336 flat units in Gaborone Block 7 at approximately P224 million, 100 units in Maun at approximately P78 million, 13 units in Phakalane at approximately P26 million, 212 units in Kazungula at approximately P160 million, 96 units at approximately P42 million in Francistown and 84 units at approximately P61 million in Letlhakane. Emphasing; “People tend to accuse us of only building houses in Gaborone, so here we are, including other areas in our planned projects.”
Researchers from some government owned regulatory institutions in the financial sector have projected that the banking sector’s profitability could increase, following Bank of Botswana Monetary Policy Committee recent decision to increase monetary policy rate.
In its bid to manage inflation, Bank of Botswana Monetary Policy Committee last month increased monetary policy rate by 0.50 percent from 1.65 percent to 2.15 percent, a development which resulted with commercial banking sector increasing interest rate in lending to household and companies. As a result of BoB adjustment of Monetary Policy Rate, from 1.65 percent to 2.15 percent commercial banks increased prime lending rate from 5.76 percent to 6.26 percent.
Researchers from Bank of Botswana, the Non-Bank Financial Institutions Regulatory Authority, the Financial Intelligence Agency and the Botswana Stock Exchange indicated that due to prospects of high inflation during the second half of 2022, there is a possibility that the Monetary Policy Committee could further increase monetary policy rate in the next meeting in August 25 2022.
Inflation rose from 9.6 percent in April 2022 to 11.9 percent in May 2022, remaining above the Bank of Botswana medium-term objective range of 3 – 6 percent. According to the researchers inflation could increase further and remain high due to factors that include: the potential increase in international commodity prices beyond current forecasts, logistical constraints due to lags in production, the economic and price effects of the ongoing Russia- Ukraine conflict, uncertain COVID-19 profile, domestic risk factors relating to possible regular annual administered price adjustments, short-term unintended consequences of import restrictions resulting with shortages in supplies leading to price increases, as well as second-round effects of the recent increases in administered prices “Furthermore, the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices could add upward pressure to inflation,” said the researchers.
The researchers indicated that Bank of Botswana could be forced to further increase monetary policy rate from the current 2.15 percent if inflation rises persistently. “Should inflation rise persistently this could necessitate an upward adjustment in the policy rate. It is against this background that the interest rate scenario assumes a 1.5 percentage points (moderate scenario) and 2.25 percentage points (severe scenario) upward adjustment in the policy rate,” said the researchers.
The researchers indicated that while any upward adjustment on BoB monetary policy rate and commercial banks prime lending rate result with increase in the cost of borrowing for household and compnies, it increase profitability for the banking sector. “Increases in the policy rate are associated with an overall increase in bank profitability, with resultant increases in the capital adequacy ratio of 0.1 percentage points and 0.2 percentage points for the moderate and severe scenarios, respectively,” said the researchers who added that upward adjustment in monetary policy rate would raise extra capital for the banking sector.
“The increase in profit generally reflects the banking industry’s positive interest rate gap, where interest earning assets exceed interest earning liabilities maturing in the next twelve months. Therefore, an increase of 1.5 percentage points in the policy rate would result in industry gains of P71.7 million (4.1 percent increase), while a 2.25 percentage points increase would lead to a gain of P173.9 million (6.1 percent increase), dominated by large banks,” said the researchers.