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Poverty declines at decreasing rate

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:

Recommendation 1

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.

Recommendation 2

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.

Recommendation 3

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.

Recommendation 4

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.

Recommendation 5

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.

Recommendation 6

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.

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P230 million Phikwe revival project kicks off

19th October 2020
industrial hub

Marcian Concepts have been contracted by Selibe Phikwe Economic Unit (SPEDU) in a P230 million project to raise the town from its ghost status.  The project is in the design and building phase of building an industrial hub for Phikwe; putting together an infrastructure in Bolelanoto and Senwelo industrial sites.

This project comes as a life-raft for Selibe Phikwe, a town which was turned into a ghost town when the area’s economic mainstay, BCL mine, closed four years ago.  In that catastrophe, 5000 people lost their livelihoods as the town’s life sunk into a gloomy horizon. Businesses were closed and some migrated to better places as industrial places and malls became almost empty.

However, SPEDU has now started plans to breathe life into the town. Information reaching this publication is that Marcian Concepts is now on the ground at Bolelanoto and Senwelo and works have commenced.  Marcian as a contractor already promises to hire Phikwe locals only, even subcontract only companies from the area as a way to empower the place’s economy.

The procurement method for the tender is Open Domestic bidding which means Joint Ventures with foreign companies is not allowed. According to Marcian Concepts General Manager, Andre Strydom, in an interview with this publication, the project will come with 150 to 200 jobs. The project is expected to take 15 months at a tune of P230 531 402. 76. Marcian will put together construction of roadworks, storm-water drains, water reticulation, street lighting and telecommunication infrastructure. This tender was flouted last year August, but was awarded in June this year. This project is seen as the beginning of Phikwe’s revival and investors will be targeted to the area after the town has worn the ghost city status for almost half a decade.

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IMF projects deeper recession for 2020, slow recovery for 2021

19th October 2020

The International Monetary Fund (IMF) has slashed its outlook the world economy projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.

On Wednesday when delivering its World Economic Outlook report titled “A long difficult Ascent” the Washington Based global lender said it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April.  For 2021, IMF experts have projected growth of 5.4%, down from 5.8%. “We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” said Gita Gopinath Economic Counsellor and Director of Research.

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Botswana partly closed economy a further blow of 4.2 fall in revenue

19th October 2020

The struggle of humanity is now how to dribble past the ‘Great Pandemic’ in order to salvage a lean economic score. Botswana is already working on dwindling fiscal accounts, budget deficit, threatened foreign reserves and the GDP data that is screaming recession.

Latest data by think tank and renowned rating agency, Moody’s Investor Service, is that Botswana’s fiscal status is on the red and it is mostly because of its mineral-dependency garment and tourism-related taxation. Botswana decided to close borders as one of the containment measures of Covid-19; trade and travellers have been locked out of the country. Moody’s also acknowledges that closing borders by countries like Botswana results in the collapse of tourism which will also indirectly weigh on revenue through lower import duties, VAT receipts and other taxes.

Latest economic data shows that Gross Domestic Product (GDP) for the second quarter of 2020 with a decrease of 27 percent. One of the factors that led to contraction of the local economy is the suspension of air travel occasioned by COVID-19 containment measures impacted on the number of tourists entering through the country’s borders and hence affecting the output of the hotels and restaurants industry. This will also be weighed down by, according to Moody’s, emerging markets which will see government losing average revenue worth 2.1 percentage points (pps) of GDP in 2020, exceeding the 1.0 pps loss in advanced economies (AEs).

“Fiscal revenue in emerging markets is particularly vulnerable to this current crisis because of concentrated revenue structures and less sophisticated tax administrations than those in AEs. Oil exporters will see the largest falls but revenue volatility is a common feature of their credit profiles historically,” says Moody’s. The domino effects of containment measures could be seen cracking all sectors of the local economy as taxes from outside were locked out by the closure of borders hence dwindling tax revenue.

Moody’s has placed Botswana among oil importers, small, tourism-reliant economies which will see the largest fall in revenue. Botswana is in the top 10 of that pecking order where Moody’s pointed out recently that other resource-rich countries like Botswana (A2 negative) will also face a large drop in fiscal revenue.

This situation of countries’ revenue on the red is going to stay stubborn for a long run. Moody’s predicts that the spending pressures faced by governments across the globe are unlikely to ease in the short term, particularly because this crisis has emphasized the social role governments perform in areas like healthcare and labour markets.

For countries like Botswana, these spending pressures are generally exacerbated by a range of other factors like a higher interest burden, infrastructure deficiencies, weaker broader public sector, higher subsidies, lower incomes and more precarious employment. As a result, most of the burden for any fiscal consolidation is likely to fall on the revenue side, says Moody’s.

Moody’s then moves to the revenue spin of taxation. The rating agency looked at the likelihood and probability of sovereigns to raise up revenue by increasing tax to offset what was lost in mineral revenue and tourism-related tax revenue. Moody’s said the capacity to raise tax revenue distinguishes governments from other debt issuers.  “In theory, governments can change a given tax system as they wish, subject to the relevant legislative process and within the constraints of international law. In practice, however, there are material constraints,” says Moody’s.

‘‘The coronavirus crisis will lead to long-lasting revenue losses for emerging market sovereigns because their ability to implement and enforce effective revenue-raising measures in response will be an important credit driver over the next few years because of their sizeable spending pressures and the subdued recovery in the global economy we expect next year.’’

According to Moody’s, together with a rise in stimulus and healthcare spending related to the crisis, the think tank expects this drop in revenue will trigger a sizeable fiscal deterioration across emerging market sovereigns. Most countries, including Botswana, are under pressure of widening their tax bases, Moody’s says that this will be challenging. “Even if governments reversed or do not extend tax-easing measures implemented in 2020 to support the economy through the coronavirus shock, which would be politically challenging, this would only provide a modest boost to revenue, especially as these measures were relatively modest in most emerging markets,” says Moody’s.

Botswana has been seen internationally as a ‘tax ease’ country and its taxes are seen as lower when compared to its regional counterparts. This country’s name has also been mentioned in various international investigative journalism tax evasion reports. In recent years there was a division of opinions over whether this country can stretch its tax base. But like other sovereigns who have tried but struggled to increase or even maintain their tax intake before the crisis, Botswana will face additional challenges, according to Moody’s.

“Additional measures to reduce tax evasion and cutting tax expenditure should support the recovery in government revenue, albeit from low levels,” advised Moody’s. Botswana’s tax revenue to the percentage of the GDP was 27 percent in 2008, dropped to 23 percent in 2010 to 23 percent before rising to 27 percent again in 2012. In years 2013 and 2014 the percentage went to 25 percent before it took a slip to decline in respective years of 2015 up to now where it is at 19.8 percent.

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