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The role of education in economic growth


Introduction
In Botswana, education has, through the years, received the largest share of the government budget. In the 2014/2015 budget, for example, the allocation to the Ministry of education and Skills Development was P9, 26 billion or 28 percent of the recurrent budget, an increase of P1, 05 billion or 0.3 percent over the 2013/2015 budget. Invariably, the expenditure on education raises several questions.


Should the Botswana government really spend so much money on education? Is the Government getting a good return on this type of investment? What should be the basic strategy of the expenditure on education growth? What really is the role of education in economic growth? This article examines the role of education in economic growth and addresses some of these questions.


How education enhances economic growth
Economists have identified three ways in which education enhances economic growth; firstly education raises the efficiency of the labour, which in turn raises labour productivity and economic growth. Second, education induces innovation and technological progress; these factors which enhance economic growth.

Thirdly, education facilitates the acquisition of foreign technology. It is asserted that presently, new technology is generated mainly by the developed countries in Europe and North America. Once created, the new technology is then diffused worldwide through different channels, the major ones being international trade and foreign direct investment. However it is argued that a country must have absorptive capacity before it can successfully acquire foreign technology and this enhances economic growth.


The importance of education in the acquisition of foreign technology has been emphasised. It is observed that modern economic growth depends mainly on the international transfer of technology, which subsequently depended on education. The economic growth of Europe and North America has been explained by the fact that masse education was already fairly well established by the early nineteenth century in England, France, Germany, and the United States of America.


Quantity versus quality in education
The quantity of education is measured by the student enrolments and years of schooling. This has been the general focus through the years and it is an approach government by the assumption that the more enrolments ad years of schooling, the higher the economic growth rate., However, three basic problems have been identified in this approach, First the amount of knowledge that students gain in a year varies across countries, it is higher in some countries than theirs. Secondly, schooling is not the only means of acquiring skills. Rather skills can be acquired at the workplace from family and peers. Thirdly what really matters for economic growth is education quality and not quantity.


Quality of education is measured by what students learn that is the cognitive skills- basic mathematics reading and writing skills. These skills are considered to be more significant for economic growth than the mere quantity of education. Since schooling and learning are not necessarily joint outcomes, we need to ensure that students learn when they are schooling. Schooling is about showing up for classes while learning is about acquiring knowledge that makes a person functionally literate.


The case of Botswana
Figure 3 shows the trends in student enrolment in Botswana at all levels of education during the period 1974 to 2007. On the other hand, Figure 4 shows only the enrolments at tertiary institutions namely the University of Botswana and vocational and technical colleges. Clearly from these figures, there has been a substantial increase in student enrolments in Botswana. This means that the quantity of education has risen in Botswana and therefore is how to enhance quality of education.


As expected primary education has highest enrolment of students; followed by secondary; and then tertiary education. Because, at any given time, most students are in primary school, education quality should target primary schools. Targeting quality at primary school level will, as they say produce the greatest good for the greatest numbers. It will lay a solid foundation for higher levels of learning and reduce the attrition at secondary and tertiary levels.

Why? This is because “children must learn how to learn” Precisely the specific policies that can improve education quality in primary school include incentives for primary school teachers , reducing the student teacher ratio by increasing the number of teachers, improving discipline updating school curricula and re training of teaches , improving testing tools and procedures. Thus in the 2015/2016 budget, the Government of Botswana has allocated P644 million for operation costs of teaching staff and P235,83 million for in service training.


 The gap is unnecessary because the skills acquired from vocational and technical training are required for enhanced economic growth. Mupimpila and Narayanu (2009), for example, find a positive and significant impact of vocational and technical training on economic growth in Botswana.


In conclusion, we to turn to the questions raised at the beginning of this article. Should the Botswana government really spend so much money on education? Is the Government getting a good return on this type of investment? To answer these questions we consider the fact that substantial increase in student enrolments in Botswana occurred after the mid-1980s.

This suggests that the Botswana Government has among others invested in reproducible capital such as machines. In essence the Hartwick rule holds that revenue from a non-renewable resource such as diamonds should be invested in other economic activities that will yield income, output economic activities that will yield income output employment and consumption in the future after the non-renewable resource is depleted.


It is principle that s implied by the bank of Botswana in its annual report of 2017. Therefore on purely economic grounds, it is necessary for Botswana government to continue to spend so much money on education.
The dividends for this type of investment may not be apparent now but they will in the future.

By contrast the skills mismatch and the high graduate unemployment which are now prevalence in Botswana suggest that the government might not be getting good return on investment. Moreover, competitiveness reports rank Botswana lowly on the quality of education. The issue really is how to increase the quality of education and produce graduates that are demanded by employers.


This report is adopted from the Stanbic Bank Quarterly Economic Review, 2015

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Mowana Mine to open, pay employees millions

18th January 2022
Mowana Mine

Mowana Copper Mine in Dukwi will finally pay its former employees a total amount of P23, 789, 984.00 end of this month. For over three years Mowana Copper Mine has been under judicial management. Updating members, Botswana Mine Workers Union (BMWU) Executive Secretary Kitso Phiri this week said the High Court issued an order for the implementation of the compromise scheme of December 9, 2021 and this was to be done within 30 days after court order.

“Therefore payment of benefits under the scheme including those owed to Messina Copper Botswana employees should be effected sometime in January latest end of January 2022,” Kitso said. Kitso also explained that cash settlement will be 30 percent of the total Messina Copper Botswana estate and negotiated estate is $3,233,000 (about P35, 563,000).

Messina Copper was placed under liquidation and was thereafter acquired by Leboam Holdings to operate Mowana Mine. Leboam Holdings struck a deal with the Messina Copper’s liquidator who became a shareholder of Leboam Holdings. Leboam Holdings could not service its debts and its creditors placed it under provisional judicial management on December 18, 2018 and in judicial management on February 28, 2019.

A new company Max Power expressed interest to acquire the mining operations. It offered to take over the Mowana Mine from Leboam Holdings, however, the company had to pay the debts of Leboam including monies owed to Messina Copper, being employees benefits and other debts owed to other creditors.

The monies, were agreed to be paid through a scheme of compromise proposed by Max Power, being a negotiated payment schedule, which was subject to the financial ability of the new owners. “On December 9, 2021, Messina Copper liquidator, called a meeting of creditors, which the BMWU on behalf of its members (former Messina Copper employees) attended, to seek mandate from creditors to proceed with a proposed settlement for Messina Copper on the scheme of compromise. It is important to note that employee benefits are regarded as preferential credit, meaning once a scheme is approved they are paid first.”

Negotiated estate is P35, 563,000

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Councilors’ benefits debacle-savingram reveals detail

18th January 2022

A savingram the Ministry of Local Government and Rural Development sent to Town Clerks and Council Secretaries explaining why councilors across the country should not have access to their terminal benefits before end of their term has been revealed.

The contents of the savingram came out in the wake of a war of words between counselors and the Ministry of Local Government and Rural Development. The councilors through the Botswana Association of Local Authorities (BALA) accuse the Ministry of refusing to allow them to have access to their terminal benefits before end of their term.

This has since been denied by the Ministry.  In the savingram to town councils and council secretaries across the country, Permanent Secretary in the Ministry of Local Government and Rural Development Molefi Keaja states that, “Kindly be advised that the terminal benefits budget is made during the final year of term of office for Honorable Councilors.”  Keaja reminded town clerks and council secretaries that, “The nominal budget Councils make each and every financial year is to cater for events where a Councilor’s term of office ends before the statutory time due to death, resignation or any other reason.”

The savingram also goes into detail about why the government had in the past allowed councilors to have access to their terminal benefits before the end of their term.  “Regarding the special dispensation made in the 2014-2019, it should be noted that the advance was granted because at that time there was an approved budget for terminal benefits during the financial year,” explained Keaja.  He added that, “Town Clerks/Council Secretaries made discretions depending on the liquidity position of Councils which attracted a lot of audit queries.”

Keaja also revealed that councils across the country were struggling financially and therefore if they were to grant councilors access to their terminal benefits, this could leave their in a dire financial situation.  Given the fact that Local Authorities currently have cash flow problems and budgetary constraints, it is not advisable to grant terminal benefits advance as it would only serve to compound the liquidity problems of councils.

It is understood that the Ministry was inundated with calls from some Councils as they sought clarification regarding access to their terminal benefits. The Ministry fears that should councils pay out the terminal benefits this would affect their coffers as the government spends a lot on councilors salaries.

Reports show that apart from elected councilors, the government spends at least P6, 577, 746, 00 on nominated councilors across the country as their monthly salaries. Former Assistant Minister of Local Government and Rural Development, Botlogile Tshireletso once told Parliament that in total there are 113 nominated councilors and their salaries per a year add up to P78, 933,16.00. She added that their projected gratuity is P9, 866,646.00.

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Households spending to drive economic recovery

17th January 2022

A surge in consumer spending is expected to be a key driver of Botswana’s economic recovery, according to recent projections by Fitch Solutions. Fitch Solutions said it forecasts household spending in Botswana to grow by a real rate of 5.9% in 2022.

The bullish Fitch Solutions noted that “This is a considerable deceleration from 9.4% growth estimated in 2021, it comes mainly from the base effects of the contraction of 2.5% recorded in 2020,” adding that, “We project total household spending (in real terms) to reach BWP59.9bn (USD8.8bn) in 2022, increasing from BWP56.5bn (USD8.3bn) in 2021.”  According to Fitch Solutions, this is higher than the pre-Covid-19 total household spending (in real terms) of P53.0 billion (USD7.8bn) in 2019 and it indicates a full recovery in consumer spending.

“We forecast real household spending to grow by 5.9% in 2022, decelerating from the estimated growth of 9.4% in 2021. We note that the Covid-19 pandemic and the related restrictions on economic activity resulted in real household spending contracting by 2.5% in 2020, creating a lower base for spending to grow from in 2021 and 2022,” Fitch Solutions says.

Total household spending (in real terms), the agency says, will increase in 2022 when compared to 2021. In 2021 and 2022, total household spending (in real terms) will be above the pre-Covid-19 levels in 2019, indicating a full recovery in consumer spending, says Fitch Solutions.  It says as of December 6 2021 (latest data available), 38.4% of people in Botswana have received at least one vaccine dose, while this is relatively low it is higher than Africa average of 11.3%.

“The emergence of new Covid-19 variants such as Omicron, which was first detected in the country in November 2021, poses a downside risk to our outlook for consumer spending, particularly as a large proportion of the country’s population is unvaccinated and this could result in stricter measures being implemented once again,” says Fitch Solutions.

Growth will ease in 2022, Fitch Solution says. “Our forecast for an improvement in consumer spending in Botswana in 2022 is in line with our Country Risk team’s forecast that the economy will grow by a real rate of 5.3% over 2022, from an estimated 12.5% growth in 2021 as the low base effects from 2020 dissipate,” it says.

Fitch Solutions notes that “Our Country Risk team expects private consumption to be the main driver of Botswana’s economic growth in 2022, as disposable incomes and the labour market continue to recover from the impacts of the Covid-19 pandemic.”
It says Botswana’s tourism sector has been negatively impacted by the Covid-19 pandemic and the related travel restrictions.

According to Fitch Solutions, “The emergence of the Omicron variant, which was first detected in November 2021, has resulted in travel bans being implemented on Southern African countries such as South Africa, Botswana, Lesotho, Namibia, Zimbabwe and Eswatini. This will further delay the recovery of Botswana’s tourism sector in 2021 and early 2022.”  Fitch Solutions, therefore, forecasts Botswana’s tourist arrivals to grow by 81.2% in 2022, from an estimated contraction of 40.3% in 2021.

It notes that the 72.4% contraction in 2020 has created a low base for tourist arrivals to grow from.  “The rollout of vaccines in South Africa and its key source markets will aid the recovery of the tourism sector over the coming months and this bodes well for the employment and incomes of people employed in the hospitality industry, particularly restaurants and hotels as well as recreation and culture businesses,” the report says.

Fitch Solutions further notes that with economies reopening, consumers are demanding products that they had little access to over the previous year. However, manufacturers are facing several problems.  It says supply chain issues and bottlenecks are resulting in consumer goods shortages, feeding through into supply-side inflation.  Fitch Solutions believes the global semiconductor shortage will continue into 2022, putting the pressure on the supply of several consumer goods.

It says the spread of the Delta variant is upending factory production in Asia, disrupting shipping and posing more shocks to the world economy. Similarly, manufacturers are facing shortages of key components and higher raw materials costs, the report says adding that while this is somewhat restricted to consumer goods, there is a high risk that this feeds through into more consumer services over the 2022 year.

“Our global view for a notable recovery in consumer spending relies on the ability of authorities to vaccinate a large enough proportion of their populations and thereby experience a notable drop in Covid-19 infections and a decline in hospitalisation rates,” says Fitch Solutions.
Both these factors, it says, will lead to governments gradually lifting restrictions, which will boost consumer confidence and retail sales.

“As of December 6 2021, 38.4% of people in Botswana have received at least one vaccine dose. While this is low, it is higher than the Africa average of 11.3%. The vaccines being administered in Botswana include Pfizer-BioNTech, Sinovac and Johnson & Johnson. We believe that a successful vaccine rollout will aid the country’s consumer spending recovery,” says Fitch Solutions.  Therefore, the agency says, “Our forecasts account for risks that are highly likely to play out in 2022, including the easing of government support. However, if other risks start to play out, this may lead to forecast revisions.”

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