FANCY FIGURES, UGLY FACTS

The income gap between the rich and the poor has always been a controversial economic, ethical, political and social issue. Income inequality in terms of how the total pie is distributed among different groups has remained a hot topic among researchers as well as politicians.

Botswana has had the highest rate of per capita growth of any country in the world in the last 35 years, with a GDP per capita of about US$70 at independence in 1966, to US$7550 in 2008. However, we don’t see the benefits of growth being distributed evenly. In 2010, Botswana’s Gini coefficient sat at 0.61, translating into that 61 percent of the population share 20 percent of the wealth whilst the remaining 40 percent share 80 percent of the nation’s wealth, making it one of the most unequal countries in the world, second only to Namibia in the region. Income inequalities in Botswana widened during decades of sustained economic growth. Gini coefficient measures the extent to which the distribution of income among individuals or households within an economy deviates from a perfectly equal distribution, 0 expressing total equality and 1 maximal inequality. The most equal countries, like Sweden, Finland and Iceland, are also the most developed.

In the Botswana case, our high unemployment plays a critical role as it limits income options. The percentage of people living below the poverty datum line is estimated at 23 percent in 2009 (official Central Statistics Office statistics) while UNDP estimates it to have been around 37 percent in 2002. Whatever figure or calculation may be right, poverty and unemployment levels in Botswana remain very high for a country doing so well economically. The income inequalities in this country are so severe that I noted that last year when public servants’ working days got adjusted, some officials got an adjustment of P50 000 to their annual salaries while others got as little P5000. Another example is that between the wages of cleaners and recent graduates, the latter will at least get P4000 while at most, the former will receive P1000. This is a 400 percent difference!

Some researchers argue that globalisation, skill-biased technological progress, institutional and regulatory reform are responsible for the inequalities. The wider and deeper integration of national markets for goods and services through international trade and investment has increased the demand for high-skilled labour more than the demand for low-skilled labour. Disparities in labour income from wages and salaries, accounting for 75 percent of household incomes of working-age adults, are the major determinant of income inequality. Though some families may have property or investments, their share in total income remains small. Although there is no formula to fixing inequalities, it is generally agreed that reducing inequalities will smoothen out poverty issues. Skills improvement is one of the less socially and politically challenging ways. Since workers' skills aren't keeping up with the advance of technology, worker education and skills development are vital. When skill-based graduates rise and there is some growth in the private sector, then there will be a reverse of economic forces, spreading the benefits of economic growth more evenly.

Just so we remember, all has not been lost. According to the IMF, “Botswana has been among the world’s fastest growing economies over the past 40 years, with an impressive record of prudent macroeconomic policies and good governance, which has moved the country from being one of the poorest in the world to the upper-middle income range.” Considerable achievements have been made in achieving virtually universal primary and junior secondary education, health care (88 percent of the population live within 8km of a health facility, and trained health personnel attend to 99 percent of births) and access to clean water supplies (97 percent of the population have access to safe drinking water).

There is so much on inequalities or the ‘behind the shadows’ facts of our vibrant economy that I will most probably 

have to explore in future instalments of this column.

*Inspired by “Fancy Figures and Ugly Facts in Botswana’s Rapid Economic Growth” written by

 Manatsha.B,and Mahajan K. of Hiroshima University,