Richest 1% in Botswana earn 20 times the national average

Mbongeni Mguni | Monday January 24, 2022 06:00

The World Inequality Lab’s database released this week features an interesting tool that allows users to gauge where their income lies in their country’s overall picture. According to the tool, to be in the top one percent of income earners in Botswana, you had to earn at least P142,601 per month in 2021 before tax.

By comparison, to be in the midpoint of the scale, where 49% of people earn less than you and 51% of people earn more than you, you have to earn P5,213 per month.

The often-quoted Finscope survey of 2015 that found that 90% of Batswana earn less than P10,000 per month, would put those who earn this exact amount in the top 70% of income earners in the country. The gap between earning P10,000 and being in the top 70%, and earning P140,000 to be in the top one percent, highlights the elite levels the rich occupy in the country.

Meanwhile, Statistics Botswana’s last report on incomes indicated that formal workers earned an average of P6,014 per month as at December 2020. According to the Lab’s estimates, this places those earning that amount in the top 55% of income earners in the country.

Importantly, however, the database also breaks down the figures into incomes per household. Most data models in the country are based on a household of four and with unemployment levels at about 20%, many households have only one income earner.

Using the Lab’s data, this means that if a home of four had only one breadwinner earning that P10,000, the household would be in the bottom 25% of incomes in the country.

If the household of four has one income earner bringing in P6,014, that household would be in the bottom 15% of incomes in the country.

The World Inequality Lab (WID) is a Paris, France-based research laboratory focusing on the study of inequality worldwide.

The WIL hosts the World Inequality Database, the most extensive public database on global inequality dynamics.

The database is built from the contributions of more than 100 researchers on all continents, with the vast network collaborating with statistical institutions, tax authorities, universities and international organisations, to harmonise, analyse and disseminate comparable international inequality data.

For Botswana, the database’s findings are no surprise, as the country has long been amongst the most unequal in the world. The new numbers, however, confirm that the gap between the rich and poor is sharper than ever, worsened by the COVID-19 pandemic.

Other wealth reports, such as New World Wealth’s Africa Wealth Report released in May 2021, indicated that 200 more people in Botswana became US dollar millionaires in the country during 2020, a year in which COVID-19 depressed most other people’s incomes.

At global level, the pandemic boosted the fortunes of the super-rich, particularly as resilient equity markets not only preserved the value of their wealth, but in many cases increased it. The World Inequality Lab noted that globally, 2020 marked the steepest increase in global billionaires’ share of wealth on record.

“Since 1995, the share of global wealth possessed by billionaires has risen from one percent to over three percent. “This increase was exacerbated during the Covid pandemic.”

Locally, the WID estimates that in 2021, the top one percent in Botswana had average incomes and wealth worth P2.5 million compared to a national average of P110,337. A distinction is made between incomes and wealth and in Botswana, no independent, in-country research exists of wealth at personal level. The data, however, also shows that the fortunes of the top one percent income earners have been fluctuating over the years. The top one percent accounted for 36% of national incomes in 1993, the highest according to figures dating back to 1980. However, for 2021, the top one percent accounted for about 23%.

During that period, more people have graduated from the ranks of the “average” to the top 10%, while generally, average national incomes have also risen significantly. For instance, the WID shows that average national annual incomes in 1980 were P47,284, rising to P110,337 in 2021.

“The figures suggest that broadly incomes have improved in the country over the decades, which is known.

“The trend, however, is that inequality has persisted as can be seen in the growing gap between the super-rich and the rest of the population.

“Yes, incomes have generally improved, but a select few have experienced phenomenal growth in their incomes far beyond the rest of the population,” a local banker said, requesting anonymity for professional reasons. Researchers at the World Inequality Lab say inequality is a “political choice” at global level.

“Income and wealth inequalities have been on the rise nearly everywhere since the 1980s, following a series of deregulation and liberalisation programmes which took different forms in different countries,” the researchers said.

“The rise has not been uniform: certain countries have experienced spectacular increases in inequality (including the US, Russia and India) while others (European countries and China) have experienced relatively smaller rises.

“These differences, which we discussed at length in the previous edition of the World Inequality Report, confirm that inequality is not inevitable, it is a political choice.”

For Botswana, inequality appears to generally be the consequence of the development path taken by the economy over the years. According to an authoritative study by the United Nations Development Programme (UNDP) in partnership with local authorities released last August, the transformation of the economy from its agricultural base, to mining and eventually services has seen many citizens fall through the cracks, while others have joined the ranks of the rich. “Botswana’s economic composition and recent changes to this composition may play an important role in determining inequality,” the researchers noted.

“As in other developing countries, Botswana is experiencing a process of structural transformation with a premature tertiarisation of the economy.

“The importance of mining to the economy has waned, ceding its position to the hospitality and trade sectors and the financial, investment and real estate sector.

“However, the services, trade and financial sectors are characterised by high-income inequality, a finding which may explain the recent increase in inequality.”

Essentially, at Independence, the economy was led by agriculture, a labour-intensive sector where incomes are generally more equal than other industries. The 1970s mining boom was less labour-intensive and tended towards widening inequality with the creation of a new wealth class.

The emergence of the financial services sector as a driver of growth has only widened the inequality, employing far fewer citizens while the income gap has been widened even more.

The UNDP’s report on inequalities in income largely focussed on the formal sector, where the richest within this class are generally the CEOs of major private sector corporates. The super-rich class that has emerged over the years enjoys both high corporate sector incomes, earnings from entrepreneurial endeavours and handsome wealth such as holdings of real estate and stock exchange equity.

For ordinary Batswana, however, a meagre salary at the end of the month is the only income. And for those in this challenge, economic inclusion has gone past being an urgency and become a crisis.