Welcome to hard times
Staff Writer | Friday January 8, 2021 18:16
Beside the likely spread of a new, more dangerous Covid-19 strain in the country, the cost of living in 2021 will be considerably higher and more difficult for the majority of Batswana. By comparison, businesses and the general economy may see slight improve as tight restrictions are avoided and global markets for Botswana’s exports improve.
The list of reasons why 2021 will be tough on Batswana is long:
- Value Added Tax will increase to 14% from 12% from April 1 - Electricity tariffs will increase by five percent from April - Botswana Housing Corporation rentals will, from April, begin a phased increase leading to 300% overall rise - A new sugar tax that increases the sweeter a beverage is expected to kick in April - The fuel levy will also likely be increased
Meanwhile, in 2020, households had to contend with the rampaging effects of COVID-19 on employment, with companies closing down because they could not retrench during the State of Public Emergency. Those that remained afloat slashed salaries, removed allowances and instituted other measures such as forced shift work, in order to cut wage bills.
In the midst of this agony, households dealt with a 22% increase in electricity prices in March, higher postal tariffs, public transport fares and fuel prices.
Crawling into 2021 is ‘welcome to hard times,’ with government set to tighten its spending as a way of reining in the budget deficit and making expenditure more priority-focussed.
“I’m not sure how we are supposed to survive in this situation,” says 23-year-old Steven Mogorosi, an unemployed design graduate encountered at the Main Mall in Gaborone. “The VAT increase alone will make all goods and services more expensive. “The economy is only recovering and not producing jobs. “Surely some of these increases should have been postponed to allow us to also recover.”
How exactly COVID-19 affected employment in the country is presently unknown as Statistics Botswana is still gathering and calculating data on the issue. However, between January and March 2020, the period right before the onset of COVID-19 in Botswana, the unemployment rate was measured at 23.2%, with youth unemployment at about 31.3%.
The employed population was measured at 751,798 people while the unemployed were measured at 226,598 out of a total population aged 18 and above of about 1.5 million. Average cash earnings for those employed were pegged at P4,848 per month.
Most analysts expect the figures to have changed drastically due to the impact of COVID-19. A leaked memo ostensibly from the higher echelons of government, suggests the civil service’s capacity to take on more unemployed people will be curtailed this year.
Government, according to the memo, intends to abolish 50% of its vacant positions this year as a way of reducing the billions of Pula it pays each year in civil service salaries.
“The reduction in vacancies to be extended to district and urban councils, land boards and state owned entities,” the memo reads.
Still, in the midst of the fire that awaits households in 2021, official documents suggest it could have been worse.
Besides VAT, sugar tax and others, the P14.5 billion Economic Recovery and Transformation Plan passed by Parliament in September to lift the economy out of its COVID-19 stress, had also proposed a carbon tax, water tariff increases and more cost recovery/sharing in areas such as health and education.
Those able to pay should bear a greater portion of the cost of providing public services by government pay, through means-tested user fees,” the documents read. “Cost-sharing and cost-recovery should be revamped post COVID-19 without compromising inclusivity,” the final ERTP reads. “Those able to pay should bear a greater portion of the cost of providing public services by government pay, through means-tested user fees. “Education is one area that could be considered, but the principle could be extended to some components of health care.”
The ERTP had also proposed to expand coverage of taxes, for example, unused land, updating of property valuations and reduction of exemptions such as those covering agriculture, reducing parastatal support and narrowing social safety programmes.
With Finance and Economic Development Minister, Thapelo Matsheka reportedly aiming at adhering to the fiscal rule that requires the deficit to be kept at less than four percent of GDP, analysts expect that other difficult pills from the ERTP may emerge in the February budget for consumers to swallow.