Inequality accounts for economic growth stagnation

KEIKANTSE LESEMELA
Correspondent | Thursday August 2, 2012 00:00

'In these instances, inequality creates prohibitive barriers to participation in the economy for many,' he said,'Inequality is a big concern. When poverty is pervasive, growing inequality makes inclusive prosperity a very distant dream and provides fertile ground for instability'. Pelotshweu Moepeng, an economist at BIDPA, highlighted that dependency on smooth income flow and reliance on agriculture creates inequality. He noted that people earning income can plan their expenditures  while those dependent on agriculture are affected by droughts, pests and diseases. He further cited income levels for the skilled and the unskilled as another source of inequality.

He said potential corrective measures to inequality can be progressive income tax - whereby income is taxed at a marginal rate that increases with the level of income. 'In Botswana, this is obvious with all employees in government and related agencies.  The taxes from the private sector might not reflect the level of incomes of business owners,' said Moepeng. He noted that more work needs to be done to address this problem.He said other potential measures to address inequality include taxes on consumption as well as government transfers such as payments to people vulnerable to income and food security such as old age pension and destitute support.

'These transfers have helped to reduce problems of high poverty rates. For example before the introduction of old age pension, most elderly people were registered as Destitute Group B - provided with food rations,' he said.He however cautioned that diamonds will decline from 2020 onwards and thus transfer income will not be sustainable.