Botswana the outlier as Africa faces $1.2tr debt crisis

To the streets: Kenyans, mainly youths, took to the streets against the proposed tax increases. More than ten were killed this week PIC: BHARTIYAMEDIA.COM
To the streets: Kenyans, mainly youths, took to the streets against the proposed tax increases. More than ten were killed this week PIC: BHARTIYAMEDIA.COM

At least 13 Kenyans died this week in riots against proposed taxes, the latest sign of the $1.2 trillion debt crisis facing African countries and forcing them to overburden their citizens. Botswana, which slashed VAT across various commodities last year, stands as a rare island in the chaos, writes MBONGENI MGUNI

The level of external public debt owed by African governments reached $1.2 trillion last year (P16.3 trillion), driven by the impact of the global financial crisis of 2008, the COVID-19 disaster, slowing growth, rising interest rates and the urgent need for development finance. Across Africa, high external debt is rocking large and small countries, with much of this denominated in hard currencies such as the US dollar, meaning further vulnerabilities for economies. The debt burden is also steeper because of the “African premium” or higher level of interest most African countries pay for debt due to their weaker credit profiles or lenders’ inherent biases and perceptions of risk on the African continent. The riots seen in Kenya in the last days are the direct result of this debt crisis. Unable to secure more lending, saddled with costly debt and an underperforming economy, Kenyan President William Ruto did what the rule book says you should do.

He resorted to the harmless sounding, but devastating alternative known as “domestic resource mobilisation,” where governments attempt to increase the amount of revenue they can raise on home soil to finance their needs. According to the BBC, the Kenyan Parliament and Ruto wanted to introduce a 16% sales tax on bread, a 25% duty on cooking oil, a new tax on financial transactions, a new 2.5 percent annual tax on vehicle ownership as well as another tax on “on products that contribute to waste and harm the environment”. This latter description would have included charges on women’s sanitary products and babies’ diapers. Ruto also wanted to impose taxes on hospital services and increase import duties, in an economy where many support themselves through cross-border trading. Domestic resource mobilisation is a term many in Botswana should be aware of. In the aftermath of the COVID-19 pandemic’s impact on the budget and economic growth, the Finance ministry ramped up debates and plans around increasing government revenue from the local economy. In April 2021, Value Added Tax rose to 14% from 12%, while a new sugar tax was introduced. Various public service fees also rose, while administered prices such as Botswana Housing Corporation rentals, electricity and water tariffs, as well as public transport fares, all rose at the same time. And yet for all the pain Batswana went through as a result of these “domestic resource mobilisation” initiatives, the country is a clear outlier in the troubles facing Africa.

Editor's Comment
Stop the children killing madness!

The incident comes on the heels of a similar one where a father murdered his two toddlers in Francistown. As we grapple with the shock and sorrow of this loss, it is essential to address the underlying issues that led to such a horrific outcome.Our hearts go out to the innocent victims, the three boys aged 13, 10, and eight who lost their lives in circumstances that defy comprehension. Their deep cuts and untimely demise have left a scar on the...

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