Commentators often call inflation a tax on every man. It affects rich and poor alike but not of course with the same intensity. Many working families can barely afford the increases of levies that we have been slapped with in the last few years. These increases have eroded the purchasing power of households and that on its own is an inflationary effect. This is why the inflation rate is now sitting at 8.8 %. It does not help matters that these increases have not been met with a corresponding growth in wages especially because of the effects of the hard lockdowns.
While the rich may in the short term keep up with increases in taxes, levies, user fees or whatever, they do not, in the same breath, have an unlimited appetite to keep on absorbing hikes. Inflation is therefore an evil phenomenon. It is a perturbing that the government marches on with decisions which drive inflation. This week we noted that the state owned power utility, Botswana Power Corporation (BPC) , a company which is still charting a path to financial stability , has been handed a decree by the powers- that-be to slash by half , domestic electricity reconnection fees for low income households.
Recognising that we are a country based on debate and dissent and putting aside inflation issue aside momentarily, the directive to BPC is interesting from a governance perspective too and therefore deserves scrutiny. It raises basic governance questions of why there is board in the first place if the Permanent Secretary can issue direct instructions to the BPC chief executive. We therefore have a muddy set up whereby the BPC boss reports to both the PS and the chairman of the board. And how exactly does that work? Even for some of us like who are not really sold on to the concept of state owned enterprises, empathise with the men and women who strive to run these organisations profitably. Reporting to someone who has no experience of the business world such as a Permanent Secretary must be excruciating. If the BPC CEO or any SOE CEO that matter is focused on commercial viability and all of a sudden is hit with a decree from a PS and not the board to slash connection fees immediately, then we are headed for perennial loss making businesses.
Curiously the electricity regulator, BERA, seems to have been missing in action. One expected them to have been the ones making the announcement about the electricity levy hike. Perhaps this is a window into why the appetite for privatizing these institutions is so low. If you privatise them, you lose a vehicle for dishing out political freebies ala massive discounts on connection fees.
But the trouble with government decrees and freebies, is that the money for implementing such must come from somewhere. Governments including ours, have no money of their own. To have money, they have to tax us first. As always, it does not matter what they call the tax. It could be VAT, Income tax, levies, excise duty or tariff. They are all taxes at the end of the day. In the case of the BPC decree to BPC, the politician is merely robbing Peter to pay Paul. Paul gets fifty percent connection but in the process s Peter pays more for the same amount of electricity through the hike in the electricity levy from five to ten thebe per kWh. If we pay more the same amount of goods, in the case electricity, it’s called inflation. So here we have a situation whereby the government decree to BPC fuels inflation.
And this is why giving your money to the government is an act of waste, nine out of ten. It’s a leaky bucket. In our case we already know that out of every Pula that we give to the government, forty thebe is wasted.
