Botswana faces persistent challenges of inequality, unemployment and poverty. These challenges have overtime been worsened by sustained low levels of investment and growth. The Botswana economy experienced two consecutive quarters of slow growth prior to the intensification of the impact of the COVID-19 crisis on the economy. The unemployment rate has remained stubbornly high and has been increasing prior to the impact of the crisis permeating through the economy.
The Covid 19 pandemic has exposed the weaknesses of the capitalist/free market Economy. It is clear from the collapse of the Global economy due to the pandemic that the Market system cannot survive on its own without Government intervention. It is a fact that in this 21st century alone, specifically between year 2000-2020 we have witnessed three global collapses of the Capitalist system. The first was in 2000, through the so-called dot.com crises. Here we witnessed the collapse of the Technology Stock bubble in the United States of America; and this dragged the Global Economy with it.
The COVID-19 pandemic has the potential to cause the biggest ever global economic recession. According to the Organization for Economic Cooperation and Development (OECD) (2020), annual global GDP growth was projected to drop to 2.4% in 2020, with growth possibly even being negative in the first quarter of 2020 due to COVID-19 pandemic. Prospects for China were revised markedly from an initial 5.7% growth estimate in November 2019 to a much lower 4.9% in March 2020.
There are already adverse effects of the COVID-19 pandemic on the several sectors of the economy in particular; tourism, agriculture, manufacturing and trade putting people’s jobs and livelihoods at risk. The adverse impact on finance markets, disruption of global supply chains, tourism sector and other sectors of the economy will have an adverse effect on the Botswana economy. The outbreak of COVID-19 has severely disrupted value chains focused on manufactured goods in South Africa and the SADC Region. The Restrictions on cross-border and domestic movement have hit highly integrated value chains hard.
The resulting shock on production of advanced manufactured goods has reduced demand for minerals and petroleum—with possibly dire implications for countries exporting mineral resources to China, such as Botswana. Transportation costs have escalated, dampening trade, global output and demand making goods in Botswana even more expensive. The reduction in demand has resulted in a lower volume of goods traded.
The pandemic is causing massive job and income losses in the Botswana, disproportionately affecting people in informal employment. The impact is sudden for thousands of people who are losing incomes and jobs overnight. The poor especially those in rural areas and Poor Urban neighbourhoods such as Old Naledi, Somerset, Botshabelo etc face a double shock from the spread of the virus and the ensuing economic depression, and a stark trade-off between safeguarding life and livelihoods.
The COVID-19 pandemic has already affected the country’s exports of minerals and agricultural goods to Asia, Europe and the USA, mainly because of reduced consumer spending as well as shutdowns in major markets. Furthermore, COVID-19 pandemic has caused a shortage of intermediate goods used to manufacture products that are exported.
UNEMPLOYMENT
Similar to other countries around the globe, Botswana has not been able to isolate itself from the global demand slump resulting from containment and lockdown policies being pursued by countries around the world and which could induce a rise in global unemployment of between 5.3 million and 24.7 million, according to the ILO. The slump in the demand for Botswana’s exports, together with the potential disruption of global value chains–with its subsequent impact on the availability of imported material, equipment, spare parts and intermediary goods–has severely affected economic activity across the country and, consequently, impacted employment.
On the one hand, informal workers have been affected by the decline in demand and see their earnings fall. The extreme LOCKDOWNS imposed by Government, have put the economy under tremendous pressure. Communal farming activity has declined further placing poor people under stress. Globally, losses in labour income are expected in the range of between 860 and 3,440 billion USD worldwide.
In Botswana, with limited social protection and unemployment benefits the impact will put at risk lives and the country’s social compact. The impact has been especially harsh on the elderly, youth, female headed households and other most vulnerable groups such as persons with disabilities. It is also likely to increase the number of the working poor. Continued high unemployment among young people is the single biggest challenge facing Botswana today. Amongst the youth, four in five are jobless and a growing number of them have tertiary qualifications. Currently over 35% of young people cannot find a job. Corona virus pandemic is going to make this worse.
Reduced income from labour, together with the already high level of unemployment will translate into lower consumption of goods and services, which is detrimental to the continuity of businesses, especially micro and small enterprises which are often heavily reliant on local demand, and in ensuring that economies are resilient. In Botswana SMEs (Small and Medium Enterprises) present a high degree of fragility and a demand shock like that caused by the Coronavirus pandemic, even if temporary, can destroy business that will not be able to reinstate or create jobs in the recovery phase.
Poverty and Income Inequality
Botswana is one of the richest Countries in Sub-Saharan Africa; however 80% of the resources are owned by 20% of the population hence the high level of income inequality and poverty. The 2018 World Bank Development Indicator’s report shows that the Poverty headcount ratio (number of people below the poverty line) at USD3.10 per day is as high as 35.7%. The report further showed that the Poverty gap (that is, the aggregate deficit of poor people’s incomes below the poverty line) is 12%.
Contrary to the illusionary achievements of the BDP Government over the past 55 years, the 2020 IMF Country Report on Botswana states that the country’s income inequality, with a Gini Index in excess of 0.60, is one of the highest in the world especially when compared with other high middle-income countries. Higher income inequalities are not only associated with shorter growth durations but also are a major contributing factor to lower economic growth and higher levels of poverty we see in Botswana. This level of poverty poses a serious security threat for Botswana.
Poverty can fuel contagion, but contagion can also create or deepen impoverishment. The coronavirus pandemic would increase poverty, inequality and unemployment due to its adverse impact on people’s jobs and livelihoods in the key sectors of the economy. The lack of health insurance for most of the poor and people who reside in rural settlements would exacerbate poverty and inequality and access to health care.
People living in or near poverty often lack disposable cash and cannot easily stockpile food in times of pandemics. Hunger, malnutrition, pneumonia and other forms of health-related shocks and stresses compound vulnerability to the COVID-19 pandemic and contribute to a vicious cycle of disease, destitution and death.
*Moeti Mohwasa is UDC Head of Communications and BNF Secretary General
