Saturday, May 28, 2022

Botswana’s middle class stuck in the middle

A study commissioned by the Ministry of Investment, Trade and Industry (MITI) paints a sense of fear and trouble that is mounting among Botswana’s middle class.


It relates to the outlook for their prosperity and wealth amid laws that make it difficult to engage in entrepreneurship. 


The study which was released recently, involved countrywide stakeholder consultations ranging from government officials, the private sector, labour unions and development partners.


The study was aimed at growing the middle class by coming up with appropriate economic policies and strategies that would cause the middle class to grow both qualitatively and numerically, while equally causing a concomitant growth in the other income categories.
The findings of the study were summarised in a document titled, “Strategy for growing the middle class in Botswana.”


According to the study, the small size of the Botswana market is a source of concern by those considering starting a business, as well as lack of adequately trained human resource professionals, low priority for entrepreneurship and greater focus on spending, limited disposable income, false sense of security in the pension.


The study says the middle class acknowledged the large number of government programs, initiatives and policies to support entrepreneurs, but the overall level of satisfaction and support was low.


“For example, only 43% were satisfied with maintenance of law and order. The level of support for other initiatives dropped even lower with 37% support for creation of an enabling environment in terms of security and stability of entrepreneurship development,” the study found.


It also found that, “Satisfaction with institutional framework for entrepreneurship development (27%) and satisfaction with existing tax incentives (23%) were particularly low.”


The views were that, the study says, “Access to schemes such as CEDA (Citizen Entrepreneurship Development Agency), NDB (National Development Bank) and BDC (Botswana Development Corporation) was low, especially for less educated entrepreneurs, due to highly technical and excessive requirements including requirements for co-lateral in some cases.”  


It says entrepreneurial skills were reported lacking on most people, including lack of confidence to start and make a business work. Key informants, the study shows, were of the view that most of training curricular is skewed towards white collar jobs, theoretical and lacking in the practical and required skill for entrepreneurship.


“There is general feeling among key informants that education and training programmes on entrepreneurship are not known if they actual exist,” the study says.


The study found that, “There is a low level of satisfaction with regulatory environment across all socio-demographic groups, with an overall level of satisfaction score of 48.4%.” It says the mean level satisfaction score increases gradually from 37.7% among respondents with secondary or lower qualifications, to 47.3% among those with post-secondary or vocational qualification, 49.9% among those with university degrees and 51.3% among respondents with a postgraduate qualification or higher.


“This finding points to observations from qualitative interviews that indicated that most of the Middle Class are not well versed with government economic diversification and empowerment policies,” the study says. It says respondents with higher qualifications are likely to have read some of the policies and hence provide a more positive response than those who do not know about existence or details of what is contained in the policies.


“Among identified barriers to Middle-Class participation in Entrepreneurship were high number of regulations, weak capital base by the Middle Class, risk averseness by Batswana, low level of innovation, lack of exposure, inadequate or inappropriate education and training, perception of insufficient markets and a lack of a deliberate strategy,” the report says.


Majority of middle class have seriously considered becoming entrepreneurs (85.9%) and would leave employment to start a business (74.1%) and major factors that influenced or would have an influence on the Middle Class to venture into entrepreneurship include a desire to have a better income (70%) followed by the desire to make a fortune (60.3%).


The study also found that potential and existing Batswana businesses enjoy a lot of institutional support although this support is not always well coordinated, leading to duplication of efforts. No previous policies have directly supported Middle Class Batswana to get into entrepreneurship. However, the study says, the National Entrepreneurship Policy (NEP) for Botswana enacted in August 2019 provides a policy for Entrepreneurship in general.
 
“Among the most popular initiatives to help middle class start business were, lowering interest rates on loans (89% support), reducing tax on goods and services (81%) and stopping corruption (74%),” the study says.


It says the majority (58%) felt that improving on already existing initiatives such as youth and women funds would be desirable, although there were divergent level of support depending on level of education. Respondents with secondary or lower qualifications strongly supported this (74%) while only 44% of respondents with postgraduate qualifications support it.
 
“Inadequate capital (85%) and high interest rates on loans (75%) were the leading perceived hindrances to starting a business. The majority of respondents (54%) acknowledged that inadequate business skills and business background was a major hindrance,” the research says. This was especially prevalent among respondents with low level of education; the study says adding that “inability to pay bills also featured as a major concern.” 


The study also warned that Botswana was in danger of falling into the ‘middle-income trap’ wherein the poor won’t be able to move up the ladder over the years.


 It says, “The sources of income remain undiversified as Middle Class respondents indicated that they were employed by central government (43.5%), Local government (21.0%), and Parastatal organizations (11.8%).”  Only 17.6% were employed in the private sector.

Majority of those employed in the private sector were working in Education (25%), Agriculture, Forestry and Fishing (20.9%), and Accommodation and Food Service Activities (8.1%). Electricity, Gas, & Air Conditioning Supply; Water Supply, Sewage & Waste Management; and Arts, Entertainment and Recreation had the least respondents (2% each).


The study classified the middle class individual from Botswana households as someone with household income of P2266 – P22, 667 per month. As a result, analysis of middle class data showed that 74.5% of the respondents can be classified as the middle class using their gross monthly salary, or 65.8% using their household monthly income.

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