Monday, March 1, 2021

Consumption spending surges 4.9%

There has been a general upsurge in household spending in Botswana, the majority of which goes to consumption rather than investment. Statistics indicate that most Batswana spend on goods such as house furniture, cars, clothing, utilities (electricity and water) and housing, to mention a few. There appears to be a fervent inclination towards consuming goods and services, a culture that supports the theory that large quantity consumption contributes positively and significantly to the performance of the economy. Increasing consumption means inducing activity within the economy, which as a result adds value to it.

While that might be the case, consumption that is largely driven towards depreciating goods and services breeds an undesirable economic state, an example of which is high and unmanageable household debt. This is because depreciating goods constantly need replacing and also cannot generate a monetary gain from their use, which therefore means that the only benefit is in their use.      

The latest Gross Domestic Product (GDP) figures indicate that total final consumption expenditure registered a 4.9 percent surge in the first quarter of 2015 compared to an increase of 2.2 percent over the same period last year. Total final consumption is broadly divided into household and government consumption. The figures highlight that the increase in household consumption is more than that of government. Household consumption rose by 6.1 percent in the first quarter of 2015 whereas that of government increased marginally by 1.6 in the same quarter.  Business investment spending, captured in this case by fixed capital formation, recorded an increase of 0.7 percent compared to a rise of 22 percent in the same period in 2014. The 2015 first quarter increase fell gravely lower than the 2014 increase.  

Consumption, as it has been shown by Bank of Botswana (BoB) reports, is largely driven by personal loans. BoB figures indicate that the largest use of personal loans is in housing with car purchases trailing behind it. Lack of a comprehensive credit database by the financial system played a contributing factor to the overblown household debt, a financial clog that has trapped households in a rat race maze. BoB asserts however that household debt has not reached crisis level and is therefore a manageable situation.

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