Monday, October 25, 2021

Is our middle class society zilch?

The ‘Rising Middle Class of Africa’ report says that Botswana’s middle class constitutes about half of the total population in 2010. 

However, fast forward to 2016, this affluent class is not seen to be shouldering the economy especially at a time government is showing incapability. The questions is: Where is this middle class? 

The middle class, as was defined by the African Development Bank (ADB), are a group of people earning between $2 and $20 per day (approximately P22 to P215). In a month with 22 working days over an eight-hour day this is between P484 and P4 730. It was at the time projected that Africa’s middle class income would grow to 1.1 billion by 2030 making up 42 percent of the continent’s population. Simply put the middle class represents growth. This is a group of people with a bigger size pocket to start businesses, to invest and spur spending of goods and services, activities which inject money into the economy and hence grow it. 

“As such, the middle class is helping to foster private sector growth in Africa as they offer a key source of effective demand for goods and services supplied by private sector entities,” says the report. The sharp rise in the sale of refrigerators, television sets, mobile phones, motors and automobiles was cited as a result of the middle class spending. 

Consumer spending was estimated at 60 percent of Africa’s GDP and is expected to double by 2030. 

In the case of Botswana the expectation of a boost to the private sector growth by the middle class seems fallacious. This is because contrary to expectation the private sector is struggling to fill the gap created by government’s shrinking pocket. Both government and private sector seem to be letting the economy down. Botswana’s private sector is currently limited by a somewhat rigid business operating environment. 

According to the report, 20 African countries are counted amongst the top 50 most improved world economies in business regulatory efficiency since 2005 and Botswana is not one of them. Rwanda had improved the most over seven years from 2005. “Starting a business, getting electricity and trading across borders are the weak elements of the business environment,” states the report. This as a result inhibits the private sector growth. This is despite it being ranked 72nd out of 189 countries, the second highest in SADC after Mauritius (32) in the World Bank’s 2016 ‘Doing Business’ report.      

Assuming that the definition of a middle class still applies in 2016 given the stagnant income growth over the past five years, could a monthly income of between P484 and P4 730 be considered a true representative of a middle class? The P484 is about P100 less than the minimum wage for the Agricultural sector set at P580 as at 2015. Given the constantly increasing cost of living, the lower range of middle class income cannot practically stimulate higher consumer spending. The higher range of middle class income is far less than the entry-level monthly income of a government employee. 

The report attributes the expansion of middle class in Botswana to the significant economic growth experienced over the past two decades. Pundits argue, however, that the country’s economic growth did not translate to improving people’s standard of living especially when taking into consideration the wide income gap between the rich and poor. 

Botswana is not counted in the list of top eight countries with the highest poverty reduction which include Burkina Faso, Ghana and Malawi. Although poverty rates have declined considerably since 1966 deep pockets of poverty still plague the country.     

The middle class’ impact in Botswana is not yet evidenced and perhaps that might be a sign that the growth that had been seen in the economy was not a true reflection of the expansion or improvement in people’s standard of living.  

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