Saturday, October 16, 2021

New President, new transport fares

When April begins the citizens would not only have to get used to a new president but also contend with the recently announced transport fares that have been hiked by the Ministry of Transport and Communications. The new public transport fares are expected to add to the rising inflationary pressures.

On Monday the ministry announced that prices for taxis will go up by 25 percent to P5 while those for combis will increase by 14 percent to P4. The increase in transport fares will hit hard on the already depressed disposable incomes of workers who depend on taxis and combis for daily commute. The ministry did not give out reasons for the increase in public transport fares, leaving the matter open to speculation.

The adjustment to public transport fares was last done almost 6 years ago, and with the new fares coming in effect on the 1st of April, concerns are mounting that inflation expectations will edge towards the upper band of Bank of Botswana’s 3-6 objective range. The recently released consumer price index (CPI) for the month of February showed that the annual inflation rate has slightly increased by 1 percent to 3.2 from the recorded 3.1 in January. Inflation rate has been steadily increasing in the last four months, however it remains within the Bank of Botswana’s medium term objective range of 3-6 percent.

Off all the CPI group indices, the transport group accounts for the largest component at a weight of 20.65 percent. On account of that, it is expected that the change in the transport fares will increase inflationary pressures. In addition, other inflationary pressures will be exerted by the VAT increase in South Africa, the country’s biggest trading partner, as well as currency fluctuations.

Last year the Botswana government approved a 17.5 thebe per litre tax in addition to fuel levy of 13.5 thebe per litre. The Minerals Resources, Green Technology and Energy minister Sadique Kebonang at the time said the introduction of the tax was to raise funds for Botswana Oil to build storage infrastructure and buy petroleum products inventory. It was also revealed that fuel pump prices will not increase as the National Petroleum Fund will be able to cushion the effect of the tax in the short term.

Hardly four months later, the Botswana Energy Regulatory Authority (BERA) announced a rise in retail pump prices for petrol, diesel and paraffin. The decision by BERA did not go kindly with motorists and public transport operators, with the latter complaining about rising costs while passenger fares remained the same. However, BERA said the increase in fuel prices comes as a result of the Organisation of Petroleum Exporting Countries (OPEC) to restrict the supply of oil into international markets thereby triggering demand to be higher than supplies hence increase in prices.

It was later revealed that the NPF is at the centre of what is has come to be seen as the country’s biggest financial scandal, where P250 million from the NPF was diverted from its original purpose. As the case plays out in court and with the Parliamentary Accounts Committee (PAC) currently investigating the NPF matter, it is the citizens now who will have to bear the brunt for now.

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