Wednesday, October 27, 2021

Privatisation, austerity could deepen Botswana’s wealth inequality

Botswana is already one of the most unequal societies in the world and with privatisation, such situation could not only get worse but also spawn another complication.

A groundbreaking economic study that is being undertaken by the Paris School of Economics in France has found that “large transfers of public to private wealth occurring over the past 40 years have yielded rising wealth inequality among individuals.” Moreover, privatisation leaves governments “without the means to improve equality of opportunity for their citizens.” Beginning with the Botswana Telecommunications Corporation (BTC), Botswana has embarked on a large-scale privatisation programme. In effect, this represents large transfers of public to private wealth which will compromise government’s ability to respond to national emergencies which could put Botswana in a situation a lot worse than that of some developed countries where the share of public wealth in national wealth has declined – close to zero in France, Germany, Japan and negative in the United States and the United Kingdom.

“Such low levels of public wealth makes tackling existing and future inequality extremely challenging given that governments do not currently possess the resources necessary for investments in education, healthcare and environmental protection,” says the World Inequality Report 2018 in explaining why policies like privatisation matter in shaping inequality.

Pro-privatisation forces have portrayed nationalisation as inefficient but the report unearthed information that proves otherwise.

“During the postwar economic boom, public assets in European countries were considerable (approximately 100ÔÇô130 percent of national income due to very large public sectors occasioned by post-war nationalisations), and significantly higher than public debt (which was typically less than 30 percent of national income). In total, public capitalÔÇönet of debtÔÇöwas largely positive, in the range of 70ÔÇô100 percent of national income. As a result, net public wealth made up a significant share of total national wealth between 1950 and 1980, typically around 15ÔÇô25 percent or more.”

A most recent example of nationalisation trumping privatisation can be found in neighbouring South Africa where the City of Johannesburg revolutionised the bus rapid transit system by taking over a good portion of it through its operation of Rea Vaya buses.

Privatisation can only empower citizens when a sufficiently high number of them have money to buy wealth that is being transferred from public to private hands. In that regard, the Botswana situation is peculiar because one too many citizens are not sufficiently empowered to do so. At the precise moment that the process of privatizing BTC was ongoing, the World Bank put out a report that lamented lack of inclusive growth in the country.

“Weak capacity by the private sector to create jobs, low wage growth, and increasing household debt pose the highest risk to Botswana’s new growth and diversification trajectory, which is driven by the services sectors such as retail and vehicle trade,” reads the report. 

Among those badly affected by the low wage growth are civil servants (the largest employee group in the country) who have come off the worst in an ongoing war between the government and public sector trade unions. This low growth has precipitated a phenomenon the nation doesn’t talk enough about ÔÇô the working poor. In one other respect, the low wage growth is the direct result of prolonged austerity that intensified following the 2008/9 global recession. The inequality report warns that prolonged austerity “also contributes to increasing inequality as governments would slash their redistribution programmes.”

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