Tuesday, December 7, 2021

Richest 20 percent of Batswana get government aid

If the general detail about Botswana being the third most unequal country in the world with a Gini Co-efficient of 60.5 saddens you, you may find precise figures from the World Bank about the extent of such inequality deeply depressing.

 

“The richest fifth of households take 55 percent of [government] scholarships; the poorest fifth get only 7 percent. The programme grants benefits on merit rather than poverty status; however, it is important to consider the implications in terms of its contribution to greater inequality,” the Bank says.

 

Botswana’s social protection system has three major categories: social insurance, social assistance or safety nets, and active labour market programmes. In the social safety net category are scholarships and sponsorships which support students in tertiary education, accounting for 1.4 percent of GDP and nearly half (45.3 percent) of total social-assistance spending. With Botswana’s tertiary education gross enrollment rate itself being low for a middle-income country, the overall programme coverage is small, with only 1.4 percent of the population living in recipient households. However, “the wealthiest 20 percent are 10 times more likely to receive [this] benefit than the poorest 20 percent.”

 

In their basic nature, social protection programmes are meant to benefit the poor but Botswana has this extremely odd situation where some programmes have higher participation among the upper-income groups. Even the richest 20 percent of the population is covered by this protection, most of it government aid not necessarily intended for this income group. It so happens that most public jobs in Botswana tend to benefit richer households.

 

“Almost 40 percent of people in the richest 20 percent quintile receive some form of government aid. This group might be expected to benefit from formal pensions; yet, coverage is not much higher than in lower income groups. Less than 2.5 percent of the population in the top quintile live in households receiving pensions. Many households in this group are still able to access various forms of government aid,” says the World Bank adding that this finding points to the need to assess the eligibility criteria with a view to preventing resources intended for the less well-off from leaking to non-intended beneficiaries.

 

Social insurance includes a defined-contribution pension scheme for public officersÔÇöthe Botswana Public Officers Pension Plan ÔÇô BPOPF as it is more commonly known. The World Bank found that pensions and annuities are “very regressive”, with most benefits accruing to the better off.

 

“The richest 20 percent receive almost 61 percent of total pension benefits; the bottom 20 percent receive less than 3 percent. To some extent, this is to be expected. Pensions go mostly to people who worked in the formal sector, and they are most likely found among the richest fifth of households. The distribution of pension benefits across income groups is very similar to the distribution of total consumption,” the Bank says.

 

Contrast that with what happens with the Destitute Persons Programme whose caseload covers only about one-fourth of the estimated number of poor people. While the Bank was unable to get data on the programme’s actual coverage, it was able to determine that the programme’s targeting is quite accurate. It thus concluded that based on current caseloads, the programme reaches only one of four poor people. What the Bank finds most problematic is that the incomethresholds used to determine eligibility for the programme have not been updated in years and today represent only one-third of the minimum wage in agriculture and less than 20 percent of the poverty line.

 

 

 

“This may contribute to the programme’s low coverage because few people can meet the eligibility criteria. In addition, the requirement for destitute but able-bodied adults to join the public works scheme further reduces coverage,” the Bank says.

 

The study finds that while some poor people don’t get any benefits, 6 percent of households in the richest quintile benefit from at least two programmes: “Many of those who received government aid also received Old Age Pension and school-feeding benefits.”

 

At least at the time that the study was conducted, the Old Age Pension (OAP) itself was found to be problematic as it does not ensure food security in the absence of other income sources. Then the pension scheme provided a monthly cash transfer of P250 (the sum is now P350) to all those 65 years and older, a benefit that corresponds to 24 percent of the poorest households’ food consumption. According to the Bank’s figures, the median generosity for such pensions in a sample ofdeveloping countries is 27 percent of adjusted consumption of the poorest quintile, slightly higher than in Botswana. On such basis, the Bank concludes that the OAP benefit is equivalent to 37 percent of the food poverty line, “not enough to sustain an individual whose only income source is the pension.”

 

The Bank undertook the study at the request of Dr. John Mothibi, the former Permanent Secretary for Poverty Eradication in the Office of the President (OP). However, when the study commenced in January last year, he had been redeployed to the Government Implementation Coordination Office where he is now the Coordinator. His successor at OP and former Assistant Minister of Local Government and Rural Development, Olebile Gaborone, took up the assignment, working with a 15-member task team from the World Bank.   

 

The Bank’s analysis indicates that economic growth and reduction in inequality would be of vital importance in both poverty reduction and eradication. However, closing the inequality gap would be a gargantuan task because with a Gini co-efficient of 60.5, Botswana is the third most unequal country in the world after South Africa and Seychelles. In considering a distribution neutral scenario (when there is no change in the aggregate consumption distribution), the Bank found that an annual growth rate of 4 percent would require eight to nine years to halve poverty from 19.4 percent to 10 percent.

 

Perhaps the most interesting detail in the report is that “Botswana has an opportunity to completely eliminate absolute poverty in a budget-neutral way through better targeting of social-assistance programmes and improving the adequacy of benefits for the poor.”

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