NDP11 targets inclusive economic growth
Brian Benza | Friday October 10, 2014 17:22
According to Key Policy Paper (KPP) for the preparation of NDP11, a major challenge to be tackled in the development plan is how the country can achieve inclusive growth through three dimensions. The three pronged approach targets enlarging the size of the economy, increasing productive employment opportunities and providing protection for the disadvantaged and marginalised groups.
Despite the country’s success in promoting sustainable economic growth prior to the global financial crisis of 2008/09, the three major development challenges of unemployment, poverty and income inequality have remained an albatross on the development history of Botswana.
For an upper middle class country, an assessment of Botswana’s social upliftment indicators shows that the country is lagging behind its peers. According to Statistics Botswana (SB), the proportion of the population living below the poverty datum line (PDL) stood at 19.3 percent in 2009/10. In absolute terms, the number of persons living with income below the poverty line declined from around 500 thousand in 2002/03 to about 373 thousand in 2009/10.
On income disparity, the latest available estimate of the Gini coefficient of per capita consumption is 0.49 in 2009/10, one of the highest in the world.
The Gini coefficient measures the extent to which income or consumption expenditure is equally distributed among individuals or households within an economy.
On the other hand, the unemployment rate is also very high at 17.8 percent in 2009/10), although according to the IMF the number can be as high as 30 percent if discouraged workers were taken into account.
According to the KPP, the preparation of NDP 11comes at a time when the country is at crossroads with respect to its development model of prudent economic management and rapid real GDP growth.
This is because, despite the rapid economic growth over the past four decades after its independence, the country continues to face development challenges such as unemployment, poverty, income inequality and a relatively undiversified economy.
While enlarging the size of the economy is a priority target in the plan, figures show that the economic rate of growth has been slowing down. According to government projections, Economic growth has successively decreased every year between 2010 and 2013 - save for 2012/13 and is projected to decrease further reaching 4.8 percent in 2017.
“Unless a major policy intervention is put in place to reverse this trend, the Plan period is most likely to witness a significant falls in real GDP growth even if the population continues to grow moderately.
“To the extent that tax revenues are derived from the economy’s value added through the taxing of production entities in the economy, this decrease in GDP growth means that growth of Government revenues from taxes will also decline,” reads the paper.
According to the IMF, for Botswana to return to the era of strong growth and accelerating the country’s convergence to higher income levels would require policies to reinvigorate Total factor productivity (TFP) growth.
These include improving the quality of public spending, notably in public investment projects and education to ensure the transformation of diamond wealth into sustainable assets.
Growth in labour productivity, as measured by value added per person employed, has been declining over the past two decades in the country from a negative of 1.45 in 1991 to a minus 1.64 in 2011. On public expenditure, the KPP suggests that the fact that government’s progressive increase in development expenditure coincided with the decrease in total factor productivity could be signalling the existence of inefficiency in public investment expenditure. Examples of typical cases of low rates of return on public projects with high cost overruns include; airports, stadia, hospitals and schools.
NDP11, which will cover the period 2016/17 to 2021/22, will succeed NDP10 that ends in 2016.