THE PRODUCTIVITY ENHANCING ASPECTS OF BOTSWANA’S GOVERNMENT SPENDING
Introduction
March 15, 2024: To achieve the aspirations of Vision 2036, it is evident that Botswana would have to adopt exceptional policies, programs and intervention to drastically change and improve the current growth trajectory.
Botswana’s average annual growth rate according to the World Development Indicators between 2017 (when Vision 2036 was endorsed) and 2022 was 3.38%. Unfortunately, this falls short of the annual growth of 6% required to attain the envisioned high-income country status by 2036. Government spending allocations and productivity enhancing initiatives are some of the important interventions that can enhance the growth of Botswana’s economy. According to Keynesian economists, government spending has the potential of raising aggregate demand which can lead to increased production and greater growth. On the other hand, historical experience and empirical evidence show that the transition from middle-income to high-income levels occurs mostly when countries pursue consistently sound but evolving productivity and competitiveness promoting policies. Given the importance of both productivity and government spending in promoting growth, this article identifies and assesses a few categories of government expenditure that could lead to productivity enhancements which could spearhead the transition into a high-income country.
Education
One productivity and competitiveness enhancing aspect of Botswana’s government expenditure is the heavy investment in education that has occurred over the years. The National Development Plan (NDP) 11 and the Transitional National Development Plan (TNDP) rightfully recognise the transformational potential of investing in a knowledge-based economy where the creation and application of knowledge become central to economic growth. They draw on the fact that empirical evidence shows that a skilled and knowledgeable workforce propels innovation, increases productivity, and fosters competitiveness in the global market. It is on this basis that this priority area is allocated P1.71 billion as development expenditure and P26.89 billion as recurrent expenditure in the 2024/25 budget. Even prior to this large budget allocation, the Institute of Management Development (IMD) ranked Botswana as 1st out of 64 middle- and high-income countries in terms of total public expenditure on education as a percentage of GDP, between 2021 and 2023.
Unfortunately, this large spending is not translating into the expected results. For instance, there are concerns regarding the state of the educational facilities, the lack of textbooks and other instructional resources. There is also high levels of unemployment amongst those with tertiary qualification. When considering whether university education meets the needs of businesses, IMD ranks Botswana 37th out of the 64 countries included in the 2023 report. This causes great concern as studies conducted in China indicate that skills mismatch and unemployment of graduates highly erode the productivity improvements that can be attained from education. Hence, Botswana’s spending on education needs to be regularly reviewed to establish whether it is being channelled in appropriate programs that are aligned to the needs of the labour market. There is also a need to strengthen the entrepreneurship training offered in the education system as this would reduce unemployment of graduates.
Health Expenditure
An article published in the Harvard Business Review in 2020, indicates that poor health reduces global GDP by 15% each year through lost productivity. Thus, another important aspect of government spending that can promote national productivity is the investment in the health sector. The Ministry of Health was allocated the fourth largest recurrent budget to the tune of P9.46 billion in the 2024/25 financial year. The annual average share of total government expenditure on health was 13% between 2016/17 and 2020/21. Given the magnitude of this expenditure in this sector, Botswana has made remarkable strides in the goal of attaining universal health coverage. The National Development Plan (NDP) 11 reported that 84% and 95% of the population lived within five(5) and 15-kilometres radius of a health facility, respectively. Furthermore, indicators such as infant mortality, maternal mortality, HIV and tuberculosis incidence have improved over the years. This is highly notable given that the provision of high-quality healthcare ensures that Batswana remain productive as healthy people are less likely to die, retire before the age of 65, or miss work because of illnesses.
Like the education sector, the health sector is also having a number of challenges that hinder its performance. Despite the government of Botswana’s commitment to ensuring that all Batswana have access to health care services of the highest standard and quality, there is an outcry of poor service delivery in public health facilities from both the media and the public at large. Some of the widely cited problems are the long waiting time to acquire services, long waiting list to see a specialist, shortage of certain medication and lack of maintenance of medical facilities and equipment, amongst other things. Whilst the massive funding in this sector is critical, emphasis should also be placed on solving these challenges in order to ensure value for money. This is highly pertinent as the productivity of the entire workforce is highly dependent on a functional and high performing health sector.
Digital Transition
Even prior to the COVID-19 pandemic, Botswana acknowledged digital transformation as a game changer in enhancing productivity, competitiveness and growth. It is in this regard, that huge government expenditure allocations were made towards the development of the ICT backbone infrastructure through the connection to the East and West Africa Cable Systems. Prior to the pandemic, government had allocated P823 million to be used in ICT development in the 2020/21 fiscal year. During the pandemic, the Economic Recovery Transformation Plan (ERTP) allocated P3.1 billion towards the digital transition. In the 2024/25 financial year a development budget of P1.83 billion is proposed to accelerate the implementation of programmes and projects geared towards innovation and digital transformation. Through this expenditure a total of 400 government online services are expected to be launched by the end of 2025/26 financial year. This is a welcome step which will proactively enhance productivity and government service delivery.
Under this aspect (digital transition) Botswana has already experienced benefits such as financial inclusion for the unbanked. Through the three mobile network operators, supported by a network of authorised agents, mobile money enables individuals and businesses to conduct financial transactions using their mobile phones. Mobile money services that are currently available in Botswana include saving; sending and receiving money; making payments (such as swiping in shops and online); and paying utility bills, amongst other things. Irrespective of these good developments on the digital front, these services are still being utilized on a miniature scale when compared to the Kenya equivalent of M-Pesa. It has been estimated that 70% of all Kenya’s financial transactions and 59% of Kenya’s annual GDP flows through M-Pesa. Underutilization of mobile money services in Botswana is mostly due to lack of exposure and knowledge of the potential rewards. Hence, it is recommended that strategies be put in place to encourage more micro and small businesses to use these services.
It is worth mentioning that although Botswana’s rejection of Starlink’s application was probably for an honourable reason, this company’s operations actually has the potential to revolutionize digital access and expedite the digital transition in any country. According to the World Population Review, this service provider is currently available in 40 countries including the United States, Canada, France, Germany, and New Zealand. The review further indicates that these countries are reaping benefits through faster, unlimited and cheaper internet. Starlink offers high-speed satellite internet to even the most remote locations, an aspect that Botswana could have heavily benefited from given the aspiration to increase rural connectivity.
Research and Development
Although there is ample evidence that Research & Development (R&D) has the strongest and most consistent influence on productivity growth, Botswana’s budgetary allocation in this area has been less than satisfactory over the years. Hence, the projected 280% increase (from P267.80 million to P1.02 billion) in R&D spending in the 2024/25 budget is a remarkable decision on the part of government. This budgetary allocation is particularly necessary as Goal 9.5 of the Sustainable Development Goals (SDGs) advocates for countries to intensify their R&D expenditure as a proportion of GDP. If well utilised, Botswana’s proposed investment in this area will go a long way in (i) lower production cost, (ii) lead to production of more innovative products, and (iii) lead to the implementation of more effective programs and policies. In the long term, this would have positive implications on productivity, national competitiveness and growth. Irrespective, Botswana’s P1.02 billion proposed spending in R&D only accounts for 0.32% of GDP (projected value) which significantly falls short of the 1% target set by the African Union’s Science, Technology and Innovation Strategy. It is also worth noting that the high R&D investment of 3.01% of GDP by US federal government in 2018 has been linked to the creation of 1.6 million jobs, $197 billion in added economic value, and $39 billion in tax revenue. For Botswana to also attain similar results it is recommended that government spending in R &D be increased and sustained in the long term. Furthermore, incentives should also be introduced to encourage the private sector to also invest in R&D.
Infrastructure
Regardless of the obvious financial constraints in form of budget deficits in recent years, Botswana’s commitment to infrastructure development has been unwavering. Infrastructure development has been identified as a priority area since the budget speech delivered in 2022/23. The projected development budget allocations to infrastructure in the 2023/24 and 2024/25 were P12.73 billion and P17.0 billion, respectively. While the average annual development expenditure allocated to transport, water and electricity development between 2017/18 and 2020/21 was P5.45 billion. This level of investment is impressive as good infrastructure improves productivity and competitiveness through improved connectivity, reduced production costs, the creation of more business opportunities, and greater access to market. A number of studies have found that decreases in public investment in infrastructure leads to sharp declines in productivity growth. Some of Botswana government’s infrastructure spending over the years, and in current years, have been devoted to water development, transport development, energy development, ICT and land servicing. Undoubtedly, spendings in these areas are all vital to improving business productivity and national competitiveness.
Despite the massive investments, IMD ranked Botswana’s infrastructure as number 61 out of 64 middle and high countries with a competitiveness score of 17.50, out of 100 in 2023. Botswana’s weaknesses according to this report include quality of air transport (ranked 56th), internet bandwidth speed (ranked 64th), energy infrastructure (ranked 51st) and road density (ranked 56th). These rankings are extremely worrisome as the African Development Bank indicates that Africa’s investments in infrastructure in the past have accounted for more than half the continent’s economic growth. Hence, the prevailing challenges under this factor need to be urgently addressed in order to make Botswana more productive and competitive.
Conclusion
In conclusion, this article identifies a few budget allocations that could lead to productivity and competitiveness enhancements required to spearhead the transition into a high-income country. The identified productivity enhancing government expenditure allocations are in the areas of (i) education, (ii) health, (iii) research and development, (iv) digital transition, and (v) infrastructure. Although, government’s heavy investment in these areas is commendable, there are still a few issues that need to be addressed in order to reap maximum benefits. Going forward, it is also important that challenges related to project implementation be addressed to ensure that go
