High income inequality hampers economic growth

Botswana has been criticised for her growing income disparities among working people, which contributes severely to the country’s stagnant economic growth.


Former World Bank Vice President Obiageli Katryn Ezekwesili said the middle income nation’s income inequalities are severe and among the worst in the world.  


She was speaking during the University of Botswana Foundation Dinner.  
Botswana has average income earnings of P4000 per month, but those on Ipelegeng scheme for instance, earn a meagre P400.
With inflation currently at 7.8 percent, because of soaring fuel and food prices, Ezekwesili felt this cripples the buying power of the low-income group given that they buy in the same shops at the same prices.
“With income inequalities, the purchasing power becomes centralised,” argued the current head of The Africa Economic Policy Development Initiative (AEPDI).


“Only a few with higher income can afford services like good education which would lead to them having lucrative jobs. On the other hand, the low income earners take up cheap and poor education, that eventually lands them low income jobs,” said Ezekwesili.
With the majority of the population unable to invest in quality education, the Nigerian national said there would be a setback in trying to push the nation towards being educated and skills-oriented, thus being unable to contribute positively to the economy.


Botswana real GDP is expected to remain at around 3.1 percent quarter-on-quarter in the second quarter of 2012 as demand for diamonds remains subdued.
Ezekwesili’s concern echoes views held by political scientists and economists on extreme income disparities between the haves and the have-nots.


Her comments also hit a familiar chord with former University of Botswana political scientist Professor Kenneth Good who said disparities between the very rich and the very poor are established and growing.
A month ago, economic experts hosted a panel discussion on the impact of income inequalities on Botswana’s economy.
Dr Pelotshweu Moepeng, an analyst at Botswana Institute of Development Policy Analysis (BIDPA) argued that there is a huge difference of income between the lowest up to the most paid people in the country.
This, according to academics leads to reduced currency circulation, which bars economic stimulation and leads to a stagnant growth. Dr Moepeng mentioned lack of diversity in income sources as one major setback. 


Obuseng Sennye, senior economist at United Nations Development Programme (UNDP) said inability by some people to afford quality education leads to them earning low because of lower educational background unlike those who could afford to pay for quality educational institutions like English Mediums and the best tertiary institutions.


AEPDI’s mandate is to build on the positive economic performance of Africa, with one important strategy being to put policies in place for the generation of sustainable private sector jobs and incomes.

Last modified on Wednesday, 31 July 2013 16:39

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