INTRODUCTION This paper will be focusing on Botswana as a rich country with poor people
This paper will be focusing on Botswana as a rich country with poor people. Botswana is regarded as a middle income country because of a higher per capita GDP and as such the country should be presenting opportunities to its citizens to better their welfare. However the country is not diversified away from the mining sector dominated by diamonds which have contributed to the riches of the country since their discovering and boosted the GDP of the country. Also because the sector mostly uses machinery few people are hired leaving many unemployed or in informal sectors earning low incomes that make it hard for them to sustain their expenses. Also the machinery used is not made in Botswana meaning that the work behind their construction is taken up by foreigners leaving citizens on the sidelines.
The paper will discuss and analyze what we perceive to be the contributory factors to making Botswana a rich country and they include the contribution of the mining sector, the tourism sector, beef industry, the security of the country as well as the economic development in terms of the financial sector of the country. Despite all the above factors, income inequality, high unemployment rate and the education system exist and they result in people of Botswana becoming poor even when they are inhabitants of a rich country. The paper will discuss and analyze them drawing a conclusion and making recommendations as to what can be done to reduce levels of poverty in the country.
WHAT MAKES PEOPLE OF BOTSWANA POOR?
The economy of Botswana although dominated by the mining sector which puts the country among one of the middle income countries in the world, the sector contributes little towards improving the welfare of citizens of the country. The main reason being that much of the work is done by machinery therefore little human capital is required and the economy lacking diversification means that unemployment rates are pushed high, income inequality emerges and they all result in high poverty rates in the country. All this factors are what makes the people of Botswana poor even when they are the inhabitants of a rich country. Also the education system emerges as one of the contributory factors making people of Botswana poor.
Unemployment refers to people who are willing and able to work but cannot find work. CITATION Dav01 l 1033 (Strobl, 2001) Adds on to say the rate of unemployment helps in determining the performance of the economy of any particular country calculating it as:
unemployment rate=unemployed workers /total labour force
In Botswana the unemployment rate measures the number of people actively looking for work as a percentage of the labour force. The youth are the most unemployed in the country and according to the National Development Plan 9, (NDP 9) this is caused by the mismatch of graduate skills with the requirements of the labour market and this emerged as a challenge that had to be addressed. The mismatch results in the supply of labour exceeding the demand of labour according to CITATION Hap03 l 1033 (Siphambe, 2003) and because of lack of graduate competitiveness in the global market the excess supply cannot be absorbed in global market. Lack of a diversified economy in Botswana also fuels the high rates of unemployment since the mining sector being dominant mostly uses machines and hire few people resulting in other sectors which their performance are still average not being able to absorb the excess workforce. This in turn contributes to high rates of unemployment in the country. The rural areas in Botswana are the most affected when it comes to the high rates of unemployment but unemployment still exists in urban areas. The effects are usually extremely bad, families are at most times not able to afford basic needs like food, proper shelter and good sanitation because of lack of income or low incomes which have been pulled down by the imbalance between supply and demand for labour and this creates bad living conditions and leaves citizens poor and dependent on government aid.
Income inequality is one of factors that make people of Botswana poor because it creates a gap between the rich and the poor and explained by OECD (2011) it acts as an indicator of how resources in a country are distributed among citizens. Defining income inequality it refers to the unequal distribution of household or individual financial gain across the assorted participants in an economy. According to CITATION Tsh17 l 1033 (Tabane, 2017) Botswana has a high income inequality with a Gini coefficient of 60 percent making it to be among countries with the highest income inequality in the world. The Gini coefficient is used to measure income inequality and a Gini coefficient of zero means there is complete equality while a Gini coefficient of 100 means there is complete inequality CITATION Tsh17 l 1033 (Tabane, 2017).
Botswana uses progressive tax for taxing individuals on their incomes. According to CITATION KPM18 l 1033 (KPMG, 2018) the tax rate ranges from 5 percent to 25 percent depending on the level of income an individual gets. For individuals earning above P36 000 they are taxed 5%, earnings of over P72 000 are taxed at 12.50%, for those over P108 000 they are taxed 18.75% and 25% is imposed on those earning over P144 000 CITATION KPM18 l 1033 (KPMG, 2018). The variation of tax rates is to try to create income equality in the country but income inequality still exists. This according to CITATION Sun17 l 1033 (Reporter, 2017) is mainly because few people are able to work in government institutions and multinational organizations and earn better salaries while most citizen are left out in subsistence and informal sectors with earning that are low and once taxed they are left with small portions of their income to sustain them. A good source of income helps in providing a better lifestyle for individuals as they will be able to afford basic needs needed for survival however if incomes are low families end up becoming poor as they are likely not to be able to afford basic needs like food and shelter.
The education system