7.0 Link Between Growth and Poverty
As indicated in the previous sections and articulated in the current National Poverty Reduction Strategy, Botswana’s overall poverty reduction strategy has been anchored on broad based growth. Like most developing countries there is a recognition that while growth is a necessary pre-requite for poverty reduction, it is not sufficient to reduce poverty unless other initiatives are in place. If an economy is growing while inequality is also growing, it is quite possible that poverty may not be falling since the growth is accruing to a small section of the society. There is a consensus that for growth to significantly impact on poverty it should be pro-poor. Pro-poor growth has been defined differently by different scholars. A number of scholars define pro-poor growth as any growth that involves or benefits the poor as pro-poor. In terms of measurement, any decline in absolute poverty would therefore be classified as pro-poor. Later definitions include income inequality changes, noting the fact that the increase in income inequality as measured by gini-coefficient may limit the extent to which growth becomes pro-poor. Kakwani and Pernia(2000) define pro- poorness as growth that benefits the poor proportionally more than the non-poor. Under this definition, pro-poor growth occurs when growth reduces poverty and concurrently, inequality falls during the growth process.
Ignoring the changes in inequality, Botswana’s growth may be classified as having been pro- poor in all the periods between 1985 and 2002. As indicated in the previous section, the headcount poverty estimates poverty to have declined from 59% in 1985 to 47% in 1993 and to a further 30% in 2002/03. Part of the decline is obviously due to the use of social safety nets. Seleka, et. al (2007) estimate that poverty goes up by about ten percentage points for the individuals when government transfer payments are removed from the household incomes. It should be noted however that the revenue to finance these social safety nets is mainly derived from the diamond revenues, which are a part of the growth. From that aspect it can therefore be concluded that growth in Botswana has been pro-poor in that it was accompanied by a significant reduction in poverty in all the periods.
When we also include the changes in inequality, the conclusion on pro poor growth is quite different. In crude terms, it can be concluded that given that income inequality was falling marginally between 1985 and 1994, growth in Botswana was during that period, pro-poor. However in the last period, 1994 to 2002/03, where the decline in absolute poverty was accompanied by an increasing income inequality, it can be concluded that the growth in this period is perhaps not pro-poor. Under this definition, pro-poor growth occurs when growth reduces poverty and concurrently, inequality falls during the growth process, which was not the case in the second period. A more rigorous measure of pro-poor growth is done by using measure called poverty equivalent growth rate (PEGR), which uses the headcount ratio, the poverty gap ratio, and the severity of poverty index (Kakwani and Pernia, 2000). It is not possible to do such an analysis for Botswana given that the poverty study done using 2002/03 HIES data is still not available for public use on thorough poverty assessment.