2022: A year foreshadowed by hardship

If households were already feeling the grind of not living well in 2019 (Perceptions on
Wellbeing survey), how much worse will the crunch get for Batswana in 2022 when
BERA is ending 2021 like a bear come to devour people whole in a greasy sludge of
frequent electricity tariff increases and unbearable oil price hikes that will have a ripple
effect across the entire economy, including transport costs and food prices?

As if carrying the COVID-19 angst isn’t enough, now Batswana have to also bear the dread of a more expensive life in 2022 as 2021 ends unceremoniously with a petrol price hike. This sour end to the year isn’t particularly a new thing because 2020 was also signed off with a fuel price increase, but perhaps the difference is that it was much less significant than the current burden.
The latest price bump up announced by Botswana Energy Regulatory Authority (BERA) is the sharpest since the trail started earlier in March. Batswana had previously been accustomed to increases less than P1.00 but this trajectory changed as was observed in the second price adjustment of the year in April. The prices increased by P1.00 on all the various fuels. The next two mark-ups, in July and October, were less than P1.00 but on the upper side of it, denoting significant increases. The December raises are way over P1.00, coming in at P1.60, P1.65 and P1.75 on unleaded 93 petrol, unleaded 95 petrol and diesel respectively. This is a sufficiently great adjustment which will hit the pocket much deeper. It doesn’t help that these changes happened in succession with little spacing between them. It may possibly be that Batswana are paying record high prices for petrol in a single year.
A smile may be hard to see on the road as motorists scramble to re-align their pockets in order to keep their cars on the move. Since the beginning of the year, motorists have been contending sharp increases in fuel prices and so a frown won’t come as a shock because now they have to pay P4.48, P4.56 and P4.35 more than they did in the first two months of 2021 for unleaded 93 petrol, unleaded 95 petrol and diesel respectively. This doesn’t just affect those behind the steering wheel because commuters alike have also been hard hit. When an upward adjustment is made on fuel prices, it means that commuters are squeezed for more transport costs in their use of public transport. Moreover, the significant fuel price changes come at a bad time for the public transportat sector, given the recent day-long transportation halt at the heart of which was unsustainable operation fees. The sector remains unhappy with the status quo, and with the fuel prices going up, the situation could see the sector passing the added cost pressure to commuters. Commuters may be in for a rude awakening with lingering transport cost increases into the New Year.

Source: Botswana Energy Regulatory Authority (BERA)

What does all of this mean to households?

Given that Botswana derives a significantly great amount of food from South Africa, it’s a no brainer that should higher transportation costs choke delivery truck companies, they may inevitably pass on a portion of the pressure to consumers. As at September 2021, food imports reflected 14.5 percent of the value of total imports into the country. This demonstrates the country’s heavy reliance on food imports, which by extension means that the cost associated with them cannot be avoided. Food will always need to be delivered to Botswana. Transport is one of the many groups that contribute to the annual inflation rate. Infact, it gobbles up the largest share. Statistics Botswana announced that the annual inflation rate in November 2021 was 8.6 percent, adding that “the main contributors to the November 2021 rate were Transport (4.4 percent), Housing, Water, Electricity, Gas & Other Fuels (1.4 percent), Food & Non-Alcoholic Beverages (0.9 percent) and Miscellaneous Goods & Services (0.6 percent).”

As it stands, Botswana’s inflation has been swinging higher than what the Bank of Botswana would like it to be. The central bank has determined a medium-term range of 3-6 percent within which inflation should desirably oscillate. In the past months that have been gripped by the COVID-19 pandemic, prices of goods and services have risen sharply. Local investment firm Kgori Capital attributed the previous high annual inflation rates to transport pressures which were primarily caused by rising fuel adjustments, citing “the main upside risk to our forecast is transport inflation as more pump price increments are required to address persistent fuel under-recoveries. The main downside risk is continued lacklustre domestic demand.” The continued fuel price hike means that inflation is likely to go upwards, keeping to its recent trend. Consumers can expect to feel the pinch in their already hurt pockets as prices of goods and services go up.
As if this not enough, households can also expect electricity tariffs to continue on their upward path. In July 2021, BERA received a request from Botswana Power Corporation to approve an incremental adjustment of electricity tariffs over two years from 2022 and 2023 at 5 percent and 3 percent respectively. The Corporation argued this change to follow a cost reflective tariff migration path. Should this application be implemented, households will also have to bear the burden of higher electricity cost. It is unfortunate that households can no longer seek refuge from the government in cushioning the financial impact as, according to BERA, “the subsidies are being gradually reduced, hence the tariff increase of last year and this year”. A huge 22 percent tariff increase was implemented in 2020 and in April this year an additional 3 percent increase was effected. It would seem that 2022 will find households left high and dry by life that is increasingly becoming unbearably expensive.

In 2019, Statistics Botswana conducted a Subjective Welfare module titled Perceptions on Wellbeing in which it revealed that most households in Botswana are of the view that they are not living well. Statistics Botswana asked households how they rated themselves in relation to other households in their communities and it found that “comparing their overall wellbeing with other households in their communities, 53.1 percent of the households indicated that they were not living well”. If households are already of the mind that they are not living well, how much worse will things shape up for them in 2022?