26 Aug 2024

Application of user fees and service charges has always been a part of government’s revenue collection endeavours.

This was said by Minister of Finance, Honourable Peggy Serame when answering a question in Parliament on Wednesday.

“This dates back to the pre-independence era, where some fees such as mining licenses were instituted in 1962. Over the years following independence, government further gradually introduced other fees such as school fees and charges for provision of healthcare,” Honourable Serame said.

In essence, she said improved revenue collection had been a common feature of governments revenue optimisation efforts over the years.

She added that the initiative gained momentum when a policy on cost recovery was introduced as part of implementation of the Mid-Term Review of National Development Plan 8. “As part of the wider public finance management reforms, government ramped up revenue maximisation drive during the financial year 2019/2020.

The initiative entailed among others, the revision of user fees and service charges as well as identification of new revenue sources,” she said. The minister also told Parliament that by the end of the Financial Year 2022/2023, total revenue collected resulting from the implementation of the revised user fees and service charges was P961.14 million compared to P646.58m collected in 2019/2020, representing a growth of P314.56m or about 49 per cent.

In the last three years, she said 934 user fees and services charges were revised in various sectors based on three principles including average inflation rate, market prices and individual’s ability to pay. Again, she said user fees and service charges on permits and licenses were normally applied as once- offs annually by ministries. Under agriculture, she said 160 user fees and service charges were revised with an average inflation rate of 3.9 per cent over a period of five years and such were last revised in 2015.

Under lands and water affairs she said 22 user fees and service charges were revised with an average inflation rate of 7.0 per cent, covering a period of 13 years and were last revised in 2005. She said fees under environment and tourism, 122 user fees and service charges were revised with an average inflation rate of 7.2 per cent over a period of 18 years and last revised in 2000.

Further, she said under transport and communications, 655 user fees and service charges were revised within inflation rates ranging between 3.2 to 7.0 per cent and were variously last revised between 2005 and 2017.

However, she said the fees for cross border permits, which were part of the 655 revised fees, were increased by 20 per cent to align them with regional countries’ fees; She added that nine user fees and service charges under trade and industry were revised based on ability to pay covering a period of eight years and last revised in 2010.

Employment and skills development revised 18 user fees and service charges with an average inflation rate of 6.6 per cent, covering a period of eight years and last revised in 2011; Under tertiary education, 27 user fees and service charges were revised with an average inflation rate of 5.9 per cent over a period of 11 years and last revised in 2008. Under minerals and energy, 14 user fees and service charges were revised based on ability to pay since they are mostly consumed by businesses.

“Some of these fees such as explosives licenses were set in 1962 and had not been reviewed since then,” she said.

Furthermore, under infrastructure and housing, she said 89 user fees and service charges were aligned to Botswana Housing Corporation (BHC) market prices and were last revised in 2004. Parliament heard that implementation of such measures started in earnest during the 2022/2023 financial year.

“In the two financial years preceding this, implementation was delayed due to the outbreak and spread of the COVID-19 pandemic. Growth in revenue was realised during the 2022/2023 financial year and the combined increase in revenue was P314.56 million as indicated earlier, which represented 0.12 per cent of Gross Domestic Product (GDP), she added.

Minister Serame explained that the policy decision to increase user fees and service charges was premised on the realisation that government needed to strengthen domestic revenue mobilisation amidst growing concerns that diamond receipts were flattening out relative to growth of government spending.

In addition, she said it emerged that user fees and service charges had taken as long as 18 years without being reviewed in almost all ministries except those under transport and public works as well as labour and home affairs ministries, which were revised in 2017 and 2019, respectively.

Furthermore, she said the cost of services had increased over the years and thus government cannot continue to finance them singlehandedly, hence the need for cost sharing to augment government’s financial capacity. She indicated that the direct impact of the user fees and service charges on the cost of living had not yet been determined.

“The reason being that the majority of the fees and service charges are charged as one-off consumption items annually. In the first two years after revision of the fees and charges, annual average inflation rates were 1.9 per cent in 2020, 6.7 per cent in 2021 and 11.5 per cent in 2022,” she said. She attributed the high inflation rate in 2022 to among others, the effects of the Russia- Ukraine conflict.

“This suggests that the review of fees and charges by itself did not have significant impact on the cost of living and consumers purchasing power. Despite this, let me assure this Honourable House that the Ministry of Finance together with line ministries, made assessments to determine the best criteria for revising the user fees and service charges at the time of the review,” she said.

Ms Serame also said as part of the assessment process, the most desirable criteria were established based on their potential effect on the life of an ordinary Botswana, and included the ability to pay, reference to market prices and use of average inflation rate.

She said government continuously monitors performance of existing user fees and service charges, including all revised user fees and service charges.

“Since government started implementing in earnest the revised fees and charges in financial year 2022/2023, the plan is to allow more time to determine their efficacy.”

Selebi Phikwe West MP, Mr Dithapelo Keorapetse had asked the minister to state and explain to Parliament, how much government had received as non-traditional sources of revenue from increased user fees and service charges since the announcement of the decision, and specifically address which user fees and service charges, including licenses, permits among others, had been increased in the last three years and by how much.

Mr Keorapetse also wanted to know the empirical evidence informed the policy decision of increasing user fees and service charges as well as the extent to which they had increased the cost of living of Batswana and/or implications for purchasing power. ENDS