292 H.K. Siphambe Economics of Education Review 19 2000 291–300
to-date rates of return to education figures for Botswana.
2
The results from this paper are useful for three major purposes. Firstly, the results are useful as a guide to edu-
cation policy in Botswana, particularly relating to efficient allocation of scarce resources between the dif-
ferent levels of education, and how funding and access to different levels affect equity. Secondly, they contrib-
ute to the debate as to whether the pattern of rates of return to education provided by Psacharopoulos do hold
for Botswana given the current labour market conditions in Botswana. Lastly, they provide a test of the empirical
usefulness of the human capital model in the economy of Botswana.
Botswana has had impressive economic growth since gaining independence in 1966. Much of the success is
attributed to the exploitation of major diamond deposits discovered 1 year after independence. Nevertheless,
important aspects of Botswana’s political economy — including political pluralism and sound economic man-
agement — have been singled out as major factors con- tributing to this success story Harvey Lewis, 1990;
Colclough McCarthy, 1980.
Despite the country’s impressive performance in terms of both growth and increased expenditures on education
and other basic needs, the economy is challenged by a set of socio-economic problems. One of the major chal-
lenges to the economy is that there is unlikely to be a major growth in revenue in the future, yet there will be
need to finance the growing expenditures. In fact, for the first time in 16 years, the financial year 19992000 has
a deficit budget of P400 million, or 1.5 of GDP. How- ever, the deficit is not much of a problem yet as it can
be financed by drawing on government cash balances accumulated over the previous years Republic of Bots-
wana, 1999. What this implies is that government will, in future, need to curtail its expenditures, including
expenditures on education. For many years education has received a lion’s share of the budget.
2. Methodology
The model used is the Human Capital Model developed by Mincer 1974 with some modifications. In
this respect, education is seen as an investment in oneself during school and later through on-the-job training. We
run OLS on an earnings equation specified as follows:
ln Y5a1b3Prim1c3LowSec1d3HighSec1e 3Tertiary1f3T1g3T
2
1h3Hrs1i3Fam where Prim, Lowsec, Highsec and Tertiary are dummies
2
Botswana is a country in southern Africa, a single citizen of the country is a Motswana and the plural is Batswana.
for education categories, T is on-the-job experience,
3
Hrs is hours worked and Fam is a Family background vari-
able measured by the education of the head of the house- hold.
The rate of return to the kth level of education r
k
is estimated by subtracting the coefficient of D
k −
1
from that of D
k
and dividing by the number of years of schooling at the kth level; i.e. r
k
= b
k
2b
k −
1
n
k
. For instance, for pri- mary education the rate of return to that level is calcu-
lated as r
primary versus illiterates
= bS
p
, where S
p
is the number of years it takes to complete primary education, which
is normally 7 years in Botswana. The coefficients are first adjusted by e
coefficient
21 to correct for an issue raised by Halvorsen and Palmquist 1980.
4
3. The data
Two sets of data are used: the Household Income and Expenditure Survey HIES and supplementary survey
data collected by the author. The supplementary survey was necessary to test for some of the issues in which
HIES data are inadequate. HIES data were provided by 3608 households living in randomly selected dwellings
all over Botswana. These households were selected from dwellings within 144 blocks equivalent to an enumer-
ation area but sometimes smaller randomly selected from 3088 blocks. This represents approximately 5 of
the total number of blocks. The supplementary data were provided by a subset of the households selected for the
CSO HIES using proportionality to size of the blocks. Twenty-five percent of the sample was collected from
urban areas and urban villages.
4. The political economy of education in Botswana
The lack of skilled and educated Batswana was one of the most important constraints on development at
independence and for many years afterwards. At inde- pendence, there were few schools and educated Bats-
wana as a result of the neglect of education by the col- onial government. The few schools that existed were a
result of local and missionary initiatives. At indepen- dence, Botswana is believed to have had 40 Batswana
who were university graduates and about 100 individuals
3
The square of experience, T
2
is to take care of the con- cavity of the earnings function and its coefficient is expected
to be negative. This implies that earnings will rise due to experi- ence but at a diminishing rate.
4
They point out that the value of the coefficient of a dummy variable in the semilogarithm regression equation is not a good
estimate of the effect of that variable on the variable being explained for large values of the coefficient. We therefore adjust
as per their suggestion.
293 H.K. Siphambe Economics of Education Review 19 2000 291–300
with a senior secondary certificate. All of the university graduates were trained outside the country, mainly in the
Republic of South Africa Harvey Lewis, 1990. Given the limited human capital inherited from the col-
onial government, the Botswana government had to invest heavily in education, but there were still severe
shortages mainly due to long time lags inherent in edu- cation and rapid economic growth, which in turn
increased the demand for educated people Harvey Lewis, 1990. Most of these critical manpower shortages
were met by heavy importation of skilled labour, which was very expensive for the Botswana government. Just
2 years prior to its independence, only 24 of the 184 administrative posts were held by Batswana; even at
lower levels, only 275 out of 623 posts in the technical, executive and secretarial grades were held by Batswana
Colclough McCarthy, 1980.
School enrolment for all levels increased considerably after independence, as a response to this manpower con-
straint. In 1975, 58 of primary-school-age children were enrolled; by 1991 this percentage had increased to
91. The percentage of children enrolled at secondary education also increased remarkably from 7 in 1970 to
54 in 1991. Post secondary tertiary enrolment increased slightly from 1 in 1970 to 3 in 1991
World Bank, 1994, pp. 217–217. Compared with most countries for which data are available, the increase in
enrolment in secondary education between 1970 and 1991 for Botswana was exceptional. South Africa
increased its enrolment from 30 to 54 over the same period; Zimbabwe, from 4 to 13; Lesotho, from 7
to 25 World Bank, 1994, pp. 216–217.
During the late 1970s the Government became increasingly aware of the equity issues of education as
there was evidence that a number of students were unable to complete some levels of education due to fin-
ancial constraints. In line with its universal education for all goal, the Government abolished school fees, first for
primary school 1978, and later for secondary school 1989.
University education was paid for by the Government via a bursary that stipulates that the graduate contributes
5 of initial gross salary for each year of sponsorship. Apart from the fact that this contribution does not cover
the full costs of training, a more serious problem has been that a majority of the graduates have not made this
contribution from their income. Co-ordination between employers and the bursaries department has been poor,
making it difficult to find out who is contributing and even to trace graduates Republic of Botswana, 1991.
To alleviate this situation, the National Development Plan 7 NDP7 introduced cost recovery through a
loangrant scheme. The loan or grant is provided to any Motswana who qualifies for university entry. Primary
and secondary education continue to be free.
5. Earnings differentials
