Revised user fees, service charges raised over P960m

Minister of Finance, Peggy Serame, reported that the revenue collected from the implementation of the revised user fees and service charges amounted to P961.14 million, compared to P646.58 million collected in 2019/2020, reflecting an increase of P314.56 million or approximately 49 percent.

Serame also noted that over the past three years, 934 user fees and service charges across various sectors were revised, guided by three key principles: the average inflation rate, market prices, and individuals' ability to pay. She explained that user fees and service charges on permits and licenses are typically applied annually as one-time payments.

Her statement was in response to a question from Selibe Phikwe West Legislator, Dithapelo Keorapetse, who requested details on the amount of money the government has collected from user fees and service charges since the decision to increase them, along with specific information on which fees and charges including licenses, permits, among others, have been raised over the past three years and by how much, including percentages. He also asked what empirical evidence informed this policy decision, the impact on the cost of living and purchasing power of Batswana, and which user fees and service charges the government plans to increase in the future, along with the expected timelines.

Serame detailed the revisions of fees and charges as follows: Agriculture: 160 user fees and service charges were revised with an average inflation rate of 3.9 percent over five years. These fees were last updated in 2015. Secondly, Lands and Water Affairs: 22 user fees and service charges were revised with an average inflation rate of 7.0 percent over a period of 13 years. The last revision was in 2005 for Environment and Tourism: 122 user fees and service charges were revised with an average inflation rate of 7.2 percent over 18 years.

These fees were last revised in 2000, Transport and Communications: 655 user fees and service charges were revised with inflation rates ranging between 3.2 to 7.0 percent. These fees were last updated between 2005 and 2017. Notably, fees for cross-border permits, part of these 655 revised fees, were increased by 20 percent to align with regional standards, Trade and Industry: 9 user fees and service charges were revised based on the ability to pay, covering an eight-year period. The last revision was in 2010 for Employment and Skills Development: 18 user fees and service charges were revised with an average inflation rate of 6.6 percent over eight years. These were last updated in 2011 for Tertiary Education: 27 user fees and service charges were revised with an average inflation rate of 5.9 percent over 11 years. These fees were last revised in 2008, Minerals and Energy: 14 user fees and service charges were revised based on the ability to pay, particularly as they are primarily consumed by businesses.

Some fees, such as those for explosives licenses, were set in 1962 and had not been reviewed since. Infrastructure and Housing: 89 user fees and service charges were aligned with Botswana Housing Corporation market prices. The last revision of these fees was in 2004. Serame stated that the implementation of these measures began in earnest during the 2022/2023 financial year. In the two preceding financial years, the implementation was delayed due to the outbreak and spread of the COVID-19 pandemic. Revenue growth was observed during the 2022/2023 financial year, with a combined increase of P314.56 million, representing 0.12 percent of Gross Domestic Product.

She further explained that the decision to increase user fees and service charges was driven by the need to strengthen domestic revenue mobilization, particularly in light of concerns that diamond revenues were plateauing while government spending continued to rise. Additionally, it was noted that user fees and service charges had gone as long as 18 years without being reviewed in most ministries, except for those under the Ministries of Transport and Public Works, and Labour and Home Affairs, which were revised in 2017 and 2019, respectively.

Moreover, the cost of providing services has increased over the years, making it unsustainable for the government to continue financing them entirely on its own. This led to the need for cost-sharing measures to bolster the government’s financial capacity.

Serame also mentioned that the direct impact of the increased user fees and service charges on the cost of living has not yet been determined, as most of these fees and charges are applied as one-off annual payments. In the first two years following the fee and charge revisions, the annual average inflation rates were 1.9 percent in 2020, 6.7 percent in 2021, and 11.5 percent in 2022. The high inflation rate in 2022 was partly due to the effects of the Russia-Ukraine conflict, suggesting that the fee and charge revisions themselves did not significantly impact the cost of living or consumers’ purchasing power.

Despite this, Serame assured the legislators that the Ministry of Finance, in collaboration with line Ministries, conducted thorough assessments to determine the most appropriate criteria for revising user fees and service charges during the review process. The assessment established the most suitable criteria, considering their potential impact on the lives of ordinary Batswana. These criteria included the ability to pay, market price references, and the use of the average inflation rate, as previously mentioned.

She emphasized that the government continuously monitors the performance of existing and revised user fees and service charges. The frequency of these reviews depends on the outcomes of periodic assessments. Since the government began implementing the revised fees and charges in earnest during the 2022/2023 financial year, more time is needed to evaluate their effectiveness.

Serame explained that the application of user fees and service charges has long been a part of the government’s revenue collection efforts. These fees and charges have traditionally been a source of government revenue, dating back to the pre-independence era when some fees, such as mining licenses, were introduced in 1962. Over the years following independence, the government gradually introduced additional fees, such as school fees and healthcare charges. In essence, improving revenue collection has been a consistent element of the government’s revenue optimization strategies.

This initiative gained momentum with the introduction of a cost-recovery policy during the Mid-Term Review of National Development Plan 8.

As part of broader public finance management reforms, the government intensified its revenue maximization efforts during the 2019/2020 financial year. This initiative included revising user fees and service charges and identifying new revenue sources.