Welfare Effects of Higher Energy and Food Prices in Botswana: A SAM Price Multiplier Analysis

Abstract

Using a social accounting matrix (SAM) multiplier framework, the paper examines the welfare effects of higher prices of internationally traded energy and food commodities on economic sectors in Botswana. These are adverse supply–side shocks to Botswana since the country is a net importer of energy and food commodities. The findings indicate that the effects of these shocks are heavily concentrated on very few production sectors; only agriculture, electricity, non-diamonds mining, water and government sectors are affected the most. Moreover, households in the rural areas are hurt much more than those in urban areas. These insights underscore the need for government to deliver on investments that are intended to increase agricultural yields and domestic energy production and to ensure that efficiency gains in food and energy supply chains are achieved. In addition, there is a need to review the adequacy and targeting of existing social safety nets.

Keywords: Social Accounting Matrix; Multiplier analysis; Welfare; Botswana

BOJE: Botswana Journal of Economics, 11(15), 21-31