The news that should come as early Christmas for Batswana is that the much anticipated projects of Special Economic Zones Authority (SEZA) are now showing signs of commitment, like an aircraft starting engine for take-off the Sir Seretse Khama International Airport (SSKIA) Special Economic Zone (SEZ) project is now ready for shovel on the ground work.
BusinessPost has established that already P100 million has been released to commit on a 1.8 kilometre road which is part of the Phase 1 strategic plan for the initial development of the Sir Seretse Khama International Airport (SSKIA) SEZ. According to SEZA, this project will open up a 90 hectares development near the SSKIA. The national airport has been declared as a multi-use SEZ and its boundary has been approved by Gaborone City Council (GCC), according to SEZA. A plan is that economic activities at the SSKIA-SEZ be more focused on innovation and diamond value addition; while also catering for opportunities in pharmaceutical manufacturing and distribution.
“Other miscellaneous economic activities will include industrial, commercial, air-related logistics and distribution. From a real estate, financial and fiscal standpoint it made sense to integrate the Innovation Hub and the Diamond Hub into the SSKIA-SEZ,” said SEZA Acting Chief Executive Officer Thatayaone Ndzinge in an interview with this publication.
The legislation enacted the Special Economic Zones Act in 2015 with a mandate, “to make provision for the establishment, development and management of special economic zones; for creating a conducive environment for local and foreign investment; to facilitate expansion of employment opportunities, attainment of economic growth targets and to provide for matters related therewith and incidental thereto.”
Government has zoned seven land spaces to be used as SEZs; Lobatse 70 hectares, Sir Seretse Khama International Airport 780 hectares, Fairgrounds 50 hectares, Palapye 500 hectares, Selibe Phikwe 1100 hectares, Francistown 700 hectares, Tuli Block 400 hectares and Pandamatenga 41000 hectares.
The SEZs has been divided into phases and in the first phase there is Sir Seretse Khama International Airport (added with the Diamond Hub as industrial and business transport zone); Selibe Phikwe(like base metal beneficiation, chemical manufacturing and agro business and Francistown(mining and logistics).
In the second phase there is; Lobatse(meat and leather hub), Palapye(coal benefication), Tuli Block(horticulture), Pandamatenga(agro-business) and Gaborone Fairgrounds(financial services hub.Last month Bothakga Burrow won tender number 014/03/2019 for constructing: “detailed urban scheme, detailed infrastructure services design and production of construction tender documentation for the designed Boulevard one of the Sir Seretse Khama International Airport Special Economic Zone (SSKI-SEZ East) in Gaborone.” This tender should be completed by next year August according to the contract.
According to SEZA, the project will also include a design scheme for provision of underground services like water, fiber, power and CCTV. “We are committed to delivering a quality project within time and budget. The success of this project will no doubt set the tone for the SSKIA-SEZ,” Ndzinge told BusinessPost.
Botswana’s SEZA was benchmarked from leading economies like Singapore, Malaysia, South Korea, Mauritius and China. Already P145 million has been approved for SEZA projects. Gabana Architects Consortium is awarded a tender to construct the P8 million Lobatse SEZ and is expected to finish this project next year June.
In Gaborone, apart from the SSKIA, SEZA has a zone at Fairgrounds commercial area where SEZA is headquarted and this tender was given Royal Haskoning at a tune of P13 million, also expected to have left the construction site by June 2020. Gabana Architects Consortium took another SEZ tender to construct the Selibe Phikwe economic zone before July 2020. Like Gabana, Royal Haskoning is lucky for the second time in snatching the building of the Francistown SEZ. However the Pandamatenga and Palapye SEZ projects are yet to be awarded. Ndzinge promised that early next year these projects will take off. He said at Palapye they are still marketing the area and awaiting an investor.
Land issue for SEZA
Last year September it was revealed by the SEZA’s Director Investor Attractions and Monitoring Joel Ramaphoi during the Business Botswana Annual General Meeting that the process of acquiring land and change or transfer of land use in Botswana has been delaying the Authority in doing its mandate. Ramaphoi said the issue of land allocation or availability of land to be zoned prove to be a big impediment before SEZA.
“Land acquisition has been a big problem. There are always delays in land acquisition and it is a big challenge. We need to get enough land which will enable to carry out our mandate,” said SEZA director, Ramaphoi who also gave an example of Lobatse where they struggled to acquire 200 hectres for SEZA as “it took too long to get land.”
During last year’s National Business Conference President Mokgweetsi Masisi said his government is working on legislation “that will fast track the processing of applications for the change of land use so that the land owners can benefit from its optimal utilization.” Masisi revealed that the target date for finalization of the legislation would December last year.
In an interview, Ndzinge said land is not a huge issue for SEZA, but there is a specific zone being the Tuli Block which could have been referred to by Ramaphoi. He said SEZA has a lot of land for SEZ safe for the Tuli Block area which is not necessarily a top priority area. He said land at Tuli Block is mostly privately owned hence the difficulty in its acquisition. But that is not a train smash according to Ndzinge as Tuli Block is not top on the list and SEZA cannot do all the eight zones at a go.
The legislative debate on SEZA
When telling Parliament of SEZ last year the then assistant Minister of Investment, Trade and Industry Moiseraele Goya said that year conferring of all the eight SEZs will be finalized during 2018 and land servicing of the seven sites was intended to be completed by December 2018 and March 2020 respectively. He further revealed that the sale and marketing of all sites started in April 2018.
This led to the debating of the Special Economic Zones Bill No. 10 of 2015 which was lauded by the former Sefhare-Ramokgonami legislator Dorcas Makgato saying the initiative of SEZs would expedite industries competitiveness in the global market, hence strengthening the country’s export earnings. Boteti East legislator Lelatisitswe Sethomo who supported the Bill wanted people in the SEZs to be empowered.
However the late Mochudi East NP Isaac Davids shot down the SEZ idea, saying that even though the Bill was a good initiative, it was going to be hampered by shortage of water and power in the country where the SEZs are located. The then Maun East MP Kostantinos Markus complained that his region was left out of the zoning even though it is a tourism attraction area. During last year Business Botswana AGM, SEZA director Ramaphoi said they have decided to start with 8 zones. He said they have been benchmarking on China which has only 4 SEZs but is successful economically.
SEZA already zoomed and zoned four investors
Ndzinge has also revealed that they have so far found four investors who are committing to convert soon and come do business in Botswana in April next year. He said their investor attraction mission which led them to Dubai, South Africa and Germany bore fruits as they talked to 30 investors, including the four who are almost ready to convert. He said most of businesses who are interested in coming to Botswana are impressed by regulations and reforms which were put in place for Doing Business.
Incentive packages for investors
On July this year cabinet approved that a company will be given 5 percent Corporate Tax incentive for its first ten years in Botswana. After ten years the incentive becomes ten percent. There will also be zero rated VAT on raw materials for manufacturing for export. Cabinet sought to put the issue of land shortage by allowing fast allocation of land for investors.
Foreign investors will also be offered long term renewal land leases. There will also be an advantage of a waiver on transfer duty on land and property and a Property Tax exemption for 5 years. Government will also duty free imports for specialist plants and machinery manufacturing purposes. Government of Botswana will ensure that there is no exchange controls but full repatriation of profits and capital.
Despite Covid-19 interrupting trade worldwide, exporting companies in Botswana which benefited from the Botswana Investment and Trade Centre (BITC) services realised P2.96 billion in export earnings during the period from April 2020 to March 2021.
In the preceding financial year, the sale of locally manufactured products in foreign markets had registered export revenue of P2, 427 billion against a target of P3, 211 billion BITC, which celebrates 10 years since establishment, continues to carry out several initiatives targeted towards expanding the Botswana export base in line with Botswana’s desire to be an export led economy, underpinned by a robust export promotion programme in line with the National Export Strategy.
The main products exported were swamp cruiser boats, pvc tanks and pvc pipes, ignition wiring sets, semi-precious stones, veterinary medicines, hair braids, coal, textiles (towels and t-shirts) and automobile batteries. These goods were destined mainly for South Africa, Zimbabwe, Austria, Germany, and Namibia.
With Covid-19 still a problem, BITC continues to roll out targeted virtual trade promotion missions across the SADC region with a view to seeking long-lasting market opportunities for locally manufactured products.
Recently, the Centre facilitated participation for Botswana companies at the Eastern Cape Development Council (ECDC) Virtual Export Symposium, the Botswana-Zimbabwe Virtual Trade Mission, the Botswana-Zambia Virtual Trade Mission, Botswana-South Africa Virtual Buyer/Seller Mission as well as the Botswana-Namibia Virtual Trade Mission.
BITC has introduced an e-Exporting programme aimed at assisting Botswana exporters to conduct business on several recommended e-commerce platforms. Due to the advent of COVID-19, BITC is currently promoting e-trade among companies through the establishment of e-commerce platforms and is assisting local companies to embrace digitisation by adopting e-commerce platforms to reach export markets as well as assisting local e-commerce platform developers to scale up their online marketplaces.
During the 2019/2020 financial year, BITC embarked on several initiatives targeted at growing exports in the country; facilitation of participation of local companies in international trade platforms in order to enhance export sales of local products and services into external markets.
BITC also helped in capacity development of local companies to compete in global markets and the nurturing of export awareness and culture among local manufacturers in order to enhance their skills and knowledge of export processes; and in development and implementation of trade facilitation tools that look to improve the overall ease of doing business in Botswana.
As part of building export capacity in 2019/20, six (6) companies were selected to initiate a process to be Organic and Fair Trade Certified. These companies are; Blue Pride (Pty) Ltd, Motlopi Beverages, Moringa Technology Industries (Pty) Ltd, Sleek Foods, Maungo Craft and Divine Morula.
In 2019 seven companies which were enrolled in the Botswana Exporter Development Programme were capacitated with attaining BOBS ISO 9001: 2015 certification. Three (3) companies successfully attained BOBS ISO 9001:2015 certification. These were Lithoflex (Pty) Ltd, General Packaging Industries and Power Engineering.
BITC’s annual flagship exhibition, Global Expo Botswana (GEB) to create opportunities for trade and strategic synergies between local and international companies. The Global Expo Botswana) is a premier business to business exposition that attracts FDI, expansion of domestic investment, promotion of exports of locally produced goods and services and promotion of trade between Botswana and other countries.
The portal also provides information on; measures, legal documents, and forms and procedures needed by Botswana companies that intend on doing business abroad. BITC continues to assist both potential and existing local manufacturing and service entities to realise their export ambitions. This assistance is pursued through the ambit of the Botswana Exporter Development Programme (BEDP) and the Trade Promotion Programme.
BEDP was revised in 2020 in partnership with the United Nations Development Programme (UNDP) with a vision to developing a diversified export-based economy. The programme focuses mostly on capacitating companies to reach export readiness status.
Prices for goods and services in this country continue to increase, with the latest figures from Statistics Botswana showing that in May 2022, inflation rate rose to 11.9 percent from 9.6 percent recorded in April 2022.
According to Statistics Botswana update released this week, the largest upward contributions to the annual inflation rate in May 2022 came from increase in the cost of transport (7.2 percent), housing, water, electricity, gas & other Fuels (1.4 percent), food & non-alcoholic beverages (1.1 percent) and miscellaneous goods & services (0.8 percent).
With regard to regional inflation rates between April and May 2022, the Rural Villages inflation rate went up by 2.5 percentage points, from 9.6 percent in April to 12.1 percent in May 2022, according to the government owned statistics entity.
In the monthly update the entity stated that the Urban Villages inflation rate stood at 11.8 percent in May 2022, a rise of 2.4 percentage points from the April rate of 9.4 percent, whereas the Cities & Towns inflation rate recorded an increase of 1.9 percentage points, from 9.9 percent in April to 11.8 percent in May.
Commenting on the national Consumer Price Index, the entity stated that it went up by 2.6 percent, from 120.1 in April to 123.2 in May 2022. Statisticians from the entity noted that the transport group index registered an increase of 7.3 percent, from 134.5 in April to 144.2 in May, mainly due to the rise in retail pump prices for petrol and diesel by P1.54 and P2.74 per litre respectively, which effected on the 13th of May 2022.
The food & non-alcoholic beverages group index rose by 2.6 percent, from 118.6 in April 2022 to 121.6 in May 2022 and this came as a result of increase in prices of oils & fats, vegetables, bread & cereal, mineral waters, soft drinks, fruits & vegetables juices, fish (Fresh, Chilled & Frozen) and meat (Fresh, Chilled & Frozen), according to the Statisticians.
The Statisticians said the furnishing, household equipment & routine maintenance group index rose by 1.0 percent, from 111.6 in April 2022 to 112.7 in May 2022 and this was attributed to a general increase in prices of household appliances, glassware, tableware & household utensils and goods & services for household maintenance.
The prices for clothing & footwear group index moved from 109.4 to 110.4, registering a rise of 0.9 percent during the period under review. Bank of Botswana has projected higher inflation in the short term, associated with the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices and added that the possible increase in public service salaries could add also upward pressure to inflation in this country.
In the latest June 2022 global economic prospects, released last week the World Bank has warned that low global economic growth and economic activity in global commodity markets such as China and Europe could negatively affect export revenues for Botswana and other Sub Saharan countries.
Recent data from Statistics Botswana show that Botswana’s exports destined to the global markets such as Asia and the European Union (EU) on monthly basis accounts for around 60.1 percent and 20.1 percent respectively.
The World Bank last week lowered its 2022 projections of global economic growth and indicated that the new forecasts could be bad news for countries like Botswana who are dependent on export mineral revenues. The Bank noted that just over two years after COVID-19 caused the deepest global recession since World War II, the world economy is again in danger and stated that this time it is facing high inflation and slow growth at the same time.
In the recent June projections, the bank lowered its forecast of global economic growth from the January 4.1 percent to 2.1 percent. “Our June forecasts reflect a sizable downgrade to the outlook: global growth is expected to slow sharply from 5.7 percent in 2021 to 2.9 percent this year. This also reflects a nearly one-third cut to our January 2022 forecast for this year of 4.1 percent,” a team of World Bank economists noted in the June 2022 Global Economic Prospects.
The World Bank indicated that exports from Botswana and other Sub Saharan countries could suffer from a substantial deceleration of activity in China and Europe. The Bank noted that exporters of industrial metals, crude oil, and ores such as Angola, Democratic Republic of Congo, Republic of Congo, South Africa, and Zambia could suffer from a substantial deceleration of activity in China.
On the other hand a sharp contraction of growth in the euro area could hurt exporters of agricultural products such as beef, coffee, tea, tobacco, cotton, and textiles from Botswana, Ethiopia, Madagascar and Malawi. “The faster-than-expected deceleration of the global economy and increased volatility of commodity prices could hurt many SSA commodity exporters,” said World Bank President David Malpass.
Malpass indicated that subdued growth in the global markets for Botswana and other Sub Saharan exports will likely persist throughout the decade because of weak investment in most of the world.
He noted that with inflation now running at multi-decade highs in many countries and supply expected to grow slowly, inflation could remain higher for longer than currently anticipated. “Even if a global recession is averted, the pain of stagflation could persist for several years— unless major supply increases are set in motion. Amid the war in Ukraine, surging inflation, and rising interest rates, global economic growth is expected to slump in 2022. Several years of above-average inflation and below-average growth are now likely,” said Malpass.