Since beginning of 2018, Ministry of Investment Trade & Industry (MITI) has been making use of it statutory powers on cross boarder trading. The Ministry has been restricting importation of some selected goods from outside Botswana, forcing the market to source the commodities locally. This is done predominantly to give space for locally produced and packaged goods and push for their retail and shelve uptake by the domestic market.
MITI says the country has reaped positive results. Improved participation of Botswana produced and packaged goods in the market have been birthed, this was revealed at the Stanbic Bank Botswana Fast Moving Consumer Goods (FMCG) seminar held in Gaborone this week. Deliberating on this, Director of Industrial Affairs at the Ministry of Investment, Trade & Industry, Obusitwe Tiroesele said some trading and industrial licenses will continue to be reserved for citizens and companies wholly-owned by citizens of Botswana.
Tiroesele cited licenses such as bottling water, brick-moulding and welding among others. “Since the implementation of the statutory instrument for the restriction of importation of bottled water, 41 enterprises have been established, a total of 22 companies operating in the water bottling sector and the employment level has increased from 196 to 417,” she said. MITI implemented the statutory Instrument No.44 of 2018 to ban importation of bottled natural and mineral water in order to give space for the local industry to flourish and birth more jobs for citizens.
The instrument was introduced in April 2018 to impose these restrictions under the Control of Goods , prices and other Charges Act , alongside temporary ban of importation of some product commodities that are viewed as noncomplex for Botswana based and citizen owned companies to produce and meet full national demand. The statutory instrument also later extended to restriction of importation of salt to promote salt packaging locally and attract more investment, which would, in turn, create employment by prohibiting importation of salt in quantities less than 100kg.
MITI revealed at the seminar that since inception of the instrument, investment levels of salt packaging companies has increased from P9.925 million to P21.94 million and the number of companies packaging salt increased from six to 15 with an employment level also increased from 56 to 90 employees. Speaking on behalf of Stanbic Bank Botswana, Head of Corporate Investment Banking, Sheperd Aisam, said the seminar was held as part of the Bank’s continued commitment to developing innovative solutions for home-grown African multi-nationals and promotion of local growth.
She said the seminar intended to ultimately map a way forward for all stakeholders to collectively work together for the benefit of the sector and the wider economy. According to Stanbic the initiative was intended to rigorously unpack challenges within the Fast-Moving Consumer Goods (FMCG) sector in Botswana relating them to regional and global trends as well as derive solutions towards sustainable economic growth. Sherped Aisam said: “We have the responsibility to extend ourselves as a financial partner beyond just banking: we must add value by providing exposure, information and our expertise to our clients to foster an environment that facilitates their growth and success.”
To support the FMCG industry Stanbic provides expertise and relationships to assist clients, and negotiate complex financial and regulatory cross-border environments trade deals. Aisam noted that with engagements from leading minds, industry experts and business leaders the FMCG seminar was an interactive session which afforded the Bank an opportunity to engage with the clients and create an environment where they are able to demonstrate the Bank’s potential and solutions in the Trade Financing space relevant to the clients in the sector.
“Stanbic Bank Botswana is more than just a bank, we are a true partner, dedicated to helping Batswana build their businesses and create their own legacies. We are wholly driven by a nuanced desire to ensure progress through collaboration. For us, it is not just about having a partner on the journey; it is being more and doing more. It is about someone who sees how far you can go in the distance because with Stanbic Bank Botswana Corporate & Investment Banking, your story is our story,” he said.
Giving an overview of the FMCG sector in Botswana, Stanbic Bank Head of Transactional Products and Services, Ms Tebogo Giddie said from a research perspective there are currently global trends such as environmental awareness whereby a lot of consumers were more cognizant of the negative effects of the development of products and by-products that influence consumer habits.
Marcian Concepts have been contracted by Selibe Phikwe Economic Unit (SPEDU) in a P230 million project to raise the town from its ghost status. The project is in the design and building phase of building an industrial hub for Phikwe; putting together an infrastructure in Bolelanoto and Senwelo industrial sites.
This project comes as a life-raft for Selibe Phikwe, a town which was turned into a ghost town when the area’s economic mainstay, BCL mine, closed four years ago. In that catastrophe, 5000 people lost their livelihoods as the town’s life sunk into a gloomy horizon. Businesses were closed and some migrated to better places as industrial places and malls became almost empty.
However, SPEDU has now started plans to breathe life into the town. Information reaching this publication is that Marcian Concepts is now on the ground at Bolelanoto and Senwelo and works have commenced. Marcian as a contractor already promises to hire Phikwe locals only, even subcontract only companies from the area as a way to empower the place’s economy.
The procurement method for the tender is Open Domestic bidding which means Joint Ventures with foreign companies is not allowed. According to Marcian Concepts General Manager, Andre Strydom, in an interview with this publication, the project will come with 150 to 200 jobs. The project is expected to take 15 months at a tune of P230 531 402. 76. Marcian will put together construction of roadworks, storm-water drains, water reticulation, street lighting and telecommunication infrastructure. This tender was flouted last year August, but was awarded in June this year. This project is seen as the beginning of Phikwe’s revival and investors will be targeted to the area after the town has worn the ghost city status for almost half a decade.
The International Monetary Fund (IMF) has slashed its outlook the world economy projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.
On Wednesday when delivering its World Economic Outlook report titled “A long difficult Ascent” the Washington Based global lender said it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April. For 2021, IMF experts have projected growth of 5.4%, down from 5.8%. “We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” said Gita Gopinath Economic Counsellor and Director of Research.
The struggle of humanity is now how to dribble past the ‘Great Pandemic’ in order to salvage a lean economic score. Botswana is already working on dwindling fiscal accounts, budget deficit, threatened foreign reserves and the GDP data that is screaming recession.
Latest data by think tank and renowned rating agency, Moody’s Investor Service, is that Botswana’s fiscal status is on the red and it is mostly because of its mineral-dependency garment and tourism-related taxation. Botswana decided to close borders as one of the containment measures of Covid-19; trade and travellers have been locked out of the country. Moody’s also acknowledges that closing borders by countries like Botswana results in the collapse of tourism which will also indirectly weigh on revenue through lower import duties, VAT receipts and other taxes.
Latest economic data shows that Gross Domestic Product (GDP) for the second quarter of 2020 with a decrease of 27 percent. One of the factors that led to contraction of the local economy is the suspension of air travel occasioned by COVID-19 containment measures impacted on the number of tourists entering through the country’s borders and hence affecting the output of the hotels and restaurants industry. This will also be weighed down by, according to Moody’s, emerging markets which will see government losing average revenue worth 2.1 percentage points (pps) of GDP in 2020, exceeding the 1.0 pps loss in advanced economies (AEs).
“Fiscal revenue in emerging markets is particularly vulnerable to this current crisis because of concentrated revenue structures and less sophisticated tax administrations than those in AEs. Oil exporters will see the largest falls but revenue volatility is a common feature of their credit profiles historically,” says Moody’s. The domino effects of containment measures could be seen cracking all sectors of the local economy as taxes from outside were locked out by the closure of borders hence dwindling tax revenue.
Moody’s has placed Botswana among oil importers, small, tourism-reliant economies which will see the largest fall in revenue. Botswana is in the top 10 of that pecking order where Moody’s pointed out recently that other resource-rich countries like Botswana (A2 negative) will also face a large drop in fiscal revenue.
This situation of countries’ revenue on the red is going to stay stubborn for a long run. Moody’s predicts that the spending pressures faced by governments across the globe are unlikely to ease in the short term, particularly because this crisis has emphasized the social role governments perform in areas like healthcare and labour markets.
For countries like Botswana, these spending pressures are generally exacerbated by a range of other factors like a higher interest burden, infrastructure deficiencies, weaker broader public sector, higher subsidies, lower incomes and more precarious employment. As a result, most of the burden for any fiscal consolidation is likely to fall on the revenue side, says Moody’s.
Moody’s then moves to the revenue spin of taxation. The rating agency looked at the likelihood and probability of sovereigns to raise up revenue by increasing tax to offset what was lost in mineral revenue and tourism-related tax revenue. Moody’s said the capacity to raise tax revenue distinguishes governments from other debt issuers. “In theory, governments can change a given tax system as they wish, subject to the relevant legislative process and within the constraints of international law. In practice, however, there are material constraints,” says Moody’s.
‘‘The coronavirus crisis will lead to long-lasting revenue losses for emerging market sovereigns because their ability to implement and enforce effective revenue-raising measures in response will be an important credit driver over the next few years because of their sizeable spending pressures and the subdued recovery in the global economy we expect next year.’’
According to Moody’s, together with a rise in stimulus and healthcare spending related to the crisis, the think tank expects this drop in revenue will trigger a sizeable fiscal deterioration across emerging market sovereigns. Most countries, including Botswana, are under pressure of widening their tax bases, Moody’s says that this will be challenging. “Even if governments reversed or do not extend tax-easing measures implemented in 2020 to support the economy through the coronavirus shock, which would be politically challenging, this would only provide a modest boost to revenue, especially as these measures were relatively modest in most emerging markets,” says Moody’s.
Botswana has been seen internationally as a ‘tax ease’ country and its taxes are seen as lower when compared to its regional counterparts. This country’s name has also been mentioned in various international investigative journalism tax evasion reports. In recent years there was a division of opinions over whether this country can stretch its tax base. But like other sovereigns who have tried but struggled to increase or even maintain their tax intake before the crisis, Botswana will face additional challenges, according to Moody’s.
“Additional measures to reduce tax evasion and cutting tax expenditure should support the recovery in government revenue, albeit from low levels,” advised Moody’s. Botswana’s tax revenue to the percentage of the GDP was 27 percent in 2008, dropped to 23 percent in 2010 to 23 percent before rising to 27 percent again in 2012. In years 2013 and 2014 the percentage went to 25 percent before it took a slip to decline in respective years of 2015 up to now where it is at 19.8 percent.