Former cabinet minister and Phakalane Estates proprietor, David Magang once opined that Botswana’s poor manufacturing sector and importation of more than 80 percent of the foodstuffs from South Africa, effectively renders Botswana a neo-colony of the former.
Various stats available indicate that the trade between two countries is a one-sided affair, lending credence to Magang’s view that, “In fact so beholden are we to the South African economy we are effectively its neo-colony.” Both countries are former British colonies and members of the African Union, the Commonwealth of Nations and the Southern African Development Community (SADC). The foundation for the trade relationship between South Africa and Botswana dates back to the establishment of the Southern African Customs Union (SACU) in 1910.
South Africa’s Economic Strength
South Africa is the 67 most competitive nation in the world out of 140 countries ranked in the 2018 edition of the Global Competitiveness Report published by the World Economic Forum. Mauritius and SA rank first and second as most competitive economies in Africa. Meanwhile ranks Botswana 90th most competitive economy out of 140 countries.
South Africa’s greatest competitive advantages are its financial system (ranked 18th), market size (35th) and level of innovation (46th) and sound infrastructure with a road connectivity ranking of 5 out of 140 countries, efficiency of clearance policies (34th) meanwhile Botswana fares badly in same areas, due to inadequate infrastructure, for ICT adoption and innovation among others.
According to Ernest Mahlaule, Group Chairman of Gauteng Growth and Development Agency, who is also former President of Johannesburg Chamber of Commerce and Industry, between 2014 and 2018, South Africa and Botswana traded R291.9 billion (about P212.2 billion) with Botswana receiving R 263.8 billion (P191.8 billion) worth of goods and services from South Africa, whilst South Africa received R 28.2 billion (P20.5 billion) worth of goods and services from Botswana.
“During the period under review South Africa enjoyed a trade surplus of R 235.7 billion. However, trade between the two countries has been muted, growing at a compound annual growth rate of 1.1 per annum since 2014,” Mahlaule told conference delegates at South Africa-Botswana Business Forum, which was part of the just ended Global Expo.
“Over the same period, 2014 and 2018, Gauteng and Botswana traded R169.4 billion. Botswana received R 152.0 billion worth of goods and services from Gauteng, whilst the City region received R 17.4 billion worth of goods and services form its SACU neighbour.” During the period under review Gauteng enjoyed a trade surplus of R 134.6 billion. However, trade between the two regions has been muted, growing at a compound annual growth rate of 1.3 percent per annum since 2014, according to Mahlaule.
“It is worth noting that the Gauteng city region accounts for 62.1 percent of all Botswana bound SA exports and similarly 57.6 percent of Botswana sourced imports are bound for Gauteng. Gauteng exports mainly Mineral Fuels, advanced machinery and vehicles to Botswana. Botswana exports mainly Precious stones and inorganic chemicals to Gauteng.
Mahlaule stated that, since 2014, South African companies have invested R 2.1 billion (P1.5 billion) in Botswana generating 497 direct jobs. Gauteng accounts for 81 percent of SA FDI into Botswana. Notable companies who have invested in Botswana since 2014 include Carrick Wealth, Standard Bank, and Open House Management. While Botswana has mandated Botswana International Trade Centre (BITC) to lure investors to set-up in Botswana, another mandate entails promoting and facilitating the promotion of locally manufactured goods to foreign markets.
Mahlaule believes Gauteng present a better business climate for Botswana ventures to set-up in South Africa. Already, owing mainly to the proximity of the Gauteng to Botswana, and its economic strength, Botswana has developed a good trade relationship with the region. The Gauteng province is home Pretoria, the capital city of South Africa, as well as Johannesburg, the country’s largest city. Gauteng City Region is home to a quarter of South Africa’s population and generates 35 percent of the country’s GDP.
The concentration of national population and growth makes the Gauteng City Region pivotal to the national agenda of Transformation, Modernisation and Re- Industrialisation. Between 2014 and 2018 exports of goods and services from Gauteng, accounted for 55 percent of total exports into South Africa. Over the same period Imports amounted to 65 percent of total goods and services imported into South Africa. Total trade in the province was approximately 87 percent of the total provincial GDP. Highlighting more accentuated trade openness relative to the whole country.
During the Global Expo, Botswana’s Minister of Investment, Trade and Industry, Bogolo Kenewendo indicated that Botswana wants to work closely with the Emerging Markets as they want to learn from them strategies of economic transformation which is Botswana’s aspiration for the next 10 years. “We also want to industrialise our economy and leap-frog into Fourth Industrial Revolution, which will require new markets for our new products and sourcing of intermediate inputs and raw materials. Emerging Markets will provide us with such opportunities,” said Kenewendo.
Kenewendo, who assumed the reins as Minister of Investment, Trade and Industry last year at the beginning of April in 2018, indicated that as part of efforst to lure investors to Botswana, government has made efforts to improve its doing business environment through reforms of business processes and legal framework. “We are also in the process of improving our regulatory framework through the implementation of the Better Regulation Strategy to introduce Impact Analysis that will ensure that laws introduced have positive impact rather than introduce bottlenecks,” she said.
Government is currently sitting on 4 400 vacant posts that remain unfilled in the civil service. This is notwithstanding the high unemployment rate in Botswana which has been exacerbated by the recent outbreak of the deadly COVID-19 pandemic.
Just before the burst of COVID-19, official data released by Statistics Botswana in January 2020, indicate that unemployment in Botswana has increased from 17.6 percent three years ago to 20.7 percent. “Unemployment rate went up by 3.1 percentage between the two periods, from 17.6 to 20.7 percent,” statistics point out.
Leading commercial bank, First National Bank Botswana (FNBB), expects the central bank to sharpen its monetary policy knife and cut the Bank Rate twice in the last quarter of 2020.
The bank expects a 25 basis point (bps) in the beginning of the last quarter, which is next month, and another shed by the same bps in December, making a total of 50 bps cut in the last quarter. According to the bank’s researchers, the central bank is now holding on to 4.25 percent for the time being pending for more informed data on the economic climate.
An audit of the accounts and records for the supply of food rations to the institutions in the Northern Region for the financial year-ended 31 March 2019 was carried out. According to Auditor General’s report and observations, there are weaknesses and shortcomings that were somehow addressed to the Accounting Officer for comments.
Auditor General, Pulane Letebele indicated on the report that, across all depots in the region that there had been instances where food items were short for periods ranging from 1 to 7 months in the institutions for a variety of reasons, including absence of regular contracts and supplier failures. The success of this programme is dependent on regular and reliable availability of the supplies to achieve its objective, the report said.
There would be instances where food items were returned from the feeding centers to the depots for reasons of spoilage or any other cause. In these cases, instances had been noted where these returns were not supported by any documentation, which could lead to these items being lost without trace.
The report further stressed that large quantities of various food items valued at over P772 thousand from different depots were damaged by rodents, and written off.Included in the write off were 13 538 (340ml) cartons of milk valued at P75 745. In this connection, the Auditor General says it is important that the warehouses be maintained to a standard where they would not be infested by rodents and other pests.
Still in the Northern region, the report noted that there is an outstanding matter relating to the supply of stewed steak (283×3.1kg cans) to the Maun depot which was allegedly defective. The steak had been supplied by Botswana Meat Commission to the depot in November 2016.
In March 2017 part of the consignment was reported to the supplier as defective, and was to be replaced. Even as there was no agreement reached between the parties regarding replacement, in 51 October 2018 the items in question were disposed of by destruction. This disposal represented a loss as the whole consignment had been paid for, according to the report.
“In my view, the loss resulted directly from failure by the depot managers to deal with the matter immediately upon receipt of the consignment and detection of the defects. Audit inspections during visits to Selibe Phikwe, Maun, Shakawe, Ghanzi and Francistown depots had raised a number of observations on points of detail related to the maintenance of records, reconciliations of stocks and related matters, which I drew to the attention of the Accounting Officer for comments,” Letebele said in her report.
In the Southern region, a scrutiny of the records for the control of stocks of food items in the Southern Region had indicated intermittent shortages of the various items, principally Tsabana, Malutu, Sunflower Oil and Milk which was mainly due to absence of subsisting contracts for the supply of these items.
“The contract for the supply of Tsabana to all depots expired in September 2018 and was not replaced by a substantive contract. The supplier contracts for these stocks should be so managed that the expiry of one contract is immediately followed by the commencement of the next.”
Suppliers who had been contracted to supply foodstuffs had failed to do so and no timely action had been taken to redress the situation to ensure continuity of supply of the food items, the report noted.
In one case, the report highlighted that the supplier was to manufacture and supply 1 136 metric tonnes of Malutu for a 4-months period from March 2019 to June 2019, but had been unable to honour the obligation. The situation was relieved by inter-depot transfers, at additional cost in transportation and subsistence expenses.
In another case, the contract was for the supply of Sunflower Oil to Mabutsane, where the supplier had also failed to deliver. Examination of the Molepolole depot Food Issues Register had indicated a number of instances where food items consigned to the various feeding centres had been returned for a variety of reasons, including food item available; no storage space; and in other cases the whole consignments were returned, and reasons not stated.
This is an indication of lack of proper management and monitoring of the affairs of the depot, which could result in losses from frequent movements of the food items concerned.The maintenance of accounting records in the region, typically in Letlhakeng, Tsabong, and Mabutsane was less than satisfactory, according to Auditor General’s report.
In these depots a number of instances had been noted where receipts and issues had not been recorded over long periods, resulting in incorrect balances reflected in the accounting records. This is a serious weakness which could lead to or result in losses without trace or detection, and is a contravention of Supplies Regulations and Procedures, Letebele said.
Similarly, consignments of a total of 892 bags of Malutu and 3 bags of beans from Tsabong depot to different feeding centres had not been received in those centres, and are considered lost. These are also not reflected in the Statement of Losses in the Annual Statements of Accounts for the same periods.