In bid to transform the economy from upper middle income to high income, one which is diversified and private sector led, Botswana continues to put up structures and investment acceleration reforms to enable such a metamorphosis.
One of the country‘s best shot at archiving this remains embedded in opening up foreign market window to export Botswana manufactured goods and services. This in turn has been underscored as a critical path towards unlocking other value chain business opportunities such as transport and logistics as well as creating much needed jobs for the youth, especially unemployed graduates.
Last week Ministry of Investment, Trade & Industry (MITI) launched Botswana Revised National Strategy 2019-2024, a document that will direct the country’s quest towards unlocking global markets for local products and services. Developed in Collaboration with Commonwealth secretariat, the strategy is updated every 6 years to align with evolving global market trends and international trade demands.
At the launch which was attended by Government representative led by Minister of Investment & Trade Centre Bogolo Kenewendo, private sector representatives and other economic strategic partners such as European Union, it was noted the major aim of the National Export Strategy (NES) is to make Botswana globally competitive with a view to expanding current levels of exports and placing new product lines in the international markets.
Ushering in official proceedings MITI Deputy Permanent Secretary in charge of Trade Ms. Ontlametse Ward revealed that key priority sectors that have been identified as strategic deliverables in this new paths includes; arts and crafts, glass products, jewellery and semi-precious stone, leather and leather products, meat and meat products, garment and textile, light manufacturing and indigenous products amongst others.
Minister Kenewendo noted that the National Export Strategy recognizes the need to broaden existing initiatives aimed at export market development such as the export development program. She further highlighted that strategic export development and promotion is seen at a national level as a crucial element for the diversification process.
Kenewendo said because of its population of just over 2 million people which is often considered too small for business, Botswana is left with no much options but to explore international markets for business and trade, highlighting that the country’s Southern African Central location and inter boarder trade arrangements oils up its ability to penetrate the over 500 million people SADC market and consequently the continental and African consumer space.
To create the much needed jobs Kenewendo observed the need for mass industrialization outputting competitive goods and export ready products that can be absorbed by the international market. She also borrowed her ministry road map which was launched in early 2018, highlighting Export Development which is one of the three key Apexes compositing her Ministry‘s new path, explaining Botswana intends to explore export-led growth by promoting export of goods for which the country has a comparative advantage.
Under the new road map the Export Development basket encompasses creation of market access through negotiation of trade agreements with strategic partners, identifying priority sectors according to export readiness and capacity as well as implementation of rigorous development strategies of export incentives.
Kenewendo explained that the new strategy speaks exactly to that, “the National Export Strategy (2019-2024) intends to transform Botswana into a developed economy, built upon a sustainable, competitive export base” she said. Overall, the strategy aims to maximize the export sector's contribution to employment creation, rural development and poverty reduction, to increase production, productivity and value addition in specific targeted sectors; to improve the business environment; to diversify the range of export products, enhance human skills capacity as well as export competency and ensure the exporters have a well-supported access to lucrative international markets; to improve exporters' access to finance, trade information and quality management; to ensure that strategy support network is effectively coordinated by a public private sector partnership. The strategy provides a precise implementation framework with a detailed action plan and resource allocation.
Amongst other key highlights in Botswana‘s export development quest is the need to ensure that there are adequate resources available for capacity building of exporters, ensure that the volume and value of exports grow, new markets, and new export products are developed, provide Strategic leadership to the various stakeholders involved in exporting, monitor and ensure continuous improvement, swell as develop and increase the pool of export-ready companies.
Deliberating on the strategy experts say amongst other challenges impeding Botswana’s export development efforts is that the country is far from large rich markets ,the inland shipping cost to South African ports, low production capacity as well as lack of access to working capital just to name but a few. To address the challenges the strategy speaks to initiatives such as creating awareness and intensifying training on export Marketing Plans, Market segmentation and product pricing.
Trade & export promotion experts further noted that there is need to determine target groups with growth potential and where the company has competitive advantage. Also highlighted at the launch was the need to put in place Quality Management Systems (QMS) and product quality, development, documentation and implementation of QMS to ensure product quality thereby enhancing market competiveness.
Minister Kenewendo noted that the new revised strategy comes at an opportune time where Botswana is currently embarking on various drives to diversify the economy. "This Strategy is a product and market specific, designed targeted specifically for the priority sectors that has been identified,” she said. It was noted that to archive this, Botswana has to build export ready companies that have at a minimum, the drive, experience, financial resources, and capacity to successfully meet demand for its product in a foreign market.
This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.
The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.
Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.
He was speaking in Parliament on Tuesday delivering Parliament’s Finance Committee report after assessing a motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.
Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.
The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.
The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.
The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.
This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.
Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.
Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.
However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.
Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.
When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.
This as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.
Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.
The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.
Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.
In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.
Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.
Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.
Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.
Acknowledging the need to draw down from GIA no more, current Minister of Finance Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”
He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”