The African Growth and Opportunity Act (AGOA) is a market access arrangement between United States of America (USA) and Africa with broad objective of boosting exports from Sub-Saharan Africa to USA by eliminating tariff barriers on a large number of their exports.
The current 10-year extension of AGOA is set to expire in September 2025. This unilateral trade agreement provides duty free access to the US market to over 6,400 product lines and 1,800 new tariff line items in addition to the 4,600 The renewal through the AGOA Extension and Enhancement Act of 2015 covers the third country fabric (TCF) provision, which is a special rule that allows lesser-developed beneficiary countries duty-free/quota-free access into the U.S. for apparel made from fabric imported from non-AGOA beneficiary countries.
Although not considered to be a lesser developed country (LDC), Botswana qualifies for the TCF provision following the granting of the lesser-developed beneficiary countries status under AGOA. For a country to be eligible, the US President determines that it has met or is making continual progress toward establishing a market-based economy; rule of law, political pluralism, and right to due process; elimination of barriers to U.S. trade and investment; economic policies to reduce poverty; a system to combat bribery and corruption; and protection of internationally recognized worker rights items enjoying duty-free status on the U.S. Generalized System of Preferences (GSP) program.
The US as an Export Market
The United States is one the world’s largest importing countries. US importers are always looking for new products to import and resell. According to US Department of Commerce, US Imports were $2,895.3 billion in 2017, up $182.5 billion from 2016. Imports of goods increased $153.2 billion to $2,361.5 billion while those of services increased $29.2 billion to $533.9 billion in 2017. The top US imports include motor vehicles, crude oil, cellphones, computer chips, gasoline, motor vehicle parts, medicines and commercial vehicles.
Since 2010, textiles/apparel has been Botswana’s main AGOA beneficiary sector, constituting between 90-100% of total AGOA exports. During its peak, Botswana had over 10 textiles/apparel firms exporting under AGOA. In 2017 Botswana total exports to USA were P775.6 million, of which AGOA exports accounted for P9.9 million. Diamonds account for over 95% of total exports to the US. Currently Botswana does not have a single company that is benefitting from the AGOA preference.
Of the over 10 textiles/apparel firms that operated from Botswana, some companies have shifted focus towards South Africa while some have relocated with others having closed down. The National AGOA response strategy is an effort by government to ramp up exports into the US market.
Potential Benefits of AGOA For Botswana
Potential benefits for Botswana from the AGOA unilateral trade preference program include: Tariff advantage: Exports from Botswana have a significant tariff advantage over those from non-AGOA eligible countries, making Botswana products more competitive, e.g. some tariffs exemptions in the textiles/apparel sector under AGOA are as high as 30%. Wide range of eligible products: The AGOA Extension offers an increased range of eligible products (over 6,400 products lines) which allows a more diversified exports to U.S. by Botswana.
Opportunity for regional integration: AGOA facility provides an opportunity to create regional integration through the development of value chains, production sharing and collaboration to meet volumes required by the U.S. market and for pitching the region as one big market. Capacity building of associations and institutions: Local institutions will build their capacity and strengthen their process through technical assistance and technical capacity building provided by the various U.S. support agencies such as the regional trade and investment hubs and others whose mandate is to provide technical assistance in AGOA beneficiary countries to facilitate increased utilization of the program.
Promotion of women in social and economic development: The AGOA Extension and Enhancement Act, encourages the promotion of women in social and economic development. Increased participation of women in labour will help increase the quantity and quality of available labour for industries involved in international trade. Job creation: AGOA has been credited with the creation of over 300,000 jobs in Sub Saharan Africa since its inception hence increased utilization of AGOA by Botswana will result in more job opportunities for Batswana.
Long term relationships: Local companies that utilize AGOA will be exposed to the U.S. market and create strategic alliances and other relationships with their U.S. counterparts, which might continue after the expiry of the AGOA facility. Giving local companies international exposure: Participation in the U.S. market under AGOA gives companies the much-needed experience for entering other international markets.
What Can Botswana Companies Export Under AGOA?
The AGOA agreement provides export opportunities to over 6400 product lines as long as they meet the AGOA rules of origin requirements and are exported directly from a beneficiary country to the United States. Botswana has developed a National AGOA Response Strategy to guide implementation of the trade agreement. The specific objectives of this strategy are to advise the Government of Botswana on how to systematically take advantage of AGOA, to identify policy responses in targeted sectors to capacitate current and potential exporters in Botswana to increase exports under AGOA, to develop an ongoing consultative mechanism between the public and private sector players and to attract investment into identified sectors that can benefit from international trade.
The National AGOA Response Strategy for Botswana has identified a number of sectors that could be developed in order to increase exports to the US. These include the Handicrafts, Meat & Meat Products, Textile/ Apparel, Natural/ Indigenous Products, Jewelry and Semi-Precious Stones and Horticulture & Agro-processing Products. Companies can check whether their products are eligible for AGOA preferences on HYPERLINK "http://agoa.info/about-agoa/products.html" http://agoa.info/about-agoa/products.html
How Can Companies Register for AGOA?
Prior to exportation, traders are required to register with the nearest BURS – Regional Office (Customs and Excise Division). In order for the goods to enjoy this trade concession, they must be processed or manufactured in Botswana as prescribed under the AGOA Rules of Origin (RoO). RoO are the requirements which set out the working and processing that must be undertaken locally in order for a product to be considered the “economic origin” of the exporting country. The salient features of AGOA's general (non-textiles and apparel) Rules of Origin are as follows:
The product must be imported directly from the AGOA-beneficiary country into the United States;
Items must be "growth, product or manufacture" of one or more AGOA-beneficiary countries (these requirements can be met jointly by more than one AGOA beneficiary – this concept is called ‘cumulation of origin’);
Products may incorporate materials sourced from outside countries (i.e. non AGOA-beneficiaries) provided that the sum of the direct cost or value of the materials produced in one or more designated AGOA-beneficiary countrie(s), plus the "direct costs of processing" undertaken in the AGOA-beneficiary countrie(s), equal at least 35% of the product's appraised value at the US port of entry;
Cost of local materials + direct cost of processing must >= 35%
In addition, a total of up to 15% of the 35% local content value (as appraised at the US port of entry) may consist of US-originating parts and materials. This concept is called “bilateral cumulation of origin”). In addition to compliance with RoO It would be worthwhile to have a clearing agent on the U.S. side. All shipments should include commercial invoice and Certificate of Origin, which specifies the Harmonized Tariff Schedule (HTS) code(s) for the product(s) being shipped. For textiles/apparel products only, an AGOA visa stamp is required, which is obtained from the Botswana Unified Revenue Services (BURS)
What Support is Available for Botswana Companies?
The Ministry of Investment, Trade and Industry has appointed Botswana Investment and Trade Centre to coordinate implementation of the National AGOA Response Strategy for Botswana. Various stakeholders such as government ministries, sector associations, business support institutions and the private sector all have specific roles in the implementation of the strategy. BITC supports the industry through its export development and promotion programs.
It promotes Botswana products in international markets by participating in outward and reverse trade missions. The outward trade missions include general and sector specific trade fairs, and contact promotion missions. BITC also capacitates exporters through the Botswana Exporter Development Programme (BEDP) which assist companies to reach export readiness status by providing technical and non-technical assistance. Other business support can be obtained from other institutions like Local Enterprise Authority, Botswana Development Corporation, Citizen Entrepreneurial Development Agency, Botswana Bureau of Standards and Botswana Unified Revenue Services.
Temo Ntapu is Director Research at Botswana Investment and Trade Cent
Botswana mining production picked up significantly in the last quarter of 2021 when compared to the same quarter in 2020 albeit a decline when mirrored against the preceding quarter; Q3 2022, Statistics Botswana revealed in the latest Index of Mining production report released this week.
The Index of Mining Production stood at 82.0 during the fourth quarter of 2021, showing a year-on-year increase of 28.1 percent from 64.0 recorded during the fourth quarter of 2020. Comparison on a quarter on-quarter basis shows a decrease of 19.6 percent from the index of 101.9 realised during the third quarter of 2021.
The main contributor to the year-on-year increase in mining production came from Diamonds, the country‘s flagship export commodity contributed 23.1 percentage points. Gold and Soda Ash were the only negative contributors to mining production, at negative 0.8 and negative 0.1 of a percentage point respectively.
On annual basis, the total index of mining production stood at 86.0, showing an increase of 37.0 percent in 2021 when compared to 62.8 registered in 2020. The 37.0 percent increase in annual mining production followed a decrease of 28.1 percent in 2020 and a decrease of 3.9 in 2019.
Although the total index of mining production increased in some parts of the period 2011 to 2021, experts at Statistics Botswana have observed and noted that it has been decreasing at an average annual rate of 0.7 percent during the last ten (10) years.
The increase in the total mining production in 2021 was mainly due to the growth realized in diamond production which contributed 33.1 percentage points to the total mining production growth. Diamond production increased by 24.2 percent (1, 038 thousand carats) from 4, 290 thousand carats during the fourth quarter of 2020 to 5, 329 thousand carats during the same quarter of 2021.
The increase was a result of intensified production strategy aligned with stronger trading conditions. The quarter-on-quarter analysis shows that production registered a decrease of 18.0 percent (1,172 thousand carats) during the fourth quarter of 2021 compared with 6, 500 thousand carats during the third quarter of 2021.
Copper in Concentrates production commenced during the third quarter of 2021 following 6 years of non-production since closure of BCL, Mowana and Boseto Mine in Toteng. The Toteng Mine has since returned to production under new ownership Khoemacau Copper Mining and is currently the only copper producing operation.
Mowana Mine has also been reborn under new ownership and it bears the nomenclature Kopano Copper Mine, production is expected to start soon. Some assets of BCL have been taken up Premium Nickel Resources, a subsidiary of Canadian North America Nickel.
During the fourth quarter of 2021, an amount of 4, 225 tonnes of Copper in Concentrates was produced. The quarter-on-quarter analysis shows that production decreased by 43.8 percent (3,292 tonnes) during the fourth quarter of 2021 compared with 7, 517 tonnes produced during the third quarter of 2021.
Gold production decreased by 49.1 percent (109 kilograms) during the fourth quarter of 2021, from 222 kilograms during the same quarter of the previous year to 113 kilograms during the period under review. Similarly, the quarter-on-quarter analysis reflects a decrease of 35.9 percent (63 kilograms) from 176 kilograms in the preceding quarter to 113 kilograms during the fourth quarter of 2021. The decrease was a result of the deteriorating lifespan of the mine arising from resource depletion.
Soda Ash production decreased by 4.4 percent (3, 116 tonnes) from 70, 159 tonnes during the fourth quarter of 2020 to 67, 043 tonnes produced during the period under review. On the other hand, quarter-on-quarter analysis shows that production went up by 2.8 percent (1, 848 tonnes) during the period under review, from 65, 195 tonnes during the previous quarter.
Salt production went up by 27.9 percent (31, 385 tonnes) to 143, 751 tonnes during the fourth quarter of 2021, from 112, 366 tonnes during the same quarter of the previous year. On the other hand, quarter-on-quarter analysis shows that salt production registered a decrease of 15.4 percent (26, 075 tonnes) compared with 169, 826 tonnes during the third quarter of 2021.
Silver production commenced during the third quarter of 2021 following 6 years of non-production as the associated mine was undergoing liquidation. During the fourth quarter of 2021, 3, 626 tonnes of silver were produced.
The quarter-on-quarter analysis shows that production decreased by 46.3 percent (3,131 tonnes) during the fourth quarter of 2021 compared with 6, 757 kg produced during the third quarter of 2021. Although the production is still at infancy, it is worthy to note that the mine is under new management following liquidation in 2015.
Coal production increased by 9.3 percent (40, 099 tonnes), from 429, 382 tonnes during the fourth quarter of 2020, to 469, 481 tonnes in the current quarter. The increase came as a result of the efforts made to meet increased demand from both domestic and international markets, particularly that new markets have been identified.
On the other hand, quarter-on-quarter comparison shows that coal production decreased by 14.5 percent (79, 746 tonnes) compared with 549, 227 tonnes during the third quarter of the current year. Copper-Nickel-Cobalt Matte recorded zero production during the period under review. The affected mines are still under liquidation.
Nearly 10 years and over P10 billion later, Morupule B – a 600 Megawatt coal fired power plant that was envisaged to end Botswana ‘s national power crises still can’t deliver to full capacity, forcing the country to pay over P2 billion annually in importation of power from surrounding producer nations.
The latest quarterly report from Statistics Botswana, reviewing the country’s power generation for the fourth quarter of 2021 has written off the progress made during the third quarter, reporting a quarter-on-quarter decrease of 18.9 percent, from an Index of Electricity Generation (IEG) of 137.7 during the third quarter of 2021 to 111.7, giving a clear reflection that the country takes 2 steps forward and 3 steps backward as far as local power generation is concerned.
In the third quarter of 2021, electricity generation had picked up, with a 14.6 percent points jump on IEG, from the Index of 120.2 during the second quarter of 2021. In physical terms, local electricity generation had increased by 14.6 percent (73,723 MWH), from 505,313 MWH during the second quarter of 2021.Statistics Botswana had credited the increase to improved performance of Morupule A and B power stations.
However in a setback during the last quarter of 2021 production of electricity locally took a downturn, both on quarterly and year-on-year basis, mainly due operational challenges at Morupule B. A year-on-year analysis shows a decrease of 9.3 percent in IEG, compared to 123.1 recorded during the corresponding quarter in 2020.
The physical volume of electricity generated decreased by 9.3 percent (48,278 MWH), from 517,627 MWH during the fourth quarter of 2020 to 469,349 MWH during the current quarter.
The quarter-on-quarter perspective shows that local electricity generation decreased by 18.9 percent (109,686 MWH), from 579,036 MWH during the third quarter of 2021 to 469,349 MWH during the period under review. “This decrease was largely due to operational challenges at Morupule B power plant.” Said Statistics Botswana
A decrease in local generation means increase in importation, during the fourth quarter of 2021, the physical volume of imported electricity increased by 16.7 percent (77,716 MWH), from 465,701 MWH during the fourth quarter of 2020 to 543,417 MWH during the quarter under review.
Compared to the previous quarter, electricity imported during the fourth quarter of 2021 increased by 28.0 percent (118,714 MWH), from 424,703 MWH during the third quarter of 2021 to 543,417 MWH.
Botswana imported 53.7 percent of total electricity distributed during the fourth quarter of 2021. Eskom, South Africa’s state-owned power generation outfit was as usual the main source of imported electricity at 40.6 percent of total electricity imports.
The Zambia Electricity Supply Corporation Limited (ZESCO) accounted for 22.0 percent, while the remaining 17.0, 15.0, 4.0 and 1.4 percent were sourced from Electricidade De Mozambique (EDM), Southern African Power Pool (SAPP), Cross-border electricity markets and Nampower, respectively.
Cross-border electricity markets is a Statistics Botswana nomenclature referring to towns and villages along the border which are supplied with electricity directly from neighbouring countries such as Namibia and Zambia.
In terms of distribution year-on-year analysis shows that the amount of distributed electricity increased by 3.0 percent (29,438 MHW), from 983,328 MWH during the fourth quarter of 2020 to 1,012,766 MWH during the current quarter.
The quarter-on-quarter comparison of distributed electricity shows an increase of 0.9 percent (9,028 MWH), from 1,003,738 MWH during the third quarter of 2021 to 1,012,766 MWH during the review quarter.
Electricity generated locally contributed 46.3 percent to electricity distributed during the fourth quarter of 2021, compared to a contribution of 52.6 percent during the same quarter in 2020, a decrease of 6.3 percentage points.
The quarter-on-quarter comparison shows that the contribution of electricity generated to electricity distributed decreased by 11.4 percentage points compared to the 57.7 percent.
MORUPULE B CHALLENGES
The Morupule B project was adopted as the least cost solution to guarantee electricity supply, self-sufficiency and address the challenges in the energy sector of Botswana. The plant comprises of 4 units with capacity of 150 megawatt each, totalling 600 megawatt, all coal fired, together with associated transmission infrastructure.
Located adjacent to the existing 132 megawatt Morupule A plant, Morupule B was constructed at over P10 billion, funded by debt finance from the African Development Bank, and was supposed to have been completed and fully commissioned in 2013, however almost 10 years later the multibillion-pula plant is still not fully operational, instead cost overruns are reported at over P4 billion still counting.
In a media briefing early this year Minister of Minerals & Energy Lefoko Moagi said construction of the plant was budgeted for P9 billion, but the total cost of construction ended up ballooning to over P12 billion. He explained that out of 4 units only 2 were working being Unit 2 and Unit 3, producing 80 megawatt and 150 megawatt respectively.
He said Unit 1 was currently at forced outage because of total failure while Unit 4 was under commissioning following completion of remedial works. “What we are doing in Morupule B is that we are changing the heat exchangers, and we have requested from the initial designers to furnish us with a new design of heat exchangers, technologically advanced with proper output configurations”.
Minister Moagi explained that the units will be restarted gradually until the plant is fully operational at 100 percent output levels. Remedial works were delayed by COVID -19 travel restrictions, and the plant will now be fully operational in 2024.
According to Minister Moagi, Botswana will not incure any cost, remedial cost will be fully taken care of by contractor. “As for us, we had budgeted for P45 million, as incidental costs, because our Engineers will be travelling to Morupule, we will be engaging experts to assess the work for us etc.”
In terms of efforts toward clean energy Minister Moagi said Morupule A wad already implementing clean coal technologies, fuel gas desulphurisation technique in place. “At Morupule B the new heat exchangers that we are installing will have reduced gas emissions,” he said.
De Beers Group is deploying the Tracr™ blockchain platform at scale for its diamond production. Tracr™ is the world’s only distributed diamond blockchain that starts at the source and provides tamper-proof source assurance at scale, enabling Sightholders to provide an immutable record of a diamond’s provenance, and empowering jewellery retailers to have confidence in the origin of the diamonds they purchase.
With more end clients wanting to know the source of the products they buy, the deep meaning associated with a diamond purchase requires a technological step-change to meet their expectations. The introduction of Tracr™ at scale delivers immutable information on the source of De Beers’ diamonds across the value chain and makes source assurance for 100% of De Beers’ production possible.
The Tracr™ platform combines distributed ledger technology with advanced data security and privacy, ensuring that participants control the use of and access to their own data. Each participant on Tracr™ has their own distributed version of the platform, meaning that their data can only be shared with their permission, and only they choose who can access their information.
The advanced privacy technologies used by Tracr™ reinforce data security on the platform. The immutable nature of each transaction on the platform ensures that the data cannot be tampered with when the diamond progresses through the value chain.
The decentralised nature of the platform ensures its speed and scalability, with the ability to register one million diamonds a week onto the platform. With centralised platforms, dealing with large volumes of data can cause bottlenecks, but the decentralised model used by Tracr™ avoids such issues and enables rapid scaling.
The scalability, speed and security of Tracr™ are combined into an intuitive user experience to support ease of use for platform participants. First launched in an R&D phase in 2018 and named by Forbes as one of the world’s 50 leading blockchain solutions in both 2020 and in 2022, De Beers has already registered one quarter of its production by value on Tracr™ in the first three Sights of the year in preparation for this first scale release.
Bruce Cleaver, CEO, De Beers Group, said: “De Beers discovers diamonds with our partners in Botswana, Canada, Namibia and South Africa and, with our long-term investment in Tracr™, we are proud to join with our Sightholders to provide the industry with immutable diamond source assurance at scale.
Tracr™, which will enable the provision of provenance information from source to Sightholder to store on a secure blockchain, will underpin confidence in natural diamonds and represents the first step in a technological transformation that will enhance standards and raise expectations of what we are capable of providing to our end clients.”
Lefoko Moagi, Minister of Minerals and Energy, Government of Botswana said: “The introduction of this advanced provenance technology is extremely exciting and we are very pleased as a large diamond producing country, and shareholder in De Beers, to be a part of this development. Confidence in diamond origin is extremely important and we look forward to seeing the roll out of this new programme delivering new benefits to the diamond industry and giving more assurance to consumers.”
The Tracr™ platform brings together a range of leading technologies – including blockchain, artificial intelligence, the Internet of Things and advanced security and privacy technologies – to support the identification of a diamond’s journey through the value chain.
De Beers’ provenance claims have been certified by the Responsible Jewellery Council and trust in the De Beers source of diamonds is also assured by the business’s Pipeline Integrity programme which involves annual third-party verification visits of participants by independent auditors.