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Opportunities for Botswana’s Manufacturing Sector

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

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Energy policy to make Botswana industrial hub of renewable energy

21st April 2021
-Botswana-industrial-hub-of-renewable-energy

Parliament last week adopted the new National Energy Policy, a blueprint crafted to catapult Botswana to an industrial hub of alternative and renewable energy.

Presented by Minister of Mineral Resources, Green Technology and Energy Security, Lefoko Maxwell Moagi, the policy was hailed by lawmakers from both the ruling party and opposition ranks as long overdue.

Moagi, who is also Member of Parliament for Ramotswa, explained that the National Energy Policy (NEP) is intended to guide the management and development of Botswana’s energy sector, especially the penetration of new and renewable energy sources into the country’s energy mix in order to attain energy self-sufficiency and increased security of supply.

“The NEP is expected to create a conducive environment that will not only facilitate investment in the energy sector but also add value to export revenues, facilitate production in other sectors of the economy and create employment within the energy sector,” he said.

Moagi said that the new policy will set a foundation that will steer the utilization of locally available energy resources optimally and efficiently to ensure that Botswana attains a sustainable and low carbon economic development.

Botswana has experienced some constraints in the energy sector in recent years, which to some extent have negatively impacted the country’s economic development prospects.

A devastating power supply and demand mismatch was encountered between the years 2008 and 2014, and this breached the country’s power supply security even to date.

Moagi noted that this encounter, and other such misfortunes have motivated the new policy to outline the principles, prospects and choices that are required to optimise the role of energy in the economy and maximise Botswana’s potential for the desired economic growth in line with the country’s Vision 2036.

Commenting on the Policy Vice President Slumber Tsogwane said the new energy roadmap would contribute towards achievement of national prosperity and economic diversification.

“This envisages Botswana’s transition from being a net energy importer to being self-sufficient and having surplus energy for export into the region, we applaud the minister for bringing this important document,” Tsogwane said.

COAL

Botswana has abundant coal resources, estimated at about 212 billion tonnes. Estimates of 196 trillion cubic feet of coal bed methane (CBM) have also been recorded and there is ongoing exploration of this resource.

Most of the coal extracted goes to power generation at Morupule power plant and the remaining small percentage is shared between local industrial use and export.

For CBM, commercially viable gas exploration is required to firm up resource quantification and associated development programs around this resource.

SOLAR

Botswana receives over 3,200 hours of sunshine per year, with an average insolation on a flat surface of 21MJ/m2.

Satellite images have revealed that Botswana has abundant countrywide irradiation presenting the highest values of direct normal irradiance (DNI) and global horizontal irradiance (GHI) the western and south-western regions, with a slight decrease towards the east.

The lowest values of irradiation are in a range of about 2,000 kWh/m²/annum (~5, 5 kWh/m²/day) DNI and GHI on average. This amount of insolation is among the highest in the world, making solar energy a promising renewable energy resource for Botswana.

WIND ENERGY

Reasonable wind speeds exist within the country with the highest wind resources potential located in the South-West, Central and Eastern parts of the country, with averaging wind speeds above 7m/s, wind power density above 200W/m2 and annual energy production above 4.5 GWh/year.

The wind potential has not been fully explored and has primarily been used on windmills for water pumping by farmers.

BIOMASS

Botswana has theoretical biomass energy potential of 32 million GJ per year, estimated from a considerable biomass potential of 20 million tonnes per year.

The use of livestock residues (cow-dung) seems to offer the highest practical opportunity for energy production in Botswana, while municipal solid waste (MSW) can also contribute to the improvement of energy generation, especially at the city level.

Other residues such as crop and agro-industrial residues, only offer a limited energy potential that could be tapped by rural communities.

PETROLEUM FUELS

Botswana is highly reliant on imports of refined petroleum products to meet the liquid fuels demand since the country does not have any proven crude oil reserves/refineries.

By far, a large amount of liquid fuels supply comes from South Africa. As at 2018, the local consumption of petroleum products stood at about 1.2 billion litres per annum for petrol, diesel and illuminating paraffin combined, and about 20 million litres of aviation fuels per annum.

Commenting on the National Energy Policy, opposition members of parliament said effective implementation of the policy would require a legislation and/or regulations for robust development of the new and renewable energy subsector.

Moagi reiterated that the provision of energy services is capital intensive and heavily reliant on technology. “It is thus important to come up with innovative ways of delivering these services”

Currently, there is no research institution dedicated to carrying out energy research and development (R&D) to inform policy.

However, there exists various institutions or think tanks that carry out energy research from various perspectives.

These include Botswana Institute for Technology Research and Innovation (BITRI), the University of Botswana (UB), Botswana International University of Science and Technology (BIUST), Botswana University of Agriculture and Natural Resources (BUAN), and Botswana Innovation Hub (BIH).

Moagi shared that however regrettably, there is neither a clearly defined collaboration among and/or between these researchers nor is there any between the researchers, the industry and the policy makers.

Recognising that coordination of efforts in R&D is key to promoting innovation, technology application and development for deployment of appropriate modern energy services; the NEP seeks to aid coordination of research activities in the energy sector as well as facilitate development and establishment of academic/industry strategic research alliances.

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MD, Board in BBS battle for supremacy

12th April 2021

Botswana Stock Exchange (BSE) moved swiftly this week to suspend BBS Limited from trading its securities following a brawl between Board of Directors and Managing Director, Pius Molefe, which led to corporate governance crisis at the organisation.

In an interesting series of events that unfolded this week, incumbent board Chairperson, Pelani Siwawa-Ndai moved to expel Molefe together with board Secretary, Sipho Showa, who also doubles up as Head of Marketing and Communications.  It is reported that Siwawa-Ndai in her capacity as the board Chairperson wrote letters of dismissals to Molefe and Showa.

Following receipt of letters, the duo sought and was furnished with legal opinion from Armstrong Attorneys advising them that their dismissals were unlawful hence they were told to continue to report to work and carry out their duties.

Documents seen by BusinessPost articulate that in the meeting which was held on the 1st of April, the five outgoing board members, unlawfully took resolutions to extend their contracts by a further 90 days after April 30 2021 as they face tough competition from five other candidates who had expressed interest to run for the elections.

Moreover, at the said meeting, management explained that neither management nor the board have the authority to decline nominations submitted by shareholders or the interested parties which is in line with Companies Act and also BBS Limited constitution.

Molefe also revealed that as management they cautioned the board that it was conflicted and it would be improper for it to influence the election process as it seems they intended to do so.
“Nonetheless, in a totally unprecedented move in the history of BBSL, the board then collectively passed the unlawful resolutions below. Leading to the illegitimate decisions, the board had brazenly directed that its discussions on the Board elections should not be recorded totally violating sound corporate governance,” reads the statement released by management this week.

When giving their legal advice, Armstrong Attorneys noted that notice for the AGM should state individuals proposed to be elected to the board and directors have no legal authority to prevent the process.

Armstrong Attorneys also noted that, “due process” cited by board members are simply to ensure that the five retiring Directors avoid competition from interested candidates to be appointed to the BBS Limited board.  The law firm further opined that the resolution of the 90 day extension of term of the five directors pending re-election or election was unlawful.

Molefe expressed with regret that BBS has been suspended from trading by BSE until the current matter has been resolved. “I am concerned by this development and other potentially harmful actions on the business. As management, we are engaging with stakeholders to mitigate any negative impact on BBS Limited,” expressed a distressed Molefe.

He assured shareholders and the rest of Management that they are working very hard to ensure that the issues are being dealt with in a mature manner.  BBS which hopes to become the first indigenous commercial bank has seen its shares halted barely four months after BSE lifted the trading suspension of shares for BBS following submission of their published 2019 audited financial statements.

According to Chief Executive Officer (CEO) of the local bourse, Thapelo Tsheole said the halting of shares of BBSL is to maintain fair, efficient and orderly securities trading environment. “The securities have been suspended to allow BBS to provide clarity to the market concerning the recent allegations which have been brought to the attention of the BSE relating to the company’s Board of Directors and senior management,” said Tsheole.

Meanwhile in their audited financial statements for the year ended 31 December 2020, BBS recorded a loss of P14.6 million as at 31 December 2020 compared to the loss of P35.7 million for the comparative year ended 31 December 2019. According to Molefe the year under review was the most challenging for the bank, its shareholders and customers endured the difficult economic environment and the negative impact of the coronavirus.

He revealed that as the bank, they were forced to put in place several measures to ensure that the business withstands the impact of coronavirus and also to cushion mortgage customers from the effects of the pandemic. “Since April 2020 up to the end of December 2020, BBS assisted 555 mortgage customers with a payment holiday,’’ he said.

This is the bank whose total balance sheet declined by 12 percent from P4, 626 billion for the year ended. 31 December 2019 to P4, 088 billion as at 31 December 2020. As if things were not bad enough, total savings and deposits at the bank declined by 14 percent from a balance of P2, 885 billion as at 31 December 2019 to P2, 494 billion as at 31 December 2020.

On a much brighter side, BBSL mortgage loans and advances improved from P3, 401 billion to P3.408 billion with impairment allowance significantly improving to P78, 648 million from P102, 532 million for the year under review, representing a positive variance of 23 percent. BBS maintained a strong capital base with capital adequacy ratios of 26.32% for the year ended 31 December 2020.

Molefe was optimistic and anticipated a positive outcome during the implementation of the new BBS corporate strategy, whose main drive is commercialization of operations, which is in full force.
“It will be spurred on by the positive results we have achieved for the year ended 31 December 2020, and our planned submission of our banking license application to Bank of Botswana which we anticipate to operate as a commercial bank in the third quarter of 2021,” he alluded.

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Mphathi promises people centred, environmentally sensitive new BCL

12th April 2021
CEO of Premium Nickel Resources Botswana: Montwedi Mphathi

Chief Executive Officer (CEO) of Premium Nickel Resources Botswana (PNRB), Montwedi Mphathi, has said his company will resuscitate the formerly owned BCL assets and deliver a new, sustainable and cutting edge mining operation.

The new mine which will leverage on modern and next generation technology, will be environmentally sensitive and cognisant of the needs of its people and that of the communities around the area of influence.

In a statement last week, Premium Nickel Resources Botswana and its parent company, the Canadian headquartered Premium Nickel Resources announced that they have now completed the Exclusivity Memorandum of Understanding (MOU) with the Liquidator.

The MOU will govern a six-month exclusivity period to complete its due diligence and related purchase agreements on the Botswana nickel-copper-cobalt (Ni-Cu-Co) assets formerly operated by BCL Limited (BCL), that are currently in liquidation.

On February 10, 2021, Lefoko Moagi, the Minister of Mineral Resources, Green Technology and Energy Security of Botswana, affirmed in Parliament a press release by the Liquidator for the BCL Group of Companies, stating that PNR was selected as the preferred bidder to acquire assets formerly owned by BCL.

“This is encouraging for the company and for Botswana. Our ambition in this new project dubbed “Tsholofelo” is to redevelop the former BCL assets into a modern, environmentally sensitive, efficient NI-Cu-Co-water producer where sustainability and the people are at the forefront of the decisions we make,” said Mphathi in a statement last Thursday.

“We also understand that no matter how successful we are at building the “New BCL” , our success will only be measured at our ability to create local wealth , skills and support the continued transition of local economy to a longer term sustainable base.”

The next step during the exclusivity period will be the completion of the definitive agreement. Simultaneous to this the PNRB will be conducting additional investigative work on site to further its understanding of the potential of these assets.

Specifically the company will complete an environmental assessment, a metallurgical study, a review of legal and social responsibilities, a review of the mine closure and rehabilitation plans and an on-site inspection of the legacy mining infrastructure and equipment that has been under care and maintenance.

Mphathi said they continue to monitor the global Covid-19 developments noting that they are committed to working with health and safety authorities as a priority and in full respect of all government and local Covid-19 protocol requirements. PNRB has developed Covid-19 travel, living and working protocols in anticipation of moving forward to on site due diligence.

“We will integrate these protocols with the currently applicable protocols of Ministry of Health & Wellness as well as District Health Management Team ( DHMT) and surrounding communities,” reads a statement released by the Gaborone based Premium Nickel Resources team.

PNRB is looking to become a catalyst in participating and building a strong economy for Botswana, with a purpose where respect and trust are core to every single step that will be taken. “Our success will mean following international best-in-class practices for the protection of Botswana’s environment and the focus on its people, building partnerships and earning respect, through cooperation and collaboration,” explains PNRB on its website.

“We are committed to Governance through transparent accountability and open communication within our team and with all our stakeholders.” Mphathi, a former BCL Executive, is widely celebrated for achieving unprecedented profitability at the mine during his tenure as General Manager.

The Serowe-born mining guru obtained a Diploma in Mining Technology from Haileybury School of Mines in Canada. He later obtained a B.Eng. Mining degree from the Technical University of Nova Scotia. Mphathi went on to City University in London, UK and obtained a M.Sc. in Industrial and Administrative Sciences.

Before ascending to the top country managerial role of Premium Nickel Resources. Mphathi was General Manager of Botswana Ash (Botash), Southern Africa’s leading salt and soda ash producer.
He was at some point linked to Debswana top post, which is still to date not substantively filled following the death of Managing Director, Albert Milton, in August 2019.

With Mphathi out of the race and now leading the rebuilding of his former employer, the top post at De Beers- Botswana joint venture is likely to be filled by current acting Managing Director Lynette Armstrong, a seasoned finance executive with unparalleled experience in the extractive industry.

“We are happy to hear that former General Manager of BCL, Mr Montwedi Mphathi, has a relationship with the new Company that intends to resuscitate the mine, he is an experienced Mining Executive who knows BCL better, we want the mine to be brought back to life so that our people can be employed ” said Dithapelo Keorapetse Member of Parliament for Selibe Phikwe West recently in Parliament.

BCL was liquidated in October 2016 following a series of losses and government bailout occasioned by low Copper prices and allegedly poor Investment decisions and maladministration. Recently PNR CEO, Keith Morrison said his team of seasoned experts both from Canada and Botswana are committed to resuscitate the BCL assets and deliver a high performance mining operation.

“The World, Botswana and the mining industry have changed dramatically since mining first started at the former BCL assets in the early 1970s. The nickel-copper-cobalt resources remaining at these mines are now critical metals, required for the continued development of a decarbonized and electrified global economy,” he said.

Morrison added: “As we move forward, it is our goal to demonstrate the potential economics of re-developing a combination of the former BCL assets to produce Ni-Cu-Co and water in a manner that is inclusive of modern environmental, social and corporate governance responsibilities.”

He explained that to attain this, extensive upgrades to infrastructure will be required with an emphasis on safety, sustainability and the application of new technologies to minimize the environmental impact and total carbon footprint for the new operations.

“Our team remains committed to working with the local communities and all of the stakeholders throughout this period and we encourage anyone with questions or feedback to reach out to us directly,” he noted.

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