Zimbabwe President Emmerson Dambudzo Mnangagwa has called on Botswana business community and Chambers of Commerce to consider his country as they expand their businesses.
Mnangagwa was speaking at the Botswana –Zimbabwe Business Forum on the sidelines of his state visit to Botswana this past Tuesday. He said the people of Zimbabwe will forever be grateful for the support they received from the government and people of Botswana during his country’s difficult times. “We are bound together by a shared culture, history and geographically we are one, which should inspire us to work together in our national growth and economic development of our 2 countries,” he said.
Mnangagwa said the forum was critical in building on the goodwill that existed between the two countries adding that it was a good platform in complimenting the bilateral relations. “The gathering is most opportune in implementing the raft of incentives for economic growth and development in my country, Zimbabwe is open for business. We equally recognize the need to engage and re-engage for socio-economic development. We are determined to make sure that Zimbabwe is an investment nation where capital feels safe,” he said.
Mnangangwa who took over the reins after the military negotiated long time leader, Robert Mugabe out of power late last year, said his administration was alive to the fact that Zimbabwe needed to put robust economic transformation and revitalization strategies and reforms to return the country‘s economy to its glory days. “We have abundant investment opportunities in mining, manufacturing and infrastructure development sectors. We are inviting investors to come to the new Zimbabwe,” he said.
The President of Zimbabwe inherited a scattered economy with over 90 % unemployment rate. Western imposed sanctions have not been friendly to that country either. The Zimbabwe leader says over the years his country suffered lack of infrastructural development due to lack of foreign financing.
For his part the minister of Investment, Trade and Industry (MITI) Vincent Seretse noted that the Botswana –Zimbabwe Forum organized by the Botswana Investment & Trade Center (BITC ) presented a golden opportunity for the two countries to strengthen foundations and facilitate open networking for the business communities to take advantage of the abundant trade and investment opportunities.
“Our predecessors in government pioneered the great vision of developing strong economic links between our great countries and it is for this reason that today, we have trade facilitation instruments such as Botswana/Zimbabwe bilateral trade agreement, which allow for goods traded between our countries to be exempted from payment of customs duties, provided they meet the minimum requirement of 25 per cent local content,” he said.
Seretse said that Botswana’s manufacturing landscape comprised of several companies with Zimbabwean shareholding. He said the majority of them are operating in the timber and sugar packaging industries. “These companies have over the years invested around P132 million in Botswana, with an estimated annual turnover of P392 million, and they employed around 436 permanent employees, and an additional 436 part-time employees,” he said.
Minister Seretse noted that the aforementioned figures do not include one of the largest investments shareholding, in the mobile telecommunications sector by Zimbabwean billionaire, Strive Masiyiwa who is one of the major founding shareholders of Mascom, Botswana’s largest mobile network. Masiyiwa has since reduced his stake in Mascom with MTN Group and BPOPF the major shareholders.
The Botswana-Zimbabwe Business Forum saw experts and chambers of commerce representatives in different economic sectors from both countries present on existing business and investment opportunities. Major Highlights from the presentation are that lucrative investment opportunities in the mining sector exist in Zimbabwe. Isaac Kwesu of The Zimbabwean Chamber of Mines said his country was home to one of the largest Lithium and Chrome reserves in the world.
Other presenters, Richard Mbaiwa from the Zimbabwean Investment Authority revealed that the new administration of Zimbabwe was putting in place reforms such as no restriction on the amount of foreign currency brought into the country in order to attract foreign direct Investment.
He also added that 100 % repatriation of disinvestment proceeds , 100% remittance of dividends, Operation of local foreign currency accounts (FCA), Borrowing from local financial system for working capital purposes as well as authorized permission on Offshore borrowing were amongst other incentives put in place and administered by the his organization to create a conducive environment for doing business in Zimbabwe.
Other presentations included that of Charles Siwawa of Botswana Chamber of Mines who shared that Botswana’s mining sector was still recovering from the liquidation of some major companies due to decline in global commodity prices in 2016. However he said opportunities existed in supply of materials and equipments as well as other value chain opportunities in the sector. Botswana authorities presented on the opportunities that existed in the SPEDU region urging Zimbabwean farmers to consider exploring the rich agricultural land in the Phikwe area. Zimbabwean business people were made were also made aware of other opportunities that existed in Botswana such as the cargo, transport and logistics.
The stand out moment at the forum was the signing of Memorandum of Understanding by Botswana Investment & Trade Centre (BITC) and ZimTrade on strengthening the relationship between the Parties and the private sectors of Zimbabwe and Botswana respectively. The MOU is set to facilitate collaboration and cooperation between the parties in matters of common interest and establish the working arrangements necessary for the implementation of the MOU; to collaborate with each other to promote and strengthen trade relations between public and private sector institutions and operators, in sectors to be mutually agreed, with a view to expand trade and economic cooperation between Zimbabwe and Botswana.
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.