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Botswana manufacturers are ready for business

The Botswana Exporters and Manufacturers Association (BEMA) is a member based organisation which advocates for a conducive business environment for local producers and exporters.  Established in 1995, the association has through consistent engagement and dialogue with policy makers managed to safeguard the interest of its members throughout the years.

In the last three years, the manufacturing sector has been going through a turbulent period characterised by massive job losses and shut-downs.  Many investors have divested from the Botswana economy to seek alternative markets and set-up shop elsewhere.  Investor confidence is low and the sector feels that the legislative environment has become somewhat unpredictable. Furthermore, excessive dumping and predatory behaviour from South Africa has placed many industries under existential threat.

With the size of the Botswana market, it is evident that growth opportunities for the sector can be realised through exports. It is difficult however, even with a good set of policies in place to support local producers, to capture even the local market, let alone secure export opportunities.

BEMA believes that for manufacturer to master and reach the level of competitiveness required for long term sustainability in exports, they must have mastered the art of satisfying their own domestic market.  A population of 2 million people is a good practice run for those with aspirations big enough to play in the global or even regional space.

The 2 million people however, must be serviced with good quality, competitive pricing and consistency.  It is absolutely crucial that local producers are allowed sufficient access to the local market if they are to reach an export ready status. Botswana is not necessarily an innovative economy, being a developing country, manufacturers compete primarily on cost as opposed to innovation or technology which is usually the case with more developed economies. 

It is therefore critical for the Government to support the growth of the sectors with knowledge of the fact that cost competitiveness is critical for the survival of manufacturing firms in Botswana.  We encourage Government to focus its policy reform strategies on subsidising input costs and offering to incentivise manufacturers on that basis.  Importers (of raw material) are already at a slight advantage due to the strength of the Pula against the Rand and the basket of currencies of some of its trading partners, but this is not enough.

Government must realise that the persistent lack of implementation which consistently appears on the agenda is a problem that will not go away.  This is a major set-back for manufacturers as it renders excellent policies obsolete and therefore there is no benefit to those it was intended to support. Local procurement preference initiatives are not taken seriously and procuring entities continue to ignore and bypass these directives without consequence.

There has to be accountability and consequences for those who choose to circumvent these directives to the detriment of the private sector.  More often than not, circumvention of directives intended to support local producers is a fire that is lit by the match of corruption.

Retailers play a big part in the growth and development of manufacturing in any emerging economy. The retail sector however, is often overlooked in conversations around economic diversification and growth in the manufacturing sector.  Government must make an effort to encourage more support from the retail sector and attach conditions to their trading license requirements if necessary. BEMA believes that at least 30% of what is on retail shelves should be locally produced, with the exception of those products that are not available locally.

The sector is still recovering from the electricity and water crisis that was experienced in recent years.  It is encouraging that this crisis seems to have been averted and that Government efforts to find solutions have borne fruit. The sector recognises Government’s efforts in reducing the cost of doing business, development of SEZ’s, creating a one stop shop platform and recent economic stimulus initiatives that have boosted some sub-sectors.

We are encouraged by the number of excellent policies that have been put in place, we have seen some effective reforms that have indeed benefitted our members.  BEMA co-chairs the AGOA Reference Committee tasked with formulating a response strategy for the renewed AGOA initiative to 2025.  We are pleased to see that the strategy document has been finalised and are happy with the level of engagement and consultation.  Members are confident and encouraged by some of the lessons learned and are confident that the new proposals and approach taken will bear fruit.

We must admit that the manufacturing sector has a lot of work to do, we recognise our responsibility to create employment for the people of Botswana. We take this responsibility seriously and as such we are willing to continue with our open and honest engagements with Government. Manufacturers in Botswana are ready for business.

We have recognised the need for us to focus on quality and consistency in production and will be signing an MOU with BOBS in the next few weeks.  We have engaged and developed positive working relationships with those whom we call our enablers and these are critical stakeholders to the sector and include the likes of BITC, PPADB and EDD amongst others.

BEMA is confident that given the opportunity to fully service the local market, both Government and the private sector, local manufacturers will surpass the expectations of buyers and consumers with their service, production and delivery capabilities. With the right mind-set and willingness to buy local, the manufacturing sector in Botswana will see exponential growth within a very short space of time.

Business confidence will be boosted unlocking further investments from both foreign and domestic investors either starting-up or expanding existing businesses.  Manufacturing will become more advanced, more innovative and more competitive in exports.  Our greatest achievement in this process will be employment creation and economic diversification.

Nkosi Mwaba is President of Botswana Exporters and Manufacturers Association

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P230 million Phikwe revival project kicks off

19th October 2020
industrial hub

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.

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IMF projects deeper recession for 2020, slow recovery for 2021

19th October 2020

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.

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Botswana partly closed economy a further blow of 4.2 fall in revenue

19th October 2020

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.

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