Botswana’s quest for economic transformation has been relatively slow. This year’s Investment & Trade Conference and the Global Expo organized by the Botswana Investment & Trade Centre (BITC) has identified the Agriculture sector and the Textile industry as two economic precincts which can lead Botswana’s economic revolution.
Experts posit that the two sectors could play an impactful role in driving Botswana’s economy into being export led, industrial, diversified and employment creative. When sharing notes on the textile and apparel industry former Minister of Trade & Industry in Lesotho, Joshua Setima said there was need for deliberate and willing political participation in the pursuit of a flourishing textile sector.
He observed that the government needed to take deliberate action by coming up with legislative frameworks that speak to duty free trades, tax incentives and other fiscal exceptions in the area of textiles. He said Botswana can learn a lot from Lesotho’s textile industry. According to Setima car seats of every Ford van assembled in South Africa are manufactured in Lesotho adding that the factories are hiring thousands of people. The former Lesotho Cabinet Minister revealed that in 2008 when investors migrated from Phikwe factory shells to his country it was because Lesotho had attractive packages for textile industrialization.
He also spoke to the issue of availability of skilled labour and access to permits for investors. “When the world is working 24 hours here in southern Africa at 10 pm we close boarders, that is not investor friendly and needs political participation from echelons of power to simply make our boarders operate 24 hours,” he said. He added that Botswana needed to come up with integrated textile and clothing clusters in order to easily address and craft well tailored policies and incentives for them depending on geographical needs. He encouraged Botswana to move with speed in resurrecting the textile firms in Phikwe since the equipment and infrastructure was already there.
Executive Director of African Cotton & Textile Industries Federation, Ms Belinda Edmonds expressed that the textile industry was an ingredient for economic revolution around the world; explaining that Europe and the United States realized their economic turnaround through clothing apparel industries. According to Edmonds, Botswana will have to tap into the technology revolution if it is to harness the comparative advantage in the textile industry. “Changing consumer behaviour and buying patterns to accommodate your textile and apparel trends also output tangible results in this sector,” she said.
The over 3O years experienced textile guru advised Botswana to leverage on initiatives like AGOA and European Union duty free incentives as well as USAID to grow the textile sector and create jobs as well as realize the much needed diversification. Agriculture must attract young people
In the agriculture sector emphasis was made in the area of attracting young entrepreneurs to venture into primary agricultural production for sustainable food security. It was established that if well developed under large scale and techno based production the agricultural sector had the potential of absorbing idle graduates from engineers, economists, crop and animal health scientists just to name but a few. Thirty-five year Multi Millionaire Nigerian rice producer, Rotimi Williams shared that after Nigeria identified Oil, agriculture was abandoned just like after Botswana discovered diamonds.
He told attendants that the Nigerian government then took deliberate steps to encourage mass entrepreneurial undertaking in the sector. Apart from the willingness and passion from an entrepreneur it was established that government deliberate actions needed to go beyond funding and access cumbersome initiatives.
The initiatives, it was said, range from monitoring and evaluation mechanisms, legislative frameworks that actually enact empowerment polices, to binding laws in the area of procurement, government uptake, as well as purchase from retail and wholesale outlets. Williams asserted that in Nigeria the government deliberately put out action plans that bore fruits to encourage food security such as incubation, mentoring and actually integrated all efforts to ensure food security.
The conference further highlighted that the dairy business is a capital intensive venture. Latest statistics from the Ministry of Agriculture indicate that only 4 % of the milk consumed locally is produced here while the rest is imported, particularly from South Africa. Ram Ottapathu, Chief Executive Officer of Choppies Group also made a courtesy call that, “we will directly procure your products with ease.’’ Ram He said they will take young entrepreneurs through their standards and accreditation and even incubate their agricultural ventures into their distribution centres, “to an extent of acquiring a stake in your business if need be, looking at your capacity you can even package the products for our Choppies brand.”
Ottapathu said Batswana needed to approach the group to take advantage of the Choppies pan African portfolio and market space. “we cannot do everything on our own, because Choppies is a Botswana brand, Batswana need to enter into processing, packaging, horticulture and all, no need to worry about 2 million market, Choppies in Kenya, Zambia can actually absorb this Botswana products provided they are deficit in those countries rather than relying only on south Africa.”
To develop the agricultural sector into a flourishing sector Dr. Martin Kebakile, Chief Executive Officer, National Food Technology Research (NAFTERC) noted the need for change of mindset “We need to identify young farmers who are making it in the agricultural sector and link them to other youth interested in the agriculture sector. That will inspire more young people into the sector.”
The recent study on youth entrepreneurship in Botswana has identified difficult access to funding, land, machinery, lack of entrepreneurial mindset and proper training as serious challenges that continue to hamper youth entrepreneurship development in this country.
The study conducted by Alliance for African Partnership (AAP) in collaboration with University of Botswana has confirmed that despite the government and private sector multi-billion pula entrepreneurship development initiatives, many young people in Botswana continue to fail to grow their businesses into sustainable and successful companies that can help reduce unemployment.
University of Botswana researchers Gaofetege Ganamotse and Rudolph Boy who compiled findings in the 2022 study report for Botswana stated that as part of the study interviews were conducted with successful youth entrepreneurs to understand their critical success factors.
According to the researchers other participants were community leaders, business mentors, Ministry of Trade and Industry, Ministry of Youth, Gender, Sport and Culture, financial institutions, higher education institutions, non-governmental institutions, policymakers, private organizations, and support structures such as legal and technical experts and accountants who were interviewed to understand how they facilitate successful youth entrepreneurship.
The researchers said they found that although Botswana government is perceived as the most supportive to businesses when compared to other governments in sub-Saharan Africa, youth entrepreneurs still face challenges when accessing government funding. “Several finance-related challenges were identified by youth entrepreneurs. Some respondents lamented the lack of access to start-up finance, whereas others mentioned lack of access to infrastructure.”
The researchers stated that in Botswana entrepreneurship is not yet perceived as a field or career of choice by many youth “Participants in the study emphasized that the many youth are more of necessity entrepreneurs, seeing business venturing as a “fall back. Other facilitators mentioned that some youth do not display creativity, mind-blowing innovative solutions, and business management skills. Some youth entrepreneurs like to take shortcuts like selling sweets or muffins.”
According to the researchers, some of the youth do not display perseverance when they are faced with adversity in business. “Young people lack of an entrepreneurial mindset is a common challenge among youth in business. Some have a mindset focused on free services, handouts, and rapid gains. They want overnight success. As such, they give up easily when faced with challenges. On the other hand, some participants argue that they may opt for quick wins because they do not have access to any land, machinery, offices, and vehicles.”
The researchers stated that most youth involved in business ventures do not have the necessary training or skills to maintain a business. “Poor financial management has also been cited as one of the challenges for youth entrepreneurs, such as using profit for personal reasons rather than investing in the business. Also some are not being able to separate their livelihood from their businesses.
Lastly, youth entrepreneurs reported a lack of experience as one of the challenges. For example, the experience of running a business with projections, sticking to the projections, having an accounting system, maintaining a clean and clear billing system, and sound administration system.”
According to the researchers, the participants in the study emphasized that there is fragmentation within the entrepreneurial ecosystem, whereby there is replication of business activities without any differentiation. “There is no integration of the ecosystem players. As such, they end up with duplicate programs targeting the same objectives. The financial sector recommended that there is a need for an intermediary body that will bring all the ecosystem actors together and serve as a “one-stop shop” for entrepreneurs and build mentorship programs that accommodate the business lifecycle from inception to growth.”
Botswana Housing Corporation (BHC) is said to have recorded an operating surplus of P61 Million, an improvement compared to the previous year. The housing, office and other building needs giant met with stakeholders recently to share how the business has been.
The P61 million is a significant increase against the P6 million operating loss realized in the prior year. Profit before income tax also increased significantly from P2 million in the prior year to P72 million which resulted in an overall increase in surplus after tax from P1 million prior year to P64 million for the year under review.
Chief of Finance Officer, Diratsagae Kgamanyane disclosed; “This growth in surplus was driven mainly by rental revenue that increased by 15% from P209 million to P240 million and reduction in expenditure from P272 million to P214 million on the back of cost containment.” He further stated that sales of high margin investment properties also contributed significantly to the growth in surplus as well as impairment reversals on receivables amounting to P25 million.
It is said that the Corporation recorded a total revenue of P702 million, an 8% decrease when compared to the P760 million recorded in the prior year. “Sales revenue which is one of the major revenue streams returned impressive margins, contributing to the overall growth in the gross margin,” added Kgamanyane.
He further stated professional fees revenue line declined significantly by 64% to P5 million from P14 million in the prior year which attributed to suspension of planned projects by their clients due to Covid-19 pandemic. “Facilities Management revenue decreased by P 24 million from P69 million recorded in prior year to P45 million due to reduction in projects,” Kgamanyane said.
The Corporation’s strength is on its investment properties portfolio that stood at P1.4 billion at the end of the reporting period. “The Corporation continues its strategy to diversify revenue streams despite both facilities management income and professional fees being challenged by the prevailing economic conditions that have seen its major clients curtailing spending,” added the CEO.
On the one hand, the Corporation’s Strategic Performance which intended to build 12 300 houses by 2023 has so far managed to build 4 830 houses under their SHHA funding scheme, 1 240 houses for commercial or external use which includes use by government and 1 970 houses to rent to individuals.
BHC Acting CEO Pascaline Sefawe noted that; BHC’s planned projects are said to include building 336 flat units in Gaborone Block 7 at approximately P224 million, 100 units in Maun at approximately P78 million, 13 units in Phakalane at approximately P26 million, 212 units in Kazungula at approximately P160 million, 96 units at approximately P42 million in Francistown and 84 units at approximately P61 million in Letlhakane. Emphasing; “People tend to accuse us of only building houses in Gaborone, so here we are, including other areas in our planned projects.”
Researchers from some government owned regulatory institutions in the financial sector have projected that the banking sector’s profitability could increase, following Bank of Botswana Monetary Policy Committee recent decision to increase monetary policy rate.
In its bid to manage inflation, Bank of Botswana Monetary Policy Committee last month increased monetary policy rate by 0.50 percent from 1.65 percent to 2.15 percent, a development which resulted with commercial banking sector increasing interest rate in lending to household and companies. As a result of BoB adjustment of Monetary Policy Rate, from 1.65 percent to 2.15 percent commercial banks increased prime lending rate from 5.76 percent to 6.26 percent.
Researchers from Bank of Botswana, the Non-Bank Financial Institutions Regulatory Authority, the Financial Intelligence Agency and the Botswana Stock Exchange indicated that due to prospects of high inflation during the second half of 2022, there is a possibility that the Monetary Policy Committee could further increase monetary policy rate in the next meeting in August 25 2022.
Inflation rose from 9.6 percent in April 2022 to 11.9 percent in May 2022, remaining above the Bank of Botswana medium-term objective range of 3 – 6 percent. According to the researchers inflation could increase further and remain high due to factors that include: the potential increase in international commodity prices beyond current forecasts, logistical constraints due to lags in production, the economic and price effects of the ongoing Russia- Ukraine conflict, uncertain COVID-19 profile, domestic risk factors relating to possible regular annual administered price adjustments, short-term unintended consequences of import restrictions resulting with shortages in supplies leading to price increases, as well as second-round effects of the recent increases in administered prices “Furthermore, the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices could add upward pressure to inflation,” said the researchers.
The researchers indicated that Bank of Botswana could be forced to further increase monetary policy rate from the current 2.15 percent if inflation rises persistently. “Should inflation rise persistently this could necessitate an upward adjustment in the policy rate. It is against this background that the interest rate scenario assumes a 1.5 percentage points (moderate scenario) and 2.25 percentage points (severe scenario) upward adjustment in the policy rate,” said the researchers.
The researchers indicated that while any upward adjustment on BoB monetary policy rate and commercial banks prime lending rate result with increase in the cost of borrowing for household and compnies, it increase profitability for the banking sector. “Increases in the policy rate are associated with an overall increase in bank profitability, with resultant increases in the capital adequacy ratio of 0.1 percentage points and 0.2 percentage points for the moderate and severe scenarios, respectively,” said the researchers who added that upward adjustment in monetary policy rate would raise extra capital for the banking sector.
“The increase in profit generally reflects the banking industry’s positive interest rate gap, where interest earning assets exceed interest earning liabilities maturing in the next twelve months. Therefore, an increase of 1.5 percentage points in the policy rate would result in industry gains of P71.7 million (4.1 percent increase), while a 2.25 percentage points increase would lead to a gain of P173.9 million (6.1 percent increase), dominated by large banks,” said the researchers.