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.”
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.