Trans Kalahari Corridor is still untapped and underutilized by Botswana, South Africa and Namibia, this observation emerged at an interactive lecture between Trade representatives from the three countries in Gaborone recently.
It was revealed that the Trans Kalahari Corridor could unlock great commerce and trade opportunities to the three economies in the area of tourism, transport and logistics sector. Developments from the gathering suggests that existing trade regulations and laws in the three different trade partners, Botswana, Namibia, and South Africa need to be harmonized to complement each other and avoid contradictions.
Botswana Unified Revenue Service (BURS) General Manager, Bugalo Mudongo noted that for their part the Botswana national customs authority was on the right track to introduce innovative, digitized ways of delivering services to enhance trade and cross border business within the region.
“The national trading window intends to link our trading partners electronically as well as interface with our neighbors. The system will also enhance efficiency of customs collection, improve security, and shorten service delivery times to actually facilitate cumbersome free cross border trade thus contributing significantly to the economies of the three counties.”
Lesille Mpofu, an Executive from the Trans Kalahari Corridor Group revealed that some trade laws and other complementing regulations of the three countries such as transport governing guidelines contradicted each other. “It is important for us to harmonise our trade laws and polices – for example, PrDP in South Africa is eligible to 22 year olds and above; whereas in Botswana and Namibia it is applicable to 25 year olds and above, this means that when a 23 year old South African freight/ cargo operator delivers something in Botswana from South Africa, soon as they cross the border they are illegal,” he noted.
The Project Manager of Walvis Bay Corridor Group urged Botswana which is the only landlocked country amongst the three to tap into the lucrative trade opportunity presented by Walvis Bay. For his part, Clive Smith noted that the bay opens up Botswana to a gateway of over 300 million potential consumers for its goods and services. “We are a strategic location; we are a gateway to South America, North America, and Europe, that’s a huge trade opportunity worth billions and Botswana because of its landlocked geographical location can take advantage of the Trans Kalahari corridor and trade agreements by using shipping services at Walvis Bay to access the overseas market,” he said.
Namibia and Botswana governments have already signed a number of agreements on the Walvis Bay and the shortcoming has been that the depot and cargo bay is unutilized by the traders and Botswana business people. Botswana as a member of Southern African Customs Union (SACU) has several trade agreements and advantages it has and enjoys from the membership. Trans Kalahari High Way, which is a corridor that links Botswana, South Africa, and Namibia is one of the projects put up by the three governments and international partners to help enhance cross border trade in the region.
The ongoing Kazungula Bridge across the Zambezi River is a project funded by the governments of Zambia and Botswana with the assistance of international partners like Japan. Once complete, Kazungula is expected to reduce crossing time 10 times when compared to the current setup of using a pantoon. The same benefits are expected to be ripped off from the over a billion pula Mohembo bridge. Botswana has several initiatives that are aimed at improving trade regionally and internationally.
HOW THE CORRIDOR WAS CONCEIVED
The Trans-Kgalagadi Road Project (the Project) is part of a wider Road Corridor, the Trans Kgalagadi Road Corridor, linking Botswana, Namibia and the Republic of South Africa. Similarly to the Maputo Corridor, the Trans Kgalagadi Road Corridor has an end-point in the province of Gauteng in South Africa.
In 1991, the AfDB approved a loan totaling UA 21.5 million (comprised of an ADB loan of 13.38 million and an ADF loan of UA 8.12) to finance the section II of the Trans-Kgalagadi Road between Kang and Ghanzi districts. The project was initially designed to reduce transport costs, enhance social and economic integration of the south-western part of Botswana and facilitate economic integration with Namibia.
The Bank’s financed project has three main components: (i) civil works for the construction of 221 kms road, (ii) consulting services for sections II and III of the road, (iii) environmental protection support, and (iv) and technical assistance for the management of the project and training of road engineers and planners. The PCR was submitted in 2005 and it rated the project performance as satisfactory.
In addition to the completion of expected outputs, the project achieved cost savings of approximately UA 6.89 million which enabled the construction of the Lobatse and Kanye bypasses. In overall the project completion suffered a delay of 21 months mainly due to delays caused by the non-availability of water in the dry land of the central Kgalagadi Desert for construction which called for an investigation on construction water sources prior to the invitation of tenders, and also delays in the disbursement of funds. Despite that, the road is technically sound and shows no major defects.
WHY THE CORRIDOR IS UNDER-UTILIZED
“ Long hours at the border posts, limitation on driving hours on the section of the highway, lack of facilities on some sections of the highway and the proximity of people and animals on the road dissuaded road users to use the highway. The unanticipated conversion of the Trans Kgalagadi Highway into a corridor was an essential measure to promote the use of the road and also to enhance regional benefits. The corridor has promoted cross-border trade and traffic as well as economic cooperation between Botswana and Namibia. The implementation of a structured corridor management committee has achieved substantial milestones in terms of customs harmonization.”
Kgalagadi Breweries Limited (KBL) has suspended its operations indefinitely owing to the tough trading conditions occasioned Government decision to ban the sale of alcohol at the beginning of this month.
The brewer announced the decision today (Wednesday). KBL Corporate Affairs Manager Madisa said from the 25th January 2021 only a minimal number of critical roles will continue to be staffed and all other operational activity will stop.
KBL also acknowledged the impact this will have on the overall supply chain and those whose livelihoods depend on the beer industry and requests their understanding.
The current ban is expected to end on 31st January 2021, KBL said should the ban be extended past this date, suspension of its operations will continue.
KBL explained that its Tuesday meeting with suppliers was to align with them that due to the current situation, the brewer will suspend payments as of 6th February 2021, up for review pending the outcome of the current alcohol ban.
“However, it is regrettable that this latest total ban on alcohol sales has resulted in the suspension of KBL’s operations, which will remain in place for as long as the alcohol ban persists. KBL continues its efforts to engage government on this critical issue, which is having an enormous impact on the industry and its extensive value chain,” said Madisa.
On Tuesday afternoon, KBL conducted an ‘emergency meeting’ with its suppliers addressing some business decisions the company has made amid the current alcohol ban. Botswana has several alcohol bans since the first lockdown of March.
Mostly alcohol has been banned as a measure of curtailing the spread of Covid-19 and government then lived with putting stringiest operating hours for alcohol sales and distribution for a long time. Next week Monday KBL will be shutting down its operations, after a two weeks ban on liquor.
Sources say ever since the 4th of January 2021 when the December curfew regulations were extended, KBL has been brewing stacks of liquor for stockpiling. This is solely the reason why the brewer decided to close shop and stop manufacturing alcohol, because KBL’s depots no longer needed supply. On Tuesday suppliers were told to stop supplying KBL as next week the plant will be closing.
Air of uncertainty was hovering in the KBL plant premises on Tuesday as many workers feared mostly for their jobs. No one knows when alcohol ban will be lifted or if Botswana is going for a hard lockdown following the recent surge of Covid-19 infections. Botswana has 18,630 coronavirus cases, with 88 deaths and 14,624 recoveries.
KBL owner Botswana Stock Exchange (BSE) listed Sechaba Holdings came into contact with response to Covid-19 in March when Botswana recorded its first cases and that was the time when the company was doing well for years since the shedding of alcohol levy.
Sechaba associates, KBL and Coca Cola Beverages Botswana (CCBB), that time according to the holding company in its abridged financial results for the year ended 31 December 2019, continued to forecast growth in 2020 notwithstanding the challenges related to COVID-19.
Sechaba that time saw the business environment has been generally positive including relationship with stakeholders and the associates continue to manage the performance and business continuity risks.
Ten months ago the brewer underestimated the damage that can come with the pandemic and expected Covid-19 disruptions to be “temporary and the business will survive.”
That time Sechaba’s sole associate, KBL operates traditional beer breweries, alcoholic fruit beverages and a clear beer brewery.
In the period that just ended in December 2019, KBL contributed 72 percent to Sechaba’s revenues while CCBB contributed 28 percent. KBL also performed high in contribution to profit after tax with a share of 74 percent while CCBB contributed 26 percent.
Sechaba holds 49.9 percent in the local headline alcohol brewer KBL and 49.9 percent in the non-alcoholic drinks associate, CCBB. Sechaba holds 60 percent of the shares of KBL while SABMiller Botswana B.V. holds 40 percent. SABMiller Plc has management control in the operating company. The Botswana Development Corporation has a 25.6 percent shareholding in Sechaba Breweries Holdings Limited.
The glitter on the glass of KBL or Sechaba, is of December 2019 financial results which was downplayed and turned into a bearish affair in the financial results for the half year ended 30 June 2020. For those results, there was a spill in profit by Sechaba cash cow KBL by 72 percent while CCBB recorded a decline in profit by 15 percent, both and respectively in correspondence with the same period in 2019. All this downfall comes down to a loss of 60 percent of profit by the parent company. That was more than the 60 percent fall expected before the release of results.
In September during the release of the June 2020 results, Sechaba admitted that the intervention put by government since April, to fight the Covid-19 pandemic, negatively impacted its business performance and its associates, KBL and CCBB bore the full brunt. Revenue collected for KBL was lower by 37 percent while for its sister associate; CCBB, the numbers were down by 7.1 percent. This is the time when sale of alcohol was banned and manufacturing of soft drinks was not part of essential services.
Sechaba Chairman, Bafana Molomo last year said even though Covid-19 interventions would have an impact on the associates, this impact is expected to be temporary and the businesses will survive.
“However, it is advised that the situation is changing constantly and that it will be monitored closely. The Group’s associates continue to forecast growth in 2020 notwithstanding the challenges relating to Covid-19. The business environment has been generally positive, and the Group continues to enhance relationships with all stakeholders. The associates continue to manage the performance and business continuity risks,” he said.
Lockdown is back, but now with less stringent measure of curfew restrictions, and will affect the economy whose bounce back was expected to be this year.
Economic projections saw 2021 with glimmer of hope, where all the past Covid-19 ruins will be offset by things going back to normal. An anomaly of curfew has since come to this country’s shores after the discovery of a new Covid-19 variant.
Some Botswana’s trade partners are on complete lockdown ever since the beginning of the festive season when the new variant was reported to be spreading rapidly and uncontrollably.
Measures were since put in place to tame the new high spreading and uncontrollable coronavirus variant called South African 501. V2 which was discovered in Botswana’s neighbor South Africa and the similar variant also known as E484K discovered in the UK.
After South Africa put in a curfew restriction following a response to a second wave of infections driven by a new Covid-19 variant, also called 20C/501Y.V2
President Mokgweetsi Masisi announced on national television Botswana’s first restrictions which was a curfew from 7pm to 4am from 24 December 2020 to 4 January 2021.
This month curfew regulations were extended from 8pm to 4am until end of January and many business operations were either stopped or closed earlier, hence slowing of economic activity in Botswana.
Latest data showing how business operations are being affected is not yet available. But many businesses are already crying foul and showing frustrations.
Lining of economic data with Covid-19 measures shows that at a time when there were lockdowns the economy slumped by 24 percent.
The GDP data of the second quarter of 2020, a time when Botswana got into its first lockdown amid national panic, shows that the real Gross Domestic Product contracted by 24 percent “due to the impact of measures that were put in place to combat the spread of the Covid-19 pandemic.”
But Botswana expected a 7.7 percent rebound and growth in 2021 from the 8.9 percent contraction forecast of last year.
This was pinned on expected improved sentiment in the global diamond industry and overall improved economic activity when the domestic economy goes back to normal.
Bank of Botswana’s Monetary Policy Committee in December last year also projected that inflation will go back to within the objective range in the second quarter of 2021.
Initially, in October last year, the central bank projected that inflation will be within 3-6 percent by the third quarter of 2021.
Two months later Bank of Botswana projections changed with the reversion to the objective range now expected to come earlier than the previous forecast as the domestic and the international economies were opening.
“Overall, risks to the inflation outlook are assessed to be balanced. Upside risks relate to the potential increase in international commodity prices beyond current forecasts, aggressive action by governments and major central banks to bolster demand, as well as possible supply constraints due to travel restrictions and lockdowns, though abating,” said Bank of Botswana last month.
When the meeting of Monetary Policy Committee which was held on 3 December 2020 decided to maintain the Bank Rate at 3.75 percent inflation had increased from 1.8 percent in September to 2.2 percent in October 2020 and remained below the lower bound of the Bank’s objective range of 3 – 6percent.
With the curfew which is place this whole month, spending or economic activity is expected to slow down and inflation will remain below the lower bound of the Bank’s objective range.
According to the last Monetary Policy Statement, the real GDP contracted by 4.2 percent in the 12 months to June 2020 compared to a growth of 3.9 percent in the corresponding period in 2019.
Mining and non-mining sectors registered a steep decline in output and this is blamed on Covid-19 containment measures.
The curfew regulation, despite being of a lesser sting than total lockdown, will have a slight or nominal impact on the domestic economy which is also affected by lockdowns in some of Botswana‘s trading partners.
Uncertainty looms on Botswana as reports continue that the 501. V2 seems to be uncontrollable and is spreading quickly in Botswana population.
While the country is on curfew restrictions, a possible lockdown looms if the disease continue to spread with this much prevalence, according to sources at government enclave.
This means the economic recovery, a rebound or leap in 2021, could remain a big pipeline dream.
The International Monetary Fund (IMF) had forecast the domestic economy to contract by 9.6 percent in 2020 compared to 5.4 percent in the April 2020 World Economic Outlook.
While the domestic eyes projected the economic to rebound to a growth of 7.7 percent, IMF had higher lenses of a growth of 8.6 percent in 2021. But the expected growth is set to be offset by the new elephant in the room, South African 501. V2.
The central bank and other international bodies have not ruled any chances of the pandemic remaining resilient or standing stubborn against countries, meaning possibility of future containment measures remains.
Now in Botswana a stubborn variant of the pandemic has caused panic and curfew regulations.
In December 2020, Monetary Policy Committee said: “Even with recovery in 2021, the contraction in 2020 equates, approximately, to a two-year loss of growth in output. The disparity in forecasts attest to the challenges of making forward projections when there is uncertainty about the duration of constrained economic activity, the resultant adverse impact on productive capacity, as well as the speed of resumption of production and pace of recovery in demand.”
Q3:2020 GDP decrease eases, but still remains in the negatives
The data for Q4: 2020 is yet to be released. Economic data available is the recent Q3:2020 released last month showing that real GDP for the third quarter of 2020 decreased by 6.0 percent compared to a deep contraction of 24.0 percent registered in the previous quarter.
As mentioned by Bank of Botswana in the last Monetary Policy Committee meeting of 2020 which was held in December just few weeks before the release of the Q3:2020 GDP data, the economy was expected to have performed better in the third quarter of 2020 compared to the second quarter given the gradual easing of COVID-19.
In Q3:2020 the economy tried to jump up out of the dark hole, but could move up 18 times and still remain in the fringes of economic hell. Many saw this movement as the one towards the recovery of 2021.
According to Statistics Botswana, the improvement in the third quarter GDP reflected continued efforts to reopen businesses and resume activities that were postponed or restricted due to the COVID-19 pandemic.
The latest report on Sub Sahara Africa (SSA) by rating agency Moody’s was prepared before the global panic of a new coronavirus variant which has already been detected in Botswana following its discovery in South Africa, the country’s major trade partner.
Latest reports are that the new variant, now christened South African 501.V2 or E484K, was detected from the local tourism hub of Maun, and the Covid-19 task team have borrowed credence from the high rate of infections prior to the festive season as vindication of the new virus mutation being in Botswana.
The local task team is not the only one missing on full scientific data of how this new corona virus variant is in Botswana and its carriers or patients — renowned rating agency released a report on Wednesday with absence of any mention of South African 501.V2.
Moody’s made a study on “2021 outlook negative as debt costs intensify amid limited institutional capacity to adjust post pandemic.”
However, the current affairs suggest that “post pandemic” there are mutations or new variants of the virus which should be dealt with, now forcing countries like Botswana, South Africa and some in Southern Africa into coming up with curfew regulations to curb the new form of Covid-19.
The Great Pandemic seems to be here to stay in the midst of humankind if reports coming from next door South Africa about Covid-19 taking new forms to survive vaccine hence spreading uncontrollably is anything to go by.
Optimism has been brought the vaccine which is currently being rolled out, but scientific theories being conducted suggest that the new variant of Covid-19 might prove to be more resistant to vaccination.
Moody’s released a report this week on the outlook of SSA creditworthiness in 2021 which is deemed to be negative. With the new variant sweeping across Botswana and its influential trade partner South Africa, curfew regulations that are currently in place in the two countries could lead to further economic injury.
That Moody’s expectation for the fundamental conditions that will drive sovereign credit over the next 12-18 months to be severe, could be less far-reaching and short sighted given the lack of the new variant factor on the latest report.
“We expect SSA sovereigns to face severe challenges in grappling with the fallout from the coronavirus shock as lower overall economic growth and revenue coupled with higher government expenditure will lead to wider fiscal deficits and higher debt,” said Moody’s on Wednesday.
Higher debt levels, weaker debt affordability (amid both lower revenue and higher interest payments) and low buffers will challenge SSA sovereigns’ institutional capacity to manage economies, public health, budget positions, financing strategies, reserves and social discontent, thus elevating event risk.”
According to Moody’s latest report on SSA, commodity producers and tourism-dependent countries like Botswana were hit particularly hard.
Currently no tourist can come to Botswana lest they want to brave the ‘new Covid-19’, incidentally borders have been closed save for goods transportation.
The change in outlook on Botswana (A2 negative) was driven by a fall in demand for diamonds, its principal export commodity, said Moody’s. This has affected Botswana’s GDP which on the third quarter of 2020 was -6 percent, moving from -24 percent in the second quarter which mirrored all the hallmarks of an economy down spiraled by Covid-19 negative ripple effects.
Moody’s furthered its report by picking on overall growth in the SSA region to be associated with lasting impact of the economic contraction, which the rating agency said it will be greater in 2021.
“The region’s long-term recovery is more precarious given that SSA sovereigns have little fiscal space to counter the pandemic’s negative impact on economic activity and preserve productive capacity, and given that structural factors are generally less conducive to fostering a rebound in SSA than in other Emerging Markets,” said Moody’s.
Moody’s said although favourable base effects will help the recovery, real GDP growth will remain lower than historical averages in most countries. Botswana was at last given a glimmer of hope by the Moody’s report, optimism was that non-energy exporters like this country will remain the most dynamic economies, with growth driven by domestic demand and high public investment rates, and a rebound in demand for non-energy commodities.
“Public investment that addresses infrastructure gaps can raise growth both over the near and longer term. However, the impact of public investment on boosting long-term growth potential is determined in part by investment efficiency, which is generally weak in the region. Public investment efficiency is constrained by weak institutional quality, which affects project selection, appraisal and monitoring, as well as high rates of corruption, which can lead to rent-seeking and cost overruns,” said the rating agency.
Moody’s projected that Botswana will average economic growth of 6.5 percent in 2021 as a global growth recovery drives greater demand for coffee and diamonds. This is despite much uncertainty wearing on this country’s prospect of a big leap, the discovery of the new coronavirus variant believed to be at large in Botswana’s shores.