Bumpy road ahead for Botswanaís manufacturing sector
BEMA’S EXECUTIVE DIRECTOR: Stembile Tawengwa
Despite its stated middle class economy, Botswana continues to struggle with the manufacturing and exporting sectors, importing almost 80 percent of its goods from neighbouring South Africa.
Botswana has the potential to produce goods and services for both its citizens and for export as well. The industry is one of the real wealth creators and is an undoubted contributor to diversification. However, despite many initiatives made available, there has been a problem in elevating the sector to the kind of heights that would auger well for its existence.
The Botswana Exporters and Manufacturing Association (BEMA), a private sector association independent from the government which deals with the improvement of the competiveness of Botswana’s manufacturing and export sectors, said that its members face numerous challenges.
“There is a lack of export incentives, work and residence permits, low preference to local manufactures and finance mechanisms for industry and for financing of specialized equipment,” said Stembile Tawengwa, BEMA’s Executive Director.
She explained that export incentives are vital because, without them, it is difficult to compete with other countries whose governments have introduced these incentives for their manufacturers.
Explaining why the manufacturing and export companies fail to thrive competitively, Keith Jefferis, the Managing Director of E-consult, concurred with Tawengwa.
“Many firms have costs of production and distribution that are too high to enable them to compete in export markets, which may be due to high transport costs, low labour productivity, lack of local raw materials, problems with erratic water and power supplies or difficulties in bringing in skilled foreign workers,” said Jefferis.
Asked what could be done to improve the competiveness of the sector, Jefferis said that not enough attention was being paid to assisting firms to reduce costs of production and governments’ many regulatory barriers that added to production costs.
“Government should pay more attention to businesses when they request policy and regulatory changes that would help to reduce costs of production and carry out a general regulatory review to remove costly regulations,” he said.
On her part, Tawengwa said that some of the issues they had tabled with the government could not be resolved in one day.
‘‘The nature of our Association and its activities require that we be in constant engagement with the government so as to increase competiveness and this is done in the form of consultation and suggested changes in policies framed by the government,’ she said.
Initiatives like the government’s Economic Diversification Drive (EDD) are efforts to invest in the growth of the production of goods and services in the country. However, the locally produced goods remain minimal, along with little competition in the manufacturing and exporting sector.
‘‘We need to take bold steps and learn from exporting countries such as Asia where the governments provide direct incentives to make their manufacturing and exporting industries competitive,” said Tawengwa.
“These incentives could include preferential utility tariffs, preferential land allotment, generous tax holidays as well as exclusive procurement from the local manufacturers and training subsidies.”
Asked for a remedy to the stagnant growth of the sector, Jefferis stated that the government “should pay more attention to successful exporting firms and seek to learn what makes them successful, whether these factors can be replicated in other firms, and what barriers can be removed to assist firms”.
“The government needs to address a couple of problems such as the immigration policy, which restricts the ability of firms to create jobs for Batswana, the water and electricity shortage and the exchange rate, which is not supportive of exporters,” he said.
Tawengwa added that programs, such as Industrial Upgrading and Modernization Program (IUMP), ensure the availability to the country of state of the art machinery used in manufacturing. She indicated that there was a growth in the manufacturing sector as more companies had been established which were exporting or ready to export with a $5 million rise of exports between the years 2011-2014.
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Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
‚ÄúIn accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,‚ÄĚ said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices.¬† Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
‚ÄúCommunity empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,‚ÄĚ said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, ¬†Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
‚ÄúAs a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy‚Äôs productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,‚ÄĚ said the Minister of Minerals and Energy.
Food import bill slightly declines
The latest figures released by Statistics Botswana this week shows that food import bill for Botswana slightly declined from around P1.1 billion in November 2022 to around P981 million in December during the same year.
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Moody‚Äôs Reaffirms African Trade Insurance‚Äôs A3 Rating & Revises Outlook to Positive
Moody‚Äôs Investors Service (‚ÄúMoody‚Äôs‚ÄĚ) has affirmed the A3 insurance financial strength rating (IFSR) of the African Trade Insurance Agency (ATI) for the fifth consecutive year and changed the outlook from stable to positive.
Moody‚Äôs noted that the change in outlook to positive reflects the strong growth in ATI‚Äôs membership base – that has resulted in improved portfolio diversification, strengthened capital adequacy, and the good profitability despite the challenging operating environment. In addition, ATI benefits from its preferred creditor status (PCS) amongst sovereign member states which protects it from the risk of default by member sovereigns through securing recoveries against claims paid on guarantees.
The strong membership and equity growth are some of the key considerations for the consistent reinstatement of ATI‚Äôs A/Stable rating by Standard & Poor‚Äôs and Moody‚Äôs rating, over the years. Also supporting the rating affirmation are; consistent improvement in financial performance, commitment of its shareholders who continue to uphold the preferred creditor status, its high quality and conservative investment portfolio as well as strong relationships with a number of global reinsurers that provide significant risk-bearing capacity.
With the change in outlook to ‚Äúpositive‚ÄĚ, ATI is now better placed to provide enhanced support to its member countries, attract additional shareholding and grow its portfolio. The positive outlook is an indication that if ATI continues to demonstrate its strong underwriting performance and ability to recover claims under the preferred creditor arrangements, among other factors, an upward pressure towards an upgrade may be generated. The Moody’s press release can be accessed from¬†here
Commenting on the rating, Africa Trade Insurance Chief Executive Officer Manuel Moses said: ‚ÄúThis positive revision is in line with our 2023 – 2027 strategic objectives in which we set to improve our rating outlook to positive in the first year, and achieve an upgrade of at least ‚ÄúAA‚ÄĚ/Stable rating by both Moody‚Äôs and S&P within this Strategic Plan period. We aim to achieve this by doubling our exposures and increasing our capital to more than USD1 billion.‚ÄĚ
ATI‚Äôs mandate is to provide trade-credit and political risk insurance, as well as other risk mitigation products to its member countries and related¬†public and private sector actors. These insurance products not only directly encourage and facilitate foreign direct investment as well as local private sector investment in our member countries, but also contribute to intra- and extra-African trade.
About The African Trade Insurance Agency¬†
ATI was founded in 2001 by African States to cover trade and investment risks of companies doing business in Africa. ATI predominantly provides Political Risk, Credit Insurance and, Surety Insurance. Since inception, ATI has supported US$78 billion worth of investments and trade into Africa. For over a decade, ATI has maintained an ‚ÄėA/Stable‚Äô rating for Financial Strength and Counterparty Credit by Standard & Poor‚Äôs, and in 2019, ATI obtained an A3/Stable rating from Moody‚Äôs, which has now been revised to A3/Positive.