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Botswana losing shine in the beef market – BIDPA

BMC’s share of cattle sales declined to 40%

While it is widely acknowledged that the beef industry in Botswana plays an important role as a source of foreign exchange, rural livelihoods and employment, the Botswana Institute of Development Policy Analysis (BIDPA) through a recent working paper have demonstrated that the country is an insignificant player in the world beef market.


A paper by Dr Tebogo Seleka and Pinkie G Ketshabile illustrates that the industry has experienced declining output since the 1970s, leading to a steady fall in exports.  “This scenario questions the industry’s sustainability and its continued role as one of the country’s leading sources of foreign exchange,” the two researchers point out.


For the continued sustenance of the beef industry in Botswana, it is important that beef exports remain competitive in the export market. However, the fall in exports experienced since the 1970s may have contributed to declining export competitiveness over time. Seleka and Ketshabile therefore tackled this issue by assessing the export competitiveness of the beef industry in Botswana, employing various indices of RCA.


The working paper revealed that Botswana has been the most competitive beef exporter in the SADC region, followed by Namibia. Export shares against the leading beef exporters indicate that Botswana is an insignificant player in the world beef market.


“However, all other RCA indices suggest that the performance of Botswana’s beef exports was generally impressive, with its competitiveness trends following those for major world beef exporters. Botswana’s beef industry was the most competitive from the early 1960s to the late 1980s, after which it was surpassed by some of the leading beef exporters.”


Seleka and Ketshabile noted a few factors underlying Botswana’s beef export competitiveness.

INSTITUTIONAL FACTORS

By way of background, Seleka and Ketshabile share that the BMC, a state trading enterprise, has been the sole exporter of beef since its establishment in 1965, which was made possible through a statutory instrument establishing the entity. Its establishment was geared at exporting beef to Britain, owing to colonial ties of the two countries. Botswana beef has also been accorded preferential access into the EU market through various trade arrangements.


“Before 1975, preferential access was made possible through the Commonwealth Preferential System, which allowed for duty free access of Botswana beef to the British market. From 1975 to 2000, non-reciprocal preferential access was made through the beef protocol of the Lomé Convention, signed between the European Commission (EC) and the African, Caribbean and Pacific (ACP) countries, which exempted ACP beef exports from ad valorem duties levied to non-ACP beef imports into the EC.9 Non-reciprocal trade preferences were further extended through the Cotonou Agreement (CA) during the period from 2001 to 2007, to give the EU and ACP countries time to negotiate WTO compatible Regional Economic Partnership Agreements.”


In 2009, Botswana, Lesotho and Swaziland signed an interim Economic Partnership Agreement (EPA) with the EU, which allowed for the continuation of non-reciprocal preferences. The interim EPA allowed for duty free/ quota free access of Botswana’s beef into the EU market while EU/SADC EPA negotiations were ongoing.

The successful conclusion of negotiations on an EPA between the EU and the SADC EPA Group (Angola, Botswana, Lesotho, Mozambique, Namibia, South Africa and Swaziland) on 15 July 2014 will result in the signing of a substantive EPA in the near future to facilitate the continuation of the ongoing preferential access of Botswana’s beef in the EU market.


According to the researchers, without doubt, the above institutions have played critical roles in stimulating the development of a competitive beef industry in Botswana, through promoting export market access.


“However, the same institutions are potential threats to beef export competitiveness in Botswana. First, the single export channel, through a state trading export monopoly, means that the collapse of the state trader may lead to an instant collapse of the beef industry in Botswana. Tis potential threat is not farfetched in that the BMC has operated at idle capacity since the 1980s when its throughput began to steadily decline. Such eminent threat is also reflected in the poor financial performance of the BMC, characterized by declining and negative profits.”


They further note that Botswana’s competitiveness is enhanced by duty free/quota free access of its beef exports to the EU market, while the country’s key competitors are subject to high import duties in the same market.  As a result, Botswana’s beef exports are priced higher than world market prices because of trade restricting protectionist policies in the EU market.


According to Seleka and Ketshabile the Trade reforms in the EU that ease trade restrictions would lower beef prices in the EU market, further leading to preference erosion and reduced beef export competitiveness in Botswana.


“Finally, changes in standards in the EU market pose risks to Botswana’s beef industry, particularly where compliance capacity is limited or compliance costs are prohibitive amongst communal farmers. For example, the requirement that cattle should have been kept in a single enclosed area for a given period before they are slaughtered for the EU market is not practical under communal arrangements and serves as a trade barrier.”


According to Seleka and Ketshabile, given that over 80 percent of Botswana’s cattle are in the communal production system, this requirement would therefore lead to reduced exports to the lucrative EU market, impacting adversely on beef industry competitiveness.
 

SUPPLY-SIDE FACTORS

Botswana’s beef cattle are produced under two distinct production systems of communal and commercial (ranching). The communal system is the most prominent and accounted for more than 80 percent of the country’s cattle population during the period from 1979 to 2012. However, the communal system is less productive than its commercial counterpart.


Seleka and Ketshabile have established that the steady and consistent fall in real cattle producer prices, from P1,228 per 100kg of carcass in 1974 to P776 per 100kg of carcass in 2005, has had long term adverse effects on beef export competitiveness in Botswana.


“This period largely coincides with the reduction in export competiveness against SADC countries and the leading beef exporters. Empirical evidence has also shown that the occurrence of drought in Botswana causes farmers to increase cattle sales, as a strategy to minimize the risk of inventory loss from drought-induced cattle mortalities (BIDPA 2006).”


 However, in subsequent good years following drought, farmers engage in inventory accumulation to rebuild their breeding stock, and thereby reducing cattle sales. Thus, such drought-induced decisions have had both short- and long-term adverse impacts on beef export competitiveness.

Foot and Mouth Disease (FMD) outbreaks have also impacted adversely on cattle sales directly through the banning of trade from affected areas. Moreover, FMD outbreaks have had long-term adverse impacts on the beef industry where they have led to the imposition of mandatory cattle destruction in the affected areas to halt further FMD spread.


They note that mandatory cattle destruction impacts adversely on cattle sales to the BMC and overall beef exports. In addition it also reduces the breeding stock now, leading to a reduction in future cattle sales, as these (cattle sales) positively relate with cattle inventory.


“Moreover, subsequent restocking exercises with cattle from disease free areas divert cattle sales from slaughter, further impacting adversely on cattle sales and beef exports. All these decisions adversely affect beef industry competitiveness in both the short- and long-term. In sum, the predominance of the communal production system, stagnant cattle population, high communal cattle mortality rates, low communal cattle offtake rates, declining cattle producers’ prices, and recurrent outbreaks of drought and livestock diseases have collectively contributed to the observed decline in the competitiveness of the beef industry in Botswana. If these factors are not effectively addressed, Botswana’s beef industry is likely to continue to experience declining competitiveness in future,” they write.

DEMAND-SIDE FACTORS

The live cattle market in Botswana may be described as oligopsonistic, with the BMC being a price leader and a residual buyer of live cattle and numerous other buyers constituting the price-taking fringe firms (BIDPA 2006).
Given stagnant cattle supply, Seleka and Ketshabile posit that an increase in domestic demand for beef in Botswana, due to increasing per capita income, would yield a reduction in cattle sales to the BMC. Since BMC is the sole exporter of beef in Botswana, this would further yield a reduction in beef exports.


The BMC’s share of cattle sales declined from about 80 percent in 1981 to 40 percent in 2012, representing a significant loss of market share.

“If we add the share of feedlots to that of BMC, assuming they sell cattle to BMC, the share for 2012 is estimated at 43 percent. This can be contrasted from the share of local abattoirs, which rose from 9 percent in 1981 to about 40 percent in 2012. Given that BMC slaughters cattle primarily for the export market and that local abattoirs slaughter solely for the domestic market, it then follows that the rising demand for beef in Botswana.”

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DIS blasted for cruelty – UN report

26th July 2022
DIS BOSS: Magosi

Botswana has made improvements on preventing and ending arbitrary deprivation of liberty, but significant challenges remain in further developing and implementing a legal framework, the UN Working Group on Arbitrary Detention said at the end of a visit recently.

Head of the delegation, Elina Steinerte, appreciated the transparency of Botswana for opening her doors to them. Having had full and unimpeded access and visited 19 places of deprivation of liberty and confidentiality interviewing over 100 persons deprived of their liberty.

She mentioned “We commend Botswana for its openness in inviting the Working Group to conduct this visit which is the first visit of the Working Group to the Southern African region in over a decade. This is a further extension of the commitment to uphold international human rights obligations undertaken by Botswana through its ratification of international human rights treaties.”

Another good act Botswana has been praised for is the remission of sentences. Steinerte echoed that the Prisons Act grants remission of one third of the sentence to anyone who has been imprisoned for more than one month unless the person has been sentenced to life imprisonment or detained at the President’s Pleasure or if the remission would result in the discharge of any prisoner before serving a term of imprisonment of one month.

On the other side; The Group received testimonies about the police using excessive force, including beatings, electrocution, and suffocation of suspects to extract confessions. Of which when the suspects raised the matter with the magistrates, medical examinations would be ordered but often not carried out and the consideration of cases would proceed.

“The Group recall that any such treatment may amount to torture and ill-treatment absolutely prohibited in international law and also lead to arbitrary detention. Judicial authorities must ensure that the Government has met its obligation of demonstrating that confessions were given without coercion, including through any direct or indirect physical or undue psychological pressure. Judges should consider inadmissible any statement obtained through torture or ill-treatment and should order prompt and effective investigations into such allegations,” said Steinerte.

One of the group’s main concern was the DIS held suspects for over 48 hours for interviews. Established under the Intelligence and Security Service Act, the Directorate of Intelligence and Security (DIS) has powers to arrest with or without a warrant.

The group said the “DIS usually requests individuals to come in for an interview and has no powers to detain anyone beyond 48 hours; any overnight detention would take place in regular police stations.”

The Group was able to visit the DIS facilities in Sebele and received numerous testimonies from persons who have been taken there for interviewing, making it evident that individuals can be detained in the facility even if the detention does not last more than few hours.

Moreover, while arrest without a warrant is permissible only when there is a reasonable suspicion of a crime being committed, the evidence received indicates that arrests without a warrant are a rule rather than an exception, in contravention to article 9 of the Covenant.

Even short periods of detention constitute deprivation of liberty when a person is not free to leave at will and in all those instances when safeguards against arbitrary detention are violated, also such short periods may amount to arbitrary deprivation of liberty.

The group also learned of instances when persons were taken to DIS for interviewing without being given the possibility to notify their next of kin and that while individuals are allowed to consult their lawyers prior to being interviewed, lawyers are not allowed to be present during the interviews.

The UN Working Group on Arbitrary Detention mentioned they will continue engaging in the constructive dialogue with the Government of Botswana over the following months while they determine their final conclusions in relation to the country visit.

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Stan Chart halts civil servants property loan facility

26th July 2022
Stan-Chart

Standard Chartered Bank Botswana (SCBB) has informed the government that it will not be accepting new loan applications for the Government Employees Motor Vehicle and Residential Property Advance Scheme (GEMVAS and LAMVAS) facility.

This emerges in a correspondence between Acting Permanent Secretary in the Ministry of Finance Boniface Mphetlhe and some government departments. In a letter he wrote recently to government departments informing them of the decision, Mphetlhe indicated that the Ministry received a request from the Bank to consider reviewing GEMVAS and LAMVAS agreement.

He said: “In summary SCBB requested the following; Government should consider reviewing GEMVAS and LAMVAS interest rate from prime plus 0.5% to prime plus 2%.” The Bank indicated that the review should be both for existing GEMVAS and LAMVAS clients and potential customers going forward.

Mphetlhe said the Bank informed the Ministry that the current GEMVAS and LAMVAS interest rate structure results into them making losses, “as the cost of loa disbursements is higher that their end collections.”

He said it also requested that the loan tenure for the residential property loans to be increased from 20 to 25 years and the loan tenure for new motor vehicles loans to be increased from 60 months to 72 months.

Mphetlhe indicated that the Bank’s request has been duly forwarded to the Directorate of Public Service Management for consideration, since GEMVAS and LAMVAS is a Condition of Service Scheme. He saidthe Bank did also inform the Ministry that if the matter is not resolved by the 6th June, 2022, they would cease receipt of new GEMVAS and LAMVAS loan applications.

“A follow up virtual meeting was held to discuss their resolution and SCB did confirm that they will not be accepting any new loans from GEMVAS and LAMVAS. The decision includes top-up advances,” said Mphetlhe. He advised civil servants to consider applying for loans from other banks.

In a letter addressed to the Ministry, SCBB Chief Executive Officer Mpho Masupe informed theministry that, “Reference is made to your letter dated 18th March 2022 wherein the Ministry had indicated that feedback to our proposal on the above subject is being sought.”

In thesame letter dated 10 May 2022, Masupe stated that the Bank was requesting for an update on the Ministry’s engagements with the relevant stakeholder (Directorate of Public Service Management) and provide an indicative timeline for conclusion.

He said the “SCBB informs the Ministry of its intention to cease issuance of new loans to applicants from 6th June 2022 in absence of any feedback on the matter and closure of the discussions between the two parties.”  Previously, Masupe had also had requested the Ministry to consider a review of clause 3 of the agreement which speaks to the interest rate charged on the facilities.

Masupe indicated in the letter dated 21 December 2021 that although all the Banks in the market had signed a similar agreement, subject to amendments that each may have requested. “We would like to suggest that our review be considered individually as opposed to being an industry position as we are cognisant of the requirements of section 25 of the Competition Act of 2018 which discourages fixing of pricing set for consumers,” he said.

He added that,“In this way,clients would still have the opportunity to shop around for more favourable pricing and the other Banks, may if they wish to, similarly, individually approach your office for a review of their pricing to the extent that they deem suitable for their respective organisations.”

Masupe also stated that: “On the issue of our request for the revision of the Interest Rate, we kindly request for an increase from the current rate of prime plus 0.5% to prime plus 2%, with no other increases during the loan period.” The Bank CEO said the rationale for the request to review pricing is due to the current construct of the GEMVAS scheme which is currently structured in a way that is resulting in the Bank making a loss.

“The greater part of the GEMVAS portfolio is the mortgage boo which constitutes 40% of the Bank’s total mortgage portfolio,” said Masupe. He saidthe losses that the Bank is incurring are as a result of the legacy pricing of prime plus 0% as the 1995 agreement which a slight increase in the August 2018 agreement to prime plus 0.5%.

“With this pricing, the GEMVAS portfolio has not been profitable to the Bank, causing distress and impeding its ability to continue to support government employees to buy houses and cars. The portfolio is currently priced at 5.25%,” he said.  Masupe said the performance of both the GEMVAS home loan and auto loan portfolios in terms of profitability have become unsustainable for the Bank.

Healso said, when the agreement was signed in August 2018, the prime lending rate was 6.75% which made the pricing in effect at the time sufficient from a profitable perspective. “It has since dropped by a total 1.5%. The funds that are loaned to customers are sourced at a high rate, which now leaves the Bank with marginal profits on the portfolio before factoring in other operational expenses associated with administration of the scheme and after sales care of the portfolio,” said the CEO.

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Botswana ranked 129 in female MPs representation

26th July 2022
Minister of Finance & Economic Development Peggy Serame

The Global Gender Gap Index, a report published by the World Economic Forum annually, has indicated that Botswana is among countries that fare badly when it comes to representation of women in legislative bodies.

The latest Global Gender Gap Index, published last week, benchmarks the current state and evolution of gender parity across four key dimensions (Economic Participation and Opportunity, Educational Attainment, Health and Survival, and Political Empowerment). It is the longest-standing index which tracks progress towards closing these gaps over time since its inception in 2006.

This year, the Global Gender Gap Index benchmarked 146 countries. Of these, a subset of 102 countries have been represented in every edition of the index since 2006, further providing a large constant sample for time series analysis.

Botswana ranks number 66 overall (out of 146 countries), with good rankings in most of the pillars. Botswana ranks 1st in Health and Survival, 7th in the Economic Participation and Opportunity, 22nd in Educational Attainment, and 129th in Political Empowerment.

The Global Gender Gap Index measures scores on a 0 to 100 scale and scores can be interpreted as the distance covered towards parity (i.e. the percentage of the gender gap that has been closed). The cross-country comparisons aim to support the identification of the most effective policies to close gender gaps.

The Economic Participation and Opportunity sub-index contains three concepts: the participation gap, the remuneration gap and the advancement gap. The participation gap is captured using the difference between women and men in labour-force participation rates. The remuneration gap is captured through a hard data indicator (ratio of estimated female-to-male earned income) and a qualitative indicator gathered through the World Economic Forum’s annual Executive Opinion Survey (wage equality for similar work).

Finally, the gap between the advancement of women and men is captured through two hard data statistics (the ratio of women to men among legislators, senior officials and managers, and the ratio of women to men among technical and professional workers).

The Educational Attainment sub-index captures the gap between women’s and men’s current access to education through the enrolment ratios of women to men in primary-, secondary- and tertiary-level education. A longer-term view of the country’s ability to educate women and men in equal numbers is captured through the ratio of women’s literacy rate to men’s literacy rate.

Health and Survival sub-index provides an overview of the differences between women’s and men’s health using two indicators. The first is the sex ratio at birth, which aims specifically to capture the phenomenon of “missing women”, prevalent in countries with a strong son preference. Second, the index uses the gap between women’s and men’s healthy life expectancy.

This measure provides an estimate of the number of years that women and men can expect to live in good health by accounting for the years lost to violence, disease, malnutrition and other factors.
Political Empowerment sub-index measures the gap between men and women at the highest level of political decision-making through the ratio of women to men in ministerial positions and the ratio of women to men in parliamentary positions. In addition, the reported included the ratio of women to men in terms of years in executive office (prime minister or president) for the last 50 years.

In the last general elections, only three women won elections, compared to 54 males. The three women are; Nnaniki Makwinja (Lentsweletau-Mmopane), Talita Monnakgotla (Kgalagadi North), and Anna Mokgethi (Gaborone Bonnington North). Four women were elected through Specially Elected dispensation; Peggy Serame, Dr Unity Dow, Phildah Kereng and Beauty Manake. All female MPs — save Dow, who resigned — are members of the executive.

Overall, Botswana has 63 seats, all 57 elected by the electorates, and six elected by parliament. Early this year, Botswana Democratic Party (BDP) secretary general and Gaborone North MP, Mpho Balopi, successfully moved a motion in parliament calling for increment of elective seats from 57 to 61. Balopi contented that population growth demands the country respond by increasing the number of MPs.

In Africa, Botswana play second fiddle to countries like Rwanda, Namibia, South Africa, Burundi, and Zimbabwe who have better representation of women, with Rwanda being the only country with more than 50 percent of women in parliament.

The low number of women in parliament is attributed to Botswana’s current, electoral system, First-Past-the-Post. During the 9th parliament, then MP for Mahalapye East tabled a motion in parliament in which she sort to increase the number of Specially Elected MPs in parliament to augment female representation in the National Assembly.

The motion was opposed famously, by then Specially Elected MP, Botsalo Ntuane, who said the citizens were not in favour of such a move since it dilute democracy, instead suggesting the Botswana should switch to Proportional-Representation-System. Botswana is currently undergoing Constitutional Review process, with the commission, appointed in December, expected to deliver the report to President Mokgweetsi Masisi by September this year.

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