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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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Khan: Boko, Masisi are fake politicians

18th January 2021
Masisi & Boko

While there is no hard-and-fast rule in politics, former Molepolole North Member of Parliament, Mohamed Khan says populism acts in the body politic have forced him to quit active partisan politics. He brands this ancient ascription of politics as fake and says it lowers the moral compass of the society.

Khan who finally tasted political victory in the 2014 elections after numerous failed attempts, has decided to leave the ‘dirty game’, and on his way out he characteristically lashed at the current political leaders; including his own party president, Advocate Duma Boko. “I arrived at this decision because I have noticed that there are no genuine politics and politicians. The current leaders, Boko and President Dr Mokgweetsi Masisi are fake politicians who are just practicing populist politics to feed their egos,” he said.

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Ookeditse rejects lobby for BPF top post

18th January 2021
LAWRENCE-OOKEDITSE

Former Botswana Democratic Party (BDP) parliamentary hopeful, Lawrence Ookeditse has rejected the idea of taking up a crucial role in the Botswana Patriotic Front (BPF) Central Committee following his arrival in the party this week. According to sources close to development, BPF power brokers are coaxing Ookeditse to take up the secretary general position, left vacant by death of Roseline Panzirah-Matshome in November 2020.

Ookeditse’s arrival at BPF is projected to cause conflicts, as some believe they are being overlooked, in favour of a new arrival. The former ruling party strategist has however ruled out the possibility of serving in the party central committee as secretary general, and committed that he will turn down the overture if availed to him by party leadership.

Ookeditse, nevertheless, has indicated that if offered another opportunity to serve in a different capacity, he will gladly accept. “I still need to learn the party, how it functions and all its structures; I must be guided, but given any responsibility I will serve the party as long as it is not the SG position.”

“I joined the BPF with a clear conscious, to further advance my voice and the interests of the constituents of Nata/Gweta which I believe the BDP is no longer capable to execute.” Ookeditse speaks of abject poverty in his constituency and prevalent unemployment among the youth, issues he hopes his new home will prioritise.

He dismissed further allegations that he resigned from the BDP because he was not rewarded for his efforts towards the 2019 general elections. After losing in the BDP primaries in 2018, Ookeditse said, he was offered a job in government but declined to take the post due to his political ambitions. Ookeditse stated that he rejected the offer because, working for government clashed with his political journey.

He insists there are many activists who are more deserving than him; he could have chosen to take up the opportunity that was before him but his conscious for the entire populace’s wellbeing held him back. Ookeditse said there many people in the party who also contributed towards party success, asserting that he only left the BDP because he was concerned about the greater good of the majority not individualism purposes.

According to observers, Ookeditse has been enticed by the prospects of contesting Nata/Gweta constituency in the 2024 general election, following the party’s impressive performance in the last general elections. Nata/Gweta which is a traditional BDP stronghold saw its numbers shrinking to a margin of 1568. BDP represented by Polson Majaga garnered 4754, while BPF which had fielded Joe Linga received 3186 with UDC coming a distant with 1442 votes.

There are reports that Linga will pave way for Ookeditse to contest the constituency in 2024 and the latter is upbeat about the prospects of being elected to parliament. Despite Ookeditse dismissing reports that he is eying the secretary general position, insiders argue that the position will be availed to him nevertheless.

Alternative favourite for the position is Vuyo Notha who is the party Deputy Secretary General. Notha has since assumed duties of the secretariat office on the interim basis. BPF politburo is expected to meet on 25th of January 2020, where the vacancy will be filled.

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BDP cancels MPs retreat

18th January 2021
President Masisi

Botswana Democratic Party (BDP) big wigs have decided to cancel a retreat with the party legislators this weekend owing to increasing numbers of Covid-19 cases. The meeting was billed for this weekend at a place that was to be confirmed, however a communique from the party this past Tuesday reversed the highly anticipated meeting.

“We received a communication this week that the meeting will not go as planned because of rapid spread of Covid-19,” one member of the party Central Committee confirmed to this publication.
The gathering was to follow the first of its kind held late last year at party Treasurer Satar Dada’s place.

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