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THE CASE FOR MANUFACTURING AND EXPORT TRADE


In the earlier volume, I somewhat rapped manufacturing on the knuckles. Does it follow that it is now a futile proposition as a basis for future development? Some pundits, who include a few of Botswana’s most notable economists, have averred so.

They maintain that having tried manufacturing for the past 30 to 40 years and without seeing it come into flower, there is every reason to read the last rites and devote our energies to more realistic prospects, services for instance. I retain very strong reservations on this take notwithstanding my own, lingering misgivings.    

In the first place, the fact that a strategy does not yield the desired results does not necessarily imply it is inherently vain or flawed. The problem might not lie with the strategy itself but with the manner in which it was executed. The strategy could also be hobbled by the absence or impotence of the confluence of factors necessary to make it bear fruit. Let us take a Formula One ace as an analogy. 

Mercedes may provide Lewis Hamilton with the fastest and most reliable car, but if he does not have mastery of the car or is so impetuous as to lack a sense of caution, he will be prone to accidents or off-track spins and pole position will frequently elude him in the qualifiers, thus seriously curtailing his chances of winning races. 

Hamilton may also be a brilliant driver himself, but if the Pirelli tyres his team chose are ill-suited to the prevailing conditions or the pit-stop calls are out of kilter, he will be hard put to romp to victory.   

At the time of writing, our import bill stood at P38 billion, equivalent to about $5 billion. Somebody has scoffed that Botswana imports everything save for meatstuffs!  And when we do import, we pay not in our own currency but in the so-called hard currencies, primarily the US dollar, a medium of international exchange we toil to earn.

Over 17 percent of our import bill falls to machinery and equipment. Given that we have a capital intensive spearhead sector in diamond mining and we have neither the capacity nor the expertise to manufacture sophisticated pieces of machinery and electrical equipment, this component of our imports was probably preordained: it is here to stay, particularly that Government has done negligibly little to alter the status quo.

But there are these other items classified in the national accounts as “Chemicals and Rubber Products”, “Metals and Metal Products”, and “Other”: these together account for about 22 percent of the  import tab.   If we were to produce them on our own turf, we would trim over P8 billion, or $1.15 billion,  from our import liability. Much of this money, needless to say, would be spent within the local economy.  

The gist of my contention, folks, is that we cannot completely jettison manufacturing. Are we, like most of Africa, condemned to a nation of mere consumers and not producers I wonder? A Chinese roving journalist was surprised to learn that up to 90 percent of the Vuvuzelas, the long, plastic trumpets which aroused so much controversy during the 2010 soccer World Cup in South Africa and which have practically become the sound of Africa, were made in China and this is a fad modelled on the traditional African kudu horn used to alert neighbouring villagers!  It is estimated that Chinese exporters raked in $20 million of Vuvuzela revenues in that year alone.

In his diatribe against his own race vexatiously titled  Capitalist  Nigger, the US-Based Nigerian journalist Chika Onyeani sneers that we, Africans, are “‘highly educated’, yet we cannot  even assemble a bicycle – we have to import it; we cannot assemble a radio – we have to import it; we cannot assemble a fan – we have to import it; we cannot assemble a television – we have to import it.” If he  were writing in 2010, Onyeani probably would have added that we Africans are “Vuvuzela crazy, yet we cannot even make a crude imitation of this ruddy, uncomplicated plastic horn!”


Those who advocate sidelining manufacturing may as well say we should forget about beneficiation considering that besides cutting and polishing gem diamonds,  it  also entails jewellery manufacturing.  I contend that there is a great deal of potential in manufacturing even for an economy as modest as ours folks.

Besides presenting an opportunity to significantly accelerate the country's growth and development, a platform of manufacturing provides a locus for stimulating the growth of other activities, such as services, and achieving specific outcomes, such as employment creation and economic empowerment.

In neighbouring South Africa, for instance, the manufacturing sector in 2013 contributed 15.2 percent of GDP, three times more than mining and quarrying, and employs 1,7 million people5, again more than three times that of the mining and quarrying sector.  If we were to nurture a manufacturing prowess on the magnitude only of South Africa’s, we would, with our population of only 2 million,  have zero employment folks.
 
(Excerpt from Chapter 15, Pages 376-378) lifted from Volume 2 of the book – Delusions of Grandeur

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Business

Investors inject capital into Tsodilo Resources Company

25th January 2023

Local diamond and metal exploration company Tsodilo Resources Limited has negotiated a non-brokered private placement of 2,200, 914 units of the company at a price per unit of 0.20 US Dollars, which will provide gross proceeds to the company in the amount of C$440, 188. 20.

According to a statement from the group, proceeds from the private placement will be used for the betterment of the Xaudum iron formation project in Botswana and general corporate purposes.

The statement says every unit of the company will consist of a common share in the capital of the company and one Common Share purchase warrant of the company.

Each warrant will enable a holder to make a single purchase for the period of 24 months at an amount of $0.20. As per regularity requirements, the group indicates that the common shares and warrants will be subject to a four month plus a day hold period from date of closure.

Tsodilo is exempt from the formal valuation and minority shareholder approval requirements. This is for the reason that the fair market value of the private placement, insofar as it involves the director, is not more than 25% of the company’s market capitalization.

Tsodilo Resources Limited is an international diamond and metals exploration company engaged in the search for economic diamond and metal deposits at its Bosoto Limited and Gcwihaba Resources projects in Botswana.  The company has a 100% stake in Bosoto which holds the BK16 kimberlite project in the Orapa Kimberlite Field (OKF) in Botswana.

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Business

Global CEOs Back Plan to Unlock $3.4 Trillion Potential of Africa Free Trade Area

23rd January 2023

African heads of state and global CEOs at the World Economic Forum Annual Meeting backed the launch of the first of its kind report on how public-private partnerships can support the implementation of the African Continental Free Trade Area (AfCFTA).

AfCFTA: A New Era for Global Business and Investment in Africa outlines high-potential sectors, initiatives to support business and investment, operational tools to facilitate the AfCFTA, and illustrative examples from successful businesses in Africa to guide businesses in entering and expanding in this area.

The report aims to provide a pathway for global businesses and investors to understand the biggest trends, opportunities and strategies to successfully invest and achieve high returns in Africa, developing local, sub-regional and continental value chains and accelerating industrialization, all of which go hand in hand with the success of the AfCFTA.

The AfCFTA is the largest free trade area in the world, by area and number of participating countries. Once fully implemented, it will be the fifth-largest economy in the world, with the potential to have a combined GDP of more than $3.4 trillion. Conceived in 2018, it now has 54 national economies in Africa, could attract billions in foreign investment, and boost overseas exports by a third, double intra-continental trade, raise incomes by 8% and lift 50 million people out of poverty.

To ease the pain of transition to its new single market, Africa has learned from trade liberalization in North America and Europe. “Our wide range of partners and experience can help anticipate and mitigate potential disruptions in business and production dynamics,” said Børge Brende, President, and World Economic Forum. “The Forum’s initiatives will help to ease physical, capital and digital flows in Africa through stakeholder collaboration, private-public collaboration and information-sharing.”

Given the continent’s historically low foreign direct investment relative to other regions, the report highlights the sense of excitement as the AfCFTA lowers or removes barriers to trade and competitiveness. “The promising gains from an integrated African market should be a signal to investors around the world that the continent is ripe for business creation, integration and expansion,” said Chido Munyati, Head of Regional Agenda, Africa, World Economic Forum.

The report focuses on four key sectors that have a combined worth of $130 billion and represent high-potential opportunities for companies looking to invest in Africa: automotive; agriculture and agroprocessing; pharmaceuticals; and transport and logistics.

“Macro trends in the four key sectors and across Africa’s growth potential reveal tremendous opportunities for business expansion as population, income and connectivity are on the rise,” said Wamkele Mene, Secretary-General, AfCFTA Secretariat.

“These projections reveal an unprecedented opportunity for local and global businesses to invest in African countries and play a vital role in the development of crucial local and regional value chains on the continent,” said Landry Signé, Executive Director and Professor, Thunderbird School of Global Management and Co-Chair, World Economic Forum Regional Action Group for Africa.

The Forum is actively working towards implementing trade and investment tools through initiatives, such as Friends of the Africa Continental Free Trade Area, to align with the negotiation process of the AfCFTA. It identifies areas where public-private collaboration can help reduce barriers and facilitate investment from international firms.

About the World Economic Forum Annual Meeting 2023

The World Economic Forum Annual Meeting 2023 convenes the world’s foremost leaders under the theme, Cooperation in a Fragmented World. It calls on world leaders to address immediate economic, energy and food crises while laying the groundwork for a more sustainable, resilient world. For further information,

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Business

Electricity generation down 15.8%

9th January 2023

Electricity generation in Botswana during the third quarter of 2022 declined by 15.8%, following operational challenges at Botswana Power Corporation’ Morupule B power plant, according to Statistics Botswana Index of Electricity Generation (IEG) released last week.

The index shows that local electricity generation decreased by 148,243 MWH from 937,597 MWH during the second quarter of 2022 to 789,354 MWH during the third of quarter of 2022.

This decrease, according to the index, was mainly attributed to a decline in power supply realized at Morupule B power station. The index shows that as a result of low power supply from the plant, imported electricity during the third quarter of 2022 increased by 76.3 percent (123,831 MWH), from 162,340 MWH during the second quarter of 2022 to 286,171 MWH during the current quarter and Statistics Botswana added that the increase was necessitated by the need to augment the shortfall in generated electricity.

In the index Statistics Botswana stated that Eskom was the main source of imported electricity at 42.0 percent of total electricity imports. “The Southern African Power Pool (SAPP) accounted for 38.4 percent, while the remaining 10.1, 9.1 and 0.5 percent were sourced from Electricidade de Mozambique (EDM), Cross-border electricity markets and the Zambia Electricity Supply Corporation Limited (ZESCO), respectively. Cross-border electricity markets are arrangements whereby towns and villages along the border are supplied with electricity from neighbouring countries such as Namibia and Zambia.”

The government owned statistics entity stated that distributed electricity decreased by 2.2 percent (24,412 MWH), from 1,099,937 MWH during the second quarter of 2022 to 1,075,525 MWH during the third quarter of 2022. The entity noted that electricity generated locally contributed 73.4 percent to electricity distributed during the third quarter of 2022, compared to a contribution of 85.2 percent during the third quarter in 2022 and added that this gives a decline of 11.8 percentage points. “The quarter-on-quarter comparison shows that the contribution of electricity generated to electricity distributed decreased by 11.8 percentage points compared to the 85.2 percent contribution during the second quarter of 2022.”

Statistics Botswana meanwhile stated that the year-on-year analysis shows some improvement in local electricity generation. Recent figures from entity show that the physical volume of electricity generated increased by 36.3 percent (210,319 MWH), from 579, 036 MWH during the third quarter of 2021 to 789,354 MWH during the current quarter. According to Statistics Botswana electricity generated locally contributed 73.4 percent to electricity distributed during the third quarter of 2022, compared to a contribution of 57.7 percent during the same quarter in 2021. This gives an increase of 15.7 percentage points.

 

The entity noted that trends also show an increase in physical volume of electricity distributed from 2013 to the third quarter of 2022, thereby indicating that there are ongoing efforts to meet the domestic demand for power. “There has been a gradual increase of distributed electricity from the first quarter of 2013 to the third quarter of 2022, even though there are fluctuations. The year-on-year perspective shows that the amount of distributed electricity increased by 7.2 percent (71,787 MHW), from 1,003,738 MWH during the third quarter of 2021 to 1,075,525 MWH during the current quarter.”

The statistics entity noted that year-on-year analysis show that during the third quarter of 2022, the physical volume of imported electricity decreased by 32.6 percent (138,532 MWH), from 424,703 MWH during the third quarter of 2021 to 286,171 MWH during the third quarter of 2022. “There is a downward trend in the physical volume of imported electricity from the first quarter of 2013 to the third quarter of 2022. The downward trend indicates the country’s continued effort to generate adequate electricity to meet domestic demand, hence the decreased reliance on electricity imports.”

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