The Botswana Manufactures and Exporters Association (BEMA) has reiterated the need to refine trade policies in order to cushion and protect local industries from outside competition.
The association says it is not against foreign competition rather it observes that the policies in place somehow do not protect the local manufactures in the awarding of tenders and even the procuring process itself.
“Botswana needs to consider taking a harder stance on the structure of its trade policies in relation to regional trends and recognise that industries amongst regional trade member states have not matured at the same rate,” said Nkosi Mwaba, the BEMA President.
Mwaba said there are instances where some BEMA members have qualified for tenders in South Africa and have lost out on these bids simply because they did not meet the Black Economic Empowerment (BEE) requirements. Policies similar to BEE in South Africa are inclined towards promoting participation of SA companies and encourage growth of their local industry.
“The fact that it is almost impossible for a Botswana companies to win tenders in South Africa and yet companies from SA and other countries are find it much easier to enter the Botswana market is concerning to BEMA members. It highlights an imbalance in our respective trade policies and shows that there is very little reciprocation in enabling free trade,” said Mwaba.
He also noted the internal challenges that are brought about by the country’s own procurement processes; codes and documents within the tendering processes hinder growth of the manufacturing sector.
“Some of our members who are bona fide, registered and qualified manufacturers lose tenders to traders, agents and fly-by-nights as a result. This happens despite the fact that certain tenders are reserved for manufacturers or producers,” he said. The local manufacturing industry has been grappling with the issue of quality of goods which has to a large extent hindered the goods to penetrate into the global market.
BEMA strongly believes that the Public Procurement and Asset Disposal Board (PPADB) has to play a more prominent and meaningful role in promoting local beneficiation and industrial growth by addressing current loopholes in the process. Mwaba said in attracting Foreign Direct Investment, the government must be conscious that current players in the industry are also potential investors in their own growth and thereby in the growth of the economy.
“There is extensive effort and expenditure in programmes that attract FDI in the form of new investments. Our sentiments as BEMA are that existing businesses must be awarded similar effort in order to encourage growth and export development,” he said.
BEMA says more attention should be given to the industries that are failing and enterprises that are shutting down within Botswana and similarly, make an elevated effort to ensure their survival and competitiveness. Mwaba added that they believe that Economic Diversification Drive (EDD) is an excellent programme which is a necessary catalyst for the growth of the manufacturing sector in Botswana.
“With the country’s buying power averaging P20 billion per annum, the efficient implementation and management of such programmes and policies is critical,” he said.
Latest export data show that 90% of the country’s exports are from mining with 80% being diamonds while Copper and Nickel contribute another 10%. Botswana’s exports for the second quarter of 2014 was just over P66 billion. “This paints a clear picture of how much work still needs to be done within the local manufacturing industry to enable meaningful diversification through exports,” emphasized Mwaba.
He said in order to encourage this capability and growth of manufacturing sector , programmes such as EDD and CEE, trade policies and Industrial development legislation must be cohesive, effective and in line with the current state and maturity of the local industry.
Meanwhile the Association has formulated a roadmap that will see the effective implementation of a new direction. “We have identified key enablers and strategic partners who we will work closely with to share experiences and find mutual ground in building a more robust public private partnership in developing Botswana’s industries’” said Mwaba.
He says he is confident that the efforts from both sides of the table will see local producers and exporters build companies that will bring about a more positive impact on the economy of Botswana.
This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.
The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.
Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.
He was speaking in Parliament on Tuesday delivering Parliament’s Finance Committee report after assessing a motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.
Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.
The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.
The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.
The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.
This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.
Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.
Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.
However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.
Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.
When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.
This as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.
Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.
The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.
Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.
In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.
Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.
Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.
Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.
Acknowledging the need to draw down from GIA no more, current Minister of Finance Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”
He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”