The Chief Executive Officer (CEO) of Anglo American, who is also Chairman of De Beers Group, Mark Cutifani used the recent Botswana Confederation of Commerce Industry and Manpower (BOCCIM) 13th National Business Conference held in Maun, to share insights into Botswana’s economic projections.
Cutifani was invited in his capacity of business leadership position to share his insights about Botswana.
His remarks focused on answering the question of how Botswana should best leverage its enviable strengths to continue the growth trajectory established in the half century since independence.
The De Beers Chairman said he understands that Botswana has long had the desire to diversify its economy away from diamonds. He explained that despite the growth achieved, the country arguably remains vulnerable to shifts in the global diamond market.
Diversification beyond extractives in general and diamonds in particular is crucial as proven resources will eventually deplete, he explained. “It is understandable that the leadership would like to make more progress towards having a more vibrant manufacturing, services and export economy,” he observed.
Cutifani said Botswana’s development strategy should be based on clear objectives that foster long term infrastructure development, the generation of intellectual capital, enhanced access to markets, inbound investments competition and improved relationships for all stakeholders.
According to Cutifani, Botswana needs three key ingredients to drive the depth and breadth of its primary growth path.
BOTSWANA HAS TO BUILD OFF HER NATURAL RESOURCES According to Cutifani there are very few economies that have not begun their growth path outside of the mining and agricultural sectors. He indicated that Botswana is in a fortunate position to not only have the mineral endowment but, contrary to some other developing nations, to have used it well.
“Mineral resources are like any other natural resources; you can either use them well or squander your endowment through short sighted and inadequate policy frameworks and approaches.”
Cutifani said Anglo American stands ready to partner with Botswana government in evaluating the economic viability of natural resource projects, across a range of commodities.
The De Beers chairman said beyond mining, tourism will continue to play a key role in promoting Botswana to the rest of the world. But he warned that tourism centers must be supported with complementary attractions and superior service that will be competitive with the country’s target customer base’s choices for high quality vacation experiences.
STRONG INSTITUTIONS, SOUND POLICIES CRITICAL Modern public governance best practice indicates that progressive, consistent, transparent and business friendly policy environments are needed for business and economics to flourish. Cutifani explained that it should be any different in Botswana. He said the country must continue to strengthen its public institutions to develop standards and norms compatible with the most successful democracies in the world.
He advised that success in this area requires a hard and honest look at the country itself and readiness to make changes where necessary to the country’s way of life norms and customs. Cutifani shared that Botswana should realize that it is competing for capital against Singapore, Brazil, Tanzania, Italy and South Africa, among other countries.
“Botswana should make it easier for foreign businesses to operate in Botswana,” and in relation to attracting Foreign Direct Investment (FDI) and ensuring the country’s global competitiveness, Cutifani advised “today living in the interconnected world, business has no boundaries because prices are global not local. States should not try and impose prices onto a producer or to cross subsidize inefficient industries by distorting prices, this compromises natural competitive advantages and opportunities and embeds inefficiently through ought an economy and society. All prices eventually come back to a global value.”
DEVELOP AND INCLUDE SOCIETY IN THE GROWTH PLAN Fortunately for Botswana, the world’s greatest and most destructive sources of social divisions and strife (ethnicity, religion, language and class) have had relatively minimum impact on Botswana’s fabric in the period since its independence. He expressed that it is certainly encouraging that democracy, development, dignity, discipline and delivery continue to be upheld as the country’s moral code through the 5D’s roadmap. He added that this is an essential ingredient to maintaining peace, the rule of law and stability in the country.
Cutifani explained that creating opportunities through investments in infrastructure is also critical. He explained that without infrastructure sustainable growth and truly diversified economy cannot be achieved. He stressed that it is important to facilitate and build infrastructures that supports other industry opportunities, in terms of access through roads and rail but also energy and information technology services.
He also advised on intellectual capital as the most important resource it could be for Botswana highlighting that young people is more valuable than the country’s diamonds.
“The quality of Botswana’s future will be determined by the quality of its leadership and the talents the country develops and retain to take its challenge. If Botswana does not find a way to make it attractive to the country’s brightest and most talented they will be lost to a world that owes Botswana a little.”
Cutifani advised that while attracting diamond grading expertise and research activities in Botswana will generate some economic activity in the short term, but the real long term value lies in retaining the intellectual property generated by attracting the world’s young high potential talent and skilled workforce to this country.
Despite Covid-19 interrupting trade worldwide, exporting companies in Botswana which benefited from the Botswana Investment and Trade Centre (BITC) services realised P2.96 billion in export earnings during the period from April 2020 to March 2021.
In the preceding financial year, the sale of locally manufactured products in foreign markets had registered export revenue of P2, 427 billion against a target of P3, 211 billion BITC, which celebrates 10 years since establishment, continues to carry out several initiatives targeted towards expanding the Botswana export base in line with Botswana’s desire to be an export led economy, underpinned by a robust export promotion programme in line with the National Export Strategy.
The main products exported were swamp cruiser boats, pvc tanks and pvc pipes, ignition wiring sets, semi-precious stones, veterinary medicines, hair braids, coal, textiles (towels and t-shirts) and automobile batteries. These goods were destined mainly for South Africa, Zimbabwe, Austria, Germany, and Namibia.
With Covid-19 still a problem, BITC continues to roll out targeted virtual trade promotion missions across the SADC region with a view to seeking long-lasting market opportunities for locally manufactured products.
Recently, the Centre facilitated participation for Botswana companies at the Eastern Cape Development Council (ECDC) Virtual Export Symposium, the Botswana-Zimbabwe Virtual Trade Mission, the Botswana-Zambia Virtual Trade Mission, Botswana-South Africa Virtual Buyer/Seller Mission as well as the Botswana-Namibia Virtual Trade Mission.
BITC has introduced an e-Exporting programme aimed at assisting Botswana exporters to conduct business on several recommended e-commerce platforms. Due to the advent of COVID-19, BITC is currently promoting e-trade among companies through the establishment of e-commerce platforms and is assisting local companies to embrace digitisation by adopting e-commerce platforms to reach export markets as well as assisting local e-commerce platform developers to scale up their online marketplaces.
During the 2019/2020 financial year, BITC embarked on several initiatives targeted at growing exports in the country; facilitation of participation of local companies in international trade platforms in order to enhance export sales of local products and services into external markets.
BITC also helped in capacity development of local companies to compete in global markets and the nurturing of export awareness and culture among local manufacturers in order to enhance their skills and knowledge of export processes; and in development and implementation of trade facilitation tools that look to improve the overall ease of doing business in Botswana.
As part of building export capacity in 2019/20, six (6) companies were selected to initiate a process to be Organic and Fair Trade Certified. These companies are; Blue Pride (Pty) Ltd, Motlopi Beverages, Moringa Technology Industries (Pty) Ltd, Sleek Foods, Maungo Craft and Divine Morula.
In 2019 seven companies which were enrolled in the Botswana Exporter Development Programme were capacitated with attaining BOBS ISO 9001: 2015 certification. Three (3) companies successfully attained BOBS ISO 9001:2015 certification. These were Lithoflex (Pty) Ltd, General Packaging Industries and Power Engineering.
BITC’s annual flagship exhibition, Global Expo Botswana (GEB) to create opportunities for trade and strategic synergies between local and international companies. The Global Expo Botswana) is a premier business to business exposition that attracts FDI, expansion of domestic investment, promotion of exports of locally produced goods and services and promotion of trade between Botswana and other countries.
The portal also provides information on; measures, legal documents, and forms and procedures needed by Botswana companies that intend on doing business abroad. BITC continues to assist both potential and existing local manufacturing and service entities to realise their export ambitions. This assistance is pursued through the ambit of the Botswana Exporter Development Programme (BEDP) and the Trade Promotion Programme.
BEDP was revised in 2020 in partnership with the United Nations Development Programme (UNDP) with a vision to developing a diversified export-based economy. The programme focuses mostly on capacitating companies to reach export readiness status.
Prices for goods and services in this country continue to increase, with the latest figures from Statistics Botswana showing that in May 2022, inflation rate rose to 11.9 percent from 9.6 percent recorded in April 2022.
According to Statistics Botswana update released this week, the largest upward contributions to the annual inflation rate in May 2022 came from increase in the cost of transport (7.2 percent), housing, water, electricity, gas & other Fuels (1.4 percent), food & non-alcoholic beverages (1.1 percent) and miscellaneous goods & services (0.8 percent).
With regard to regional inflation rates between April and May 2022, the Rural Villages inflation rate went up by 2.5 percentage points, from 9.6 percent in April to 12.1 percent in May 2022, according to the government owned statistics entity.
In the monthly update the entity stated that the Urban Villages inflation rate stood at 11.8 percent in May 2022, a rise of 2.4 percentage points from the April rate of 9.4 percent, whereas the Cities & Towns inflation rate recorded an increase of 1.9 percentage points, from 9.9 percent in April to 11.8 percent in May.
Commenting on the national Consumer Price Index, the entity stated that it went up by 2.6 percent, from 120.1 in April to 123.2 in May 2022. Statisticians from the entity noted that the transport group index registered an increase of 7.3 percent, from 134.5 in April to 144.2 in May, mainly due to the rise in retail pump prices for petrol and diesel by P1.54 and P2.74 per litre respectively, which effected on the 13th of May 2022.
The food & non-alcoholic beverages group index rose by 2.6 percent, from 118.6 in April 2022 to 121.6 in May 2022 and this came as a result of increase in prices of oils & fats, vegetables, bread & cereal, mineral waters, soft drinks, fruits & vegetables juices, fish (Fresh, Chilled & Frozen) and meat (Fresh, Chilled & Frozen), according to the Statisticians.
The Statisticians said the furnishing, household equipment & routine maintenance group index rose by 1.0 percent, from 111.6 in April 2022 to 112.7 in May 2022 and this was attributed to a general increase in prices of household appliances, glassware, tableware & household utensils and goods & services for household maintenance.
The prices for clothing & footwear group index moved from 109.4 to 110.4, registering a rise of 0.9 percent during the period under review. Bank of Botswana has projected higher inflation in the short term, associated with the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices and added that the possible increase in public service salaries could add also upward pressure to inflation in this country.
In the latest June 2022 global economic prospects, released last week the World Bank has warned that low global economic growth and economic activity in global commodity markets such as China and Europe could negatively affect export revenues for Botswana and other Sub Saharan countries.
Recent data from Statistics Botswana show that Botswana’s exports destined to the global markets such as Asia and the European Union (EU) on monthly basis accounts for around 60.1 percent and 20.1 percent respectively.
The World Bank last week lowered its 2022 projections of global economic growth and indicated that the new forecasts could be bad news for countries like Botswana who are dependent on export mineral revenues. The Bank noted that just over two years after COVID-19 caused the deepest global recession since World War II, the world economy is again in danger and stated that this time it is facing high inflation and slow growth at the same time.
In the recent June projections, the bank lowered its forecast of global economic growth from the January 4.1 percent to 2.1 percent. “Our June forecasts reflect a sizable downgrade to the outlook: global growth is expected to slow sharply from 5.7 percent in 2021 to 2.9 percent this year. This also reflects a nearly one-third cut to our January 2022 forecast for this year of 4.1 percent,” a team of World Bank economists noted in the June 2022 Global Economic Prospects.
The World Bank indicated that exports from Botswana and other Sub Saharan countries could suffer from a substantial deceleration of activity in China and Europe. The Bank noted that exporters of industrial metals, crude oil, and ores such as Angola, Democratic Republic of Congo, Republic of Congo, South Africa, and Zambia could suffer from a substantial deceleration of activity in China.
On the other hand a sharp contraction of growth in the euro area could hurt exporters of agricultural products such as beef, coffee, tea, tobacco, cotton, and textiles from Botswana, Ethiopia, Madagascar and Malawi. “The faster-than-expected deceleration of the global economy and increased volatility of commodity prices could hurt many SSA commodity exporters,” said World Bank President David Malpass.
Malpass indicated that subdued growth in the global markets for Botswana and other Sub Saharan exports will likely persist throughout the decade because of weak investment in most of the world.
He noted that with inflation now running at multi-decade highs in many countries and supply expected to grow slowly, inflation could remain higher for longer than currently anticipated. “Even if a global recession is averted, the pain of stagflation could persist for several years— unless major supply increases are set in motion. Amid the war in Ukraine, surging inflation, and rising interest rates, global economic growth is expected to slump in 2022. Several years of above-average inflation and below-average growth are now likely,” said Malpass.