Botswana’s business climate is one of the best in the region, and a comprehensive programme of regulatory reforms is enhancing competitiveness in commerce and industry as well as supporting private sector development.
Botswana supports an enabling business environment through largely accommodative policies relating to tariff and non-tariff barriers and tax incentives, along with agencies that encourage, foster and facilitate business development and investment. Special initiatives, such as the Economic Diversification Drive (EDD), Economic Stimulus Programme (ESP) Hubs and Clusters, and Special Economic Zones (SEZs) have been responsible for speeding up the diversification of the economy and spurring growth in the manufacturing sector.
In response to the economic impact of Covid-19, a number of fiscal and financial packages were put in place during 2020 to ease liquidity pressures on businesses, and to safeguard jobs and household incomes. Following the adoption of the economic relief package, Government developed an Economic Recovery and Transformation Plan (ERTP), which was approved by Parliament in September 2020. The plan aims to fast-track recovery and transformation, as well as enhance medium to long- term economic resilience. A total of P14.5 billion has been allocated for its implementation.
To ensure that efforts are focused and aligned to the identified priorities, spending will be channelled towards the development of economic clusters, such as agriculture, tourism, creative industries and manufacturing. Furthermore, projects have been identified to expedite digital transition and SME development, improve health and education outcomes, develop productive infrastructure, and create a conducive environment in which to do business.
The government has set up an Industry Support Fund (ISF) in the amount of P1.3 billion to support local businesses. Additionally, the National Development Bank (NDB) established a P50 million Agri-Business Stimulus Fund to promote smart farming, as well as creating a P20 million Essential Services Fund to assist businesses with purchase order financing.
A National e-Commerce Strategy, which is at an advanced stage of development, aims to facilitate commercial activity across all sectors of the economy. Botswana’s National Payments System Vision and Strategy (NPSS) 2020-2024 is designed to promote the use of digital payment platforms, thus supporting the growth of the digital economy.
While the domestic economy is expected to have contracted by 7.7 percent in 2020, real GDP is projected to expand by 8.8 percent in 2021, driven mainly by the expected recovery of mining activity and anticipated improvement in global output. At the same time, the performance of the non-mining sectors should improve, underpinned by, among others, the accommodative monetary conditions in the domestic economy, improvements in water and electricity, transport and communications and trade, hotels and restaurants sectors, as well as government interventions such as the implementation of the ERTP.
PRIVATE SECTOR
The private sector is a key driver of economic growth, diversification and employment creation, and a number of initiatives have been developed to promote private sector participation in economic activities. These include Public-Private Partnerships (PPPs), privatisation of State Owned Enterprises (SOEs), and reform of the business environment. However, the contribution of the private sector to the domestic economy is still considered to be below its potential.
A review of Government’s public service delivery model is currently in the spotlight in order to ensure that taxpayers and citizens receive value-for-money. This encompasses issues relating to wastage and inefficiency, poor productivity in the public sector, and inefficient procurement processes. There is also a need to improve the selection and management of public investment projects, with the intention of opening these up to allow the private sector to play a much larger role. Public sector project management can be improved by utilising private sector skills and techniques to ensure that projects are implemented on time and within budget.
In the 2021/22 financial year, Government will be creating opportunities for the private sector to deliver major investment projects.
The PPP Policy and Implementation Framework was adopted in 2009 as an alternative means of financing public infrastructure projects and creating a conducive environment for more robust public and private sector partnerships. Using PPPs to deliver on planned projects is even more vital in view of the current economic hurdles brought about by the Covid-19 pandemic, and such partnerships will help to alleviate pressure on the Government budget in the short to medium term.
Several ministries have already identified suitable projects to be undertaken using the PPP method. The Ministry of Land Management, Water and Sanitation Services has invited the private sector to undertake the Reclamation and Treatment of Wastewater project at Glen Valley, while the Ministry of Mineral Resources, Green Technology and Energy Security has already pre-qualified bidders for the Coal to Liquid project. Private sector partners are thus being contracted in the 2021/22 financial year to finance, construct and operate these projects.
In addition, requests for expressions of interest to build, finance and operate the following projects on a PPP basis will be issued during 2021/22: the Zambezi Agro- Commercial Development project
and the Chobe-Zambezi Water Transfer Scheme; Tshele Hill Bulk Fuel Storage Facility; Sepopa Prison Farm; Headquarters for Botswana Prison Services; Serowe Magistrates Court; the Offender Rehabilitation Centre in Lobatse; the Francistown–Nata Road; Maun–Mohembo Road; and the Mmamabula– Lephalale and Mosetse–Kazungula railways.
Regarding the privatisation of SOEs, the demutualisation and privatisation of the Botswana Building Society (BBS), which included the conversion of the Society into a company registered under the Companies Act, was completed in 2018. The BBS is in the process of applying for a licence from the central bank to operate as a fully- fledged commercial bank. In addition, efforts to restructure the National Development Bank (NDB) continue. Once fully restructured, the NDB will be commercialised, with the ultimate objective of privatising it.
Another significant milestone was the demutualisation of the Botswana Stock Exchange in 2018, which involved significant changes to its legal status, structure and governance. This transformation has positioned the Stock Exchange to play a critical role in the development of the domestic capital market.
The World Bank’s ‘Doing Business 2020’ report puts Botswana in sixth place regionally after Mauritius, Rwanda, Kenya, South Africa and Zambia, and in 87th position out of 190 economies worldwide, as regards ease of doing business.
While Botswana’s regulatory environment protects the overall freedom to establish and run a business relatively well, there are nonetheless improvements which can be made to facilitate the business development in the country. Implementation of the Industrial and Trade Regulations Act commenced in June 2020. Under the regulations, only ten trade activities which have public health and safety requirements now need licensing, while the remaining 35 trade activities can start operations and register with Councils within 30 days of commencement. Furthermore, the new Act has abolished Trade Licensing Committees and introduced over-the-counter licensing.
Furthermore, the amended Environmental Assessment Act will enhance the ease of doing business in Botswana. A reduction in the categories of projects subjected to the Environmental Impact Assessment (EIA) should assist in reducing the turnaround time for reviewing EIA project documents from six to three months.
In an attempt to expedite digital transition and create a smart Botswana, Government has started the upgrading of the National Identification System (NIS). This will lead to the development of a Biometric National Identity Card (Omang), which should support timely service delivery as well as helping to facilitate the process of doing business. The project is currently at procurement stage.
Other steps being taken to improve the business environment include the review of immigration and citizenship policies and acts. Furthermore, Government is finalising a Migration Policy in collaboration with the Southern African Development Community (SADC). This should be completed by the end of the first quarter of 2021.
Government is committed to making Botswana the country of choice for international tourists and investors. Various reforms have been introduced in this regard, such as the decentralisation of visa applications to Botswana’s Diplomatic Missions and the issuance of visas at some ports of entry. In addition, a relaxation in visa requirements is helping to make doing business in Botswana smooth and seamless. Ultimately, the intention is to provide the service digitally.
Along with these measures comes the commitment to improved competitiveness and productivity, with a focus on reducing the costs of domestic production and removing other barriers to trade. Hence, competitiveness has been made the overriding benchmark by which to evaluate all Government policies and measures. For export-led growth to be achieved, it is necessary that this yardstick be applied systematically in the review of all Government decisions and major policy frameworks, systems and procedures in the economic, labour and social areas.
The Bank of Botswana’s December 2020 Business Expectations Survey (BES) indicates less pessimism about business conditions among firms in 2021.
ENTREPRENEURSHIP
Botswana recognises the need for proactive measures to encourage Small, Medium and Micro Enterprises (SMMEs) which, given their diverse nature and low start-up costs, have the potential to contribute significantly to economic development and employment, as well as to enhance production supply chains. However, a high percentage of local SMMEs fail within the first 18 months of operation, with the sector facing challenges such as lack of finance, prohibitive costs in acquiring and effectively utilising appropriate technology, and limited managerial skills and business acumen.
Government’s Cluster Development Initiative is expected to help the development of SMMEs, which currently lack the capacity to compete effectively with multinational and regional industries. The initiative will assist SMMEs with infrastructure development such as power distribution, water reticulation, telecommunications, drainage and pollution control, as well as in setting up common facility centres for balancing or improving production lines. In this context, not only does the cluster development concept have the potential to drive private sector development, it also provides important opportunities for employment creation and poverty reduction.
Funding, training and mentoring services are offered to Batswana wishing to go into business or to expand existing businesses through the autonomous and professionally- managed Citizen Entrepreneurial Development Agency (CEDA). In addition to fostering citizen entrepreneurship and empowerment, the agency is tasked with achieving economic diversification, creating sustainable employment opportunities, promoting the development of vertical integration and horizontal linkages between citizen enterprises and primary industries in agriculture, mining and tourism, and improving efficiency in the delivery of services to business.
During the 2019/20 financial year, CEDA funded 2 127 businesses valued at P451 million. In addition, the agency financed 1 442 businesses owned by women at a value of P134 million, and 568 youth-led businesses in a sum of P27 million. The Services sector was the most funded at 55 percent, followed by Agriculture at 28 percent, Property at 10 percent and Manufacturing at 7 percent. This translated into the creation of 3 883 jobs during the period under review.
The Revised CEDA Guidelines will play a facilitative role in realising broad-based citizen economic empowerment, and offer concessionary lending terms and longer repayment periods. Government has identified agro- processing, construction, technology and innovation, energy, manufacturing, agriculture, tourism and mining, as well as the creative industry, as priority sectors.
CEDA’s Letlhabile product was launched in 2020 to resuscitate the informal sector in the wake of Covid-19. The product had by the end of the year assisted 3 873 micro businesses valued at P17.6 million and protected 4 066 jobs. Moreover, CEDA’s Covid-19 Relief Fund has assisted 62 businesses at a cost of P35 million.
In an effort to promote citizen economic empowerment, Government is developing the Economic Inclusion Law, which seeks to strengthen the enforcement of
citizen economic empowerment initiatives and ensure meaningful participation of citizens in the economy.
The Local Enterprise Authority (LEA) offers a one-stop shop that provides development and support services to SMMEs. This encompasses training, mentoring, business plan finalisation, market access facilitation, and facilitation of technology adaptation and adoption. In pursuit of economic diversification, LEA promotes and facilitates entrepreneurship and enterprise development in Botswana through targeted interventions, with the current focus on the Agriculture and Manufacturing sectors as key drivers for job creation.
LEA’s incubation programme provides, on a temporary basis, shared premises, capital equipment, business and technical services, as well as access to finance, including venture capital and business herald network. The programme focuses on agreed priority sectors in the economy and forms part of the drive to create an enabling environment for the growth of entrepreneurial skills and accelerated businesses development. These five incubators comprise:
• Pilane Multi Sector Incubator, with a focus on food processing and manufacturing (2009)
• Gaborone Leather Industries Incubator (2010)
• Francistown Industrial Business Incubator, focusing on mining related products, textiles and carpentry (2011)
• Glen Valley Horticulture Incubator (2011)
• Kutla Incubation Centre, introduced to bridge the technology gap in machine operation, manufacturing/ production processes and business advisory services (2017)
LEA currently supports 1 078 SMMEs across the country, 51 of them being accommodated in LEA incubators and factory shells. The combined contribution of these enterprises to GDP stood at P420.2 million in revenue, from April 2019 to September 2020. Through LEA’s market linkages, the supported SMMEs managed to supply national retailers and parastatals to the value of P52.47 million over the same period, whilst the value of goods and services that contributed towards import substitution stood at P47.2 million. In spite of the challenging trading environment, the assistance availed to SMMEs to improve quality and secure markets led to the creation of 1 391 new jobs.
LEA began an SMME registration exercise in April 2020 with the intention of providing the necessary data to inform future enterprise development initiatives, as well as the ability to measure the impact of interventions in the form of SMME contributions to employment and GDP.
Government also continues to implement initiatives and programmes that are geared towards empowering young people in business and skills development. During the 2019/20 financial year, a total of 975 businesses owned by young people were funded at a cost of P94.67 million, in the process creating 1 918 jobs.
In addition, 24 Non-Governmental Organisations (NGOs) were funded to implement character building and life skills development programmes with a focus on unemployed youth without formal training. In this regard, a total of 160 962 youth were trained between April and November 2020. Further, funds amounting to P125 000 were allocated for skills development in Gaborone, Francistown, Kgatleng, Ghanzi and Selebi-Phikwe.
As at July 2020, enrolment in volunteer programmes averaged 16 326. At the same time, the number of interns engaged in formal employment was 8 457. In all, 1 954 jobs were created through the Youth Development Fund.
PRODUCTIVITY, LABOUR & EMPLOYMENT
International competitiveness can be achieved through growth in productivity and improved efficiency among domestic economic entities. This hinges on a labour force that is efficient, productive and reliable, an environment conducive to cooperation between workers and employers, and a first-class dispute resolution mechanism.
As the national facilitator of productivity and quality knowledge and methods, the Botswana National Productivity Centre (BNPC) is pivotal to creating a new mind-set regarding performance improvement, sustainable productivity and quality development. Productivity awareness interventions are given top priority so as to develop the required culture of excellence within Botswana. The Enterprise Support Programme (ESP) empowers Botswana’s private sector enterprises, including SMMEs, to achieve sustainable world-class performance through the application of productivity and quality best practices.
Government provides labour administration services to the nation with a view to promoting industrial harmony. These include labour inspections, trade disputes resolution, promotion of industrial relations, processing of workers compensation and work and residence permits. It supports the attainment of sustainable economic growth by putting in place favourable laws, policies and regulations in line with international labour standards.
The Botswana Decent Work Country Programme (2020- 2024) was signed in February 2020 by representatives of Government, employers and workers, as well as the International Labour Organisation (ILO). The programme is anchored on three pillars; namely, creation of sustainable and decent employment, enhanced social protection and conditions of work; and strong labour market governance institutions.
Tripartite consultations on the review of some labour laws were set to be finalised in the 2020/21 financial year. This paves the way for the drafting of Bills on the proposed changes to the laws, in order to align them with relevant international instruments. Some of the emerging labour issues that were prompted by Covid-19 are not adequately catered for in Botswana’s labour laws. For example, during the State of Emergency regulations were introduced to prevent dismissals and industrial action.
Employment creation remains Botswana’s top priority. A National Employment Policy (NEP) is being developed in order to promote productive, gainful and decent employment for Batswana. It is based on five strategic focus areas: strengthening the growth of employment in the private sector; reforming the education and training system; improving the flow of information between job seekers and job openings; strengthening programmes such as the Young Farmers’ Fund; and implementing a systematic monitoring and evaluation framework. It is expected to be finalised in the first half of 2021.
Between April 2019 and June 2020, the investment promotion drive implemented by the Botswana Investment and Trade Centre (BITC) saw the creation of 4 382 jobs, most of which were in the services sector.
Government continues to provide a platform for graduates to acquire work skills to enhance their marketability and employability, through the National Internship Programme and National Service Scheme (Tirelo Sechaba) by placing them in various organisations in the public sector, parastatals and NGOs. By September 2020, enrolment in the National Internship Programme was 3 070, out of which 2 460 were in the public sector, 474 in Parastatals and 136 in NGOs, while Tirelo Sechaba had enrolled 12 534 against the target of 15 000. Both programmes are currently being revamped, in collaboration with the United Nations Development Programme (UNDP), to make them more responsive to the ever-changing needs of the youth. The review is expected to be completed by the end of the 2021/22 financial year, and is expected to inform the way forward on the administration of these programmes.
MANUFACTURING
The manufacturing sector is important to job creation, being reasonably labour intensive and paying higher average wages than many other sectors. Firms are concentrated in urban areas such as Gaborone and Francistown, as well as Selebi-Phikwe. Botswana produces a wide variety of goods for both local and export markets, including polished diamonds and semi-precious stones; electronic and electrical items; vehicle parts and components; engineering and steel products; textiles, garments and other ancillary products; leather goods and canned products. Manufacturers enjoy a concessionary corporate tax rate of 15 percent.
For the year ending September 2019, manufacturing sector output expanded by 3.5 percent compared with 3.6 percent in 2018. The slightly lower increase resulted from contractions in tanning and leather products (3.8 percent), textiles (2.3 percent) and meat and meat products (1.5 percent). In addition, growth in other manufacturing output decelerated from 3.8 percent to 3.5 percent during the same period. Meanwhile, beverages output increased by
1.4 percent, reflecting the extension of liquor trading hours effected in August 2018.
During 2020, restrictions on movement and Covid-19 precaution measures slowed logistics and disrupted supply chains. Moreover, the pandemic slowed down economic activity as manufacturers and producers were not able to operate with a full complement of workers due to having to adhere to social distancing measures. As such, demand remained the same, or even higher, while supply was sluggish, thus leading to an increase in prices.
Botswana’s Industrial Development Policy is presently under review, and should be completed by December 2021. Its primary objective is to align it to the Southern African Development Community (SADC) Protocol on Industry. Government has over the years introduced statutory instruments to support local industry, growth and investment. Most recently, these have included restrictions on the importation of bread and confectionery as well as face masks.
An amount of P1.3 billion was approved in the 2021/22 Supplementary Budget for the Industry Support Facility (ISF), which provides soft loans for existing businesses. The loans are administered through CEDA, the NDB and BDC, depending on the size and sector of the borrowing enterprises. Out of the total, P900 million is provided for general industry, while there are dedicated sums of P200 million for tourism enterprises and P100 million for agricultural enterprises. An additional P100 million has been made available to provide small grants to informal sector and micro enterprises registered with LEA.
Furthermore, Government’s focus on transformation has necessitated the review of the Public Procurement and Asset Disposal (PPAD) Act and the Local Authorities Procurement and Asset Disposal (LAPAD) Act with a view to aligning them with the transformation agenda. The reviews will help Government empower Batswana through public procurement and reduce the country’s import bill – especially for power supply, clothing, apparel, leather products and
food imports – as well as promoting the domestic production base. It will also serve to stimulate economic growth through targeted sectors such as agriculture and manufacturing.
Established in 1995, the Botswana Exporters and Manufacturers Association (BEMA) is a member- based organisation which advocates for a conducive business environment for local producers and exporters. BEMA has been assisting manufacturers in enhancing their competitiveness though producing good quality and competitively priced products.
One of the strategic initiatives identified to promote economic diversification is the Economic Diversification Drive (EDD), which uses Government’s purchasing power to support local production of goods and services. The EDD medium to long term strategy focuses on the leather, dairy and textiles subsectors.
The Botswana Development Corporation has a primary mandate to drive industrialisation by providing financial assistance to investors with commercially viable projects. The Corporation provides both debt and equity financing for enterprises fulfilling one or more of the following criteria: pioneering new industries; unlocking value in existing industries; stimulating private sector growth and fostering linkages with local industry; driving diversification and exports; and creating significant employment.
The Cluster Development Strategy focuses on improving business productivity, value chains and competitiveness. The five priority sectors include: diamond beneficiation; tourism; beef; mining; finance and knowledge intensive business services. This strategy underpins the establishment of Special Economic Zones (SEZs). The intention is to accelerate the pace of industrialisation by attracting high-calibre domestic and foreign investors to conduct business within a specialised operational environment and incentive structure to boost the country’s competitiveness in global export markets, especially in the non-mineral sectors. Preparations are at an advanced stage for the operationalising of SEZs. The Special Economic Zones Authority (SEZA) has been set up, along with business development and marketing strategies, regulations and incentives. There are currently 15 potential investors, with an estimated investment value exceeding P10 billion. The first company was licensed in June 2020 and will begin to operate as a brownfield investment company from Sir Seretse Khama International Airport (SSKIA). Pandamatenga agricultural area is the location for SEZ projects with a focus on horticulture. The design and construction of 12 steel grain silos with an overall storage capacity of 60 000 metric tonnes is at an advanced stage at should be finished by August 2021. In Gaborone, the development of Phase 1 of the SSKIA SEZ is underway and is expected to be completed in May 2021
Botswana is well-placed geographically in central Southern Africa to produce leather goods for the growing SADC and wider continental consumer base, and is home to manufacturers of upholstery, shoes, belts, protective wear and accessories. A leather cluster and park is under development on a 38-hectare piece of land in Lobatse, with the construction of the first phase of the Lobatse Leather Park is expected to begin before the end of the 2020/21 financial year. It should be completed within 18 months. The tender for the construction of the bulk infrastructure has been evaluated and is currently being adjudicated. The leather park is intended to feed into other sectors, such as automotive and component manufacturing, where synergies will be developed. The aim is to produce high premium and luxury leather products ranging from OEM car seats to consumables. LEA is also involved in developing the subsector, and has a Leather Industry Incubator in Gaborone. Enterprises currently include upholstery, shoe manufacture and other leather products. The incubator provides leather sector courses on design, cutting, stitching, lasting and finishing, with clients able to make use of a two-year incubation period during which they receive subsidised rates, shared facilities, technology and business coaching.
Botswana’s textile and clothing industry was established in the 1980s and expanded rapidly as a result of the trade preferences available to it under the Southern African Customs Union (SACU) and Cotonou agreements, as well as the African Growth and Opportunity Act (AGOA). Francistown is at the heart of the industry, with businesses involved in spinning, weaving, knitting and garments manufacturing, producing items such as industrial wear, school wear, corporate wear, sportswear, towelling products, acrylic fibre blankets, T-shirts and men’s underwear. Formed in 2014, the Botswana Textile and Clothing Association (BTCA) represents Botswana’s textile firms. Historically, Botswana’s textile companies have carried out manufacturing mainly under government contract, with few local manufacturers exporting to the South African market or beyond. As the garment industry is one of the key sectors identified under the country’s EDD, Government has been working with the USAID Southern Africa Trade and Investment Hub to formulate a strategy for the sector to attract foreign direct investment. With AGOA extended until 2025, investors are being encouraged to set up export operations and take advantage of unilateral tariff- free market access. It was reported in September 2020 that the Trade and Investment Hub is working with Botswana- based Dinesh Textiles to explore potential exports of personal protective equipment (PPE) to the United States. The firm is part of the 14 PPE producing firms in the USAID TradeHub’s pilot programme to supply the Hub’s targeted markets in South Africa and the United States.
Selebi-Phikwe is another location for large-scale light manufacturing, and was targeted by Government as a regional metallurgical hub for the refinement of base metal concentrates owing to the area’s copper-nickel mining industry. The Selebi-Phikwe Economic Diversification Unit (SPEDU) began operating in 2014. Following the closure of the BCL mine in 2016, Government has refocused the region’s development strategy on the following crucial sectors: agricultural production and related value chains, tourism and related services, and manufacturing; establishing the region as a Special Economic Zone. Fiscal incentives include a tax rate of 5 percent for the first five years and 10 percent thereafter, and customs duty and VAT rebates on imported raw materials.