By Oscar Habeenzu | for Moakanyi Magazine
Botswana is open for business, and its ranking on the African and Global market space is getting better by the day; 2020 will be a great year for the country, as the world furthers Doing Business in Botswana.
The economic year 2020 is around the corner, and whosoever has a plan before others have one in their industry, has a greater chance of profitability and growth therein. Even if some may not have, there are many investors across the world, that have great and profitable plans for Botswana. Their first port of call for advice on doing business in Botswana is the Doing Business in 2020 Report.
Botswana is the fastest growing economy in the world for the last four decades, and it ranks as the 8th best place to do business in Africa, and 87th in the world, with a 66.2 score on the Ease of Doing Business Index. What is their formula, you may ask?
In a Global Megatrends for 2020 review, Bloomberg noted that globally Urbanization, Consumerism, Digitalization are on the rise, and focus of developed economies, Africa being a ripe destination of investment in these regards. Botswana stands to benefit and tap into new capital injections in these areas of interest.
Speaking at the JCK Las Vegas, in May 2019, His Excellency Dr. Mokgweetsi Masisi, the President of Botswana, said “The very fact that Debswana is the largest private sector entity in the country and that has been so successful is testament to the fact that this government is deeply committed to yielding a private sector led economy”. Diamond was the inception of a knowledge economy that is using international standards of partnerships that are profitable yet beneficial to the Batswana people.
Botswana is moving from being a mineral resource-based economy, into a knowledge-based economy. In order to achieve such, the country must open itself to the world through public and private partnerships that have clear localised beneficiation schemes that not only include economic, but social developmental benefits. The forging of such an economy can only be made possible if the outside world has enough information on the playing field in Botswana; the Doing Business Report of 2020, provides such.
The Doing Business Index measures economic performance of nations in respect to Starting a business; Dealing with construction permits; Getting electricity; Registering property; Getting credit; Protecting minority investors; Paying taxes; Trading across borders; Enforcing contracts; Resolving insolvency; and Employing workers.
The 17th edition of the World Bank’s report “Doing Business in 2020” was released this October 2019. In it, like a few other African countries, Botswana has made a key improvement, and still leaving more areas needing attention. We highlight the country’s performance, and shape a perspective of this report and its impact on local economics for the SMME, listed, and conglomerate business operating in Botswana.
The landscape for doing business in Africa is improving, as more economies open up to globalisation in this fourth industrial age, dubbed Industry 4.0, hence using this globalised yardstick to measure economic engagement and performance goes a long way in developing the economy of Botswana.
Doing Business Report, Africa in 2020
Doing Business 2020 measures regulations across 190 economies in 12 business regulatory areas to assess the business environment in each economy. Ten of these indicators were used to estimate an ease of doing business score this year, over the 12 months ending April 30, 2019. This is the 17th edition of a study that has motivated governments worldwide to undertake business reforms with the goal of bolstering sustainable economic growth.
The study looks at rules affecting a business from inception through operation to wind-down: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency.
According to the 2019 report, Mauritius is 13th in world yet first in Africa, it is followed by Rwanda (2nd) with a 76.5 score and 38th in the world; Morocco (3rd) with a 73.4 score and 53th; Kenya (4th) with a 73.2 score and 56th; Tunisia (5th) with a 68.7 score and 78th; South Africa (6th) with a 67.0 score and 84th; Zambia (7th) with a 66.9 score and 85th; Botswana (8th) with a 66.2 score and 87th; Togo (9th) with a 62.3 score and 97th; and Seychelles (10th) with a 61.7 score and 100th.
International Trade
To understand Botswana’s economic health, you must take a look at the economic performance from an international perspective; international trade. Total imports for 2018 were valued at P64,275 billion, reflecting an increase of 16.6% over the 2017 value of P55.124 billion. The increase is attributable to imports of diamonds, which rose by 26.3% from P14.356 billion recorded in 2017 to P18.131 billion in 2018. Most commodity groups also experienced increases in 2018.
An increase of 9.7% was registered for total exports in 2018, from P61.226 billion in 2017 to P67.191 billion. Diamond exports contributed significantly to the increase in total exports with an 8.9% increase from P55.458 billion in 2017 to P60.409 billion in 2018.
A trade surplus of P2.916 billion was recorded in 2018 as compared to a trade surplus of P6.101 billion in 2017. Though the surplus was lower in 2018, Botswana development is evident in its economic activities, and remains a profitable investment destination.
Botswana Beef Exports
Beef is a key export that plays a major role in Botswana as the world does business with its economy. According to FAO, the world has 1.468 billion head of cattle, and Botswana has 2.5 million of that herd, and it is estimated to account for less than 2% of Botswana’s GDP.
Further, recurrent outbreaks of cattle diseases and drought, and the rise in domestic demand for beef (coupled with stagnant domestic supply) have adversely impacted beef export competitiveness. In June 2019, “Botswana has launched a process involving privatization of its loss-making beef exporting firm Botswana Meat Commission (BMC). This follows a report by auditing firm, KPMG Botswana which recommended that BMC should be privatized as a way of liberalising Botswana beef export market”, reported The Southern Times. The privatization of the BMC creates an open field for more entrants into the export market, as cattle herders will have options; that being a major growth factor to the communal and small-scale farmer who own 80% of the export beef sent to the commission. The Weekend Post, reported that the “BMC has been protected from export competition, with several privately owned and local council abattoirs, as well as a large number of local butcheries that undertake slaughter having been restricted to supply only the domestic market.”
The beef industry in Botswana plays an important role as a source of foreign exchange, rural livelihoods and employment, and there is potential for exports, as Botswana, despite the losses being made by the sole exporter – BMC, the country is a regional leader. Beef accounts for 65% of Botswana’s Agricultural exports, which were valued at US$118 million in 2017 and 43% was going to the United Kingdom and 42% was going to Norway, and the remaining 15% to the rest of the world.
SMME Development in Botswana
Another positive indicator of doing business in Botswana is the development of Small Businesses. The Ministry of Investment, Trade and Industry (MITI) endeavours to create a conducive environment for the promotion of Investment and development of Sustainable Industries and Trade, with a view to diversifying and growing the economy, creating wealth and employment, so that there is prosperity for all. The Ministry is prioritising entrepreneurship and the advancement of Small, Micro and Medium-sized Enterprises (SMMEs) as the catalyst to achieving economic growth and development as well as economic diversification.
To effectively contribute towards attainment of this vision, the Ministry has refocused its implementation approach and initiatives through a three-pronged Apex model; the SMME Development, Investment Promotion and Export Development. One of the core initiatives under the SMME development Apex is to develop and provide pre-project funding for high impact projects in the SMME space on a grant basis.
The Project Facilitation Fund is an outcome of the collaboration between Citizen Entrepreneurial Development Agency (CEDA) and the Local Enterprise Authority (LEA) to achieve the SMME Development Apex.
At the launch of the Fund in May 2019, the Minister of Investment, Industry and Trade, Hon. Bogolo Kenewendo, expressed her desire, says “Government considers citizen economic empowerment a vehicle which can address development challenges that our country is facing today. This include poverty, unemployment and income inequality. It is for this reason that economic growth and diversification remain priority for our country. Government will therefore continue to address challenges that impede economic growth, especially for the SMMEs and implement initiatives geared towards broadening the economic base.”
Energy Exports from Botswana
Through Shumba Energy, Botswana is turning to be the lion king of energy in the Southern African region, and this will be key to doing business in and with Botswana in 2020 and beyond.
Shumba Energy made headlines in August 2019, as it entered into a lucrative joint venture, creating a new venture, and driving its operations – Coal and Petroleum Limited. Mining MX reported that “SHUMBA Energy, the Botswana-listed firm, has signed an agreement with two Chinese companies that could lead to the develop of a $1bn coal-to-liquids plant (CTL) using coal from its Mabesekwa prospect in Botswana. Shumba formed a joint venture Coal Petroleum (CoPet) in which it will have an 80% stake. CoPet is to develop Project Tsosoloso which is targeting production of petroleum using coal supplied from its one billion tonne Mabesekwa prospect. CoPet is partnered with Powerchina International Group and Wison Group which will bring the CTL technology to bear in a bankable feasibility study. Phumaphi said it was possible CoPet could be listed in the UK in order to access capital to fund its equity contribution to Project Tsosoloso”.
As the 8th best economic environment out of 54 economies in Africa, Botswana stands to effectively attract, collaborate, and profit with international investors in 2020, and beyond.
