27 August 2008
editorial
Early this month, 11 out of 14 members of the Southern African Development Community (SADC) signed a document that will abolish tariffs.
This means that the region has been declared a Free Trade Area (FTA) by which movement of goods and services will be unlimited since import tariffs will be eliminated.
Companies in the countries that have signed will sell their goods to markets in other countries without the burden of tariffs.
This presents opportunities and challenges to countries with small industries like Botswana whose manufacturing sector is still in its infancy. The country has failed to produce enough goods for export. Mainly, it has been an importer.
The problem has been that the local market, based on a population of less than two million people, is not big enough to support the domestic manufacturing sector.
This is the reason why car manufacturers like Hyundai had to close shop because it also became the envy of other jealous car-producing countries like South Africa.
On the other hand, the anticipated market of 250 million people also raises several opportunities, allowing Botswana to make its mark in the region.
There are new companies like Can Manufacturers that produce food cans and it is already exporting to the SADC region, including bigger markets like South Africa and Zimbabwe.
This is the type of comparative advantage that Botswana could focus on since there is no turning back from the agreement, unless the country pulls out of SADC. There are other new factories like Delta Dairies, which produces UHT milk that is becoming popular on the market.
Unlike other countries, Botswana can still make an impact because of its good transport infrastructure including the Trans Kalahari highway that links South Africa, Botswana and Namibia.
Despite these developments, there are still questions that hang from this SADC FTA. There are concerns in the region about the protection of infant industries because the market is expected to be dominated by South African products.
What about the regulation on importation of vegetable products on which the Botswana government sometimes imposes a moratorium on imported products to help domestic producers?
The Ministry of Trade and Industry would do well to clarify this issue.
The ministry should tell local producers, which goods and services are tariff free because some are sensitive products, especially beef, dairy and milling products.
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