18 August 2017

Botswana: Reflecting On Botswana's FDI Climate

Gaborone — As Botswana continues to intensify its Foreign Direct Investment (FDI) effort, BOPA reporter Calviniah Kgautlhe finds out what foreign investors think of Botswana's investment climate and what challenges they encounter in the process of setting up companies in Botswana.

Botswana Investment and Trade Center acting chief executive officer, Mr Meshack Tshekedi recently said Botswana's Gross Domestic Product (GDP) was at P170 billion with mainly exports in diamonds, copper, nickel, soda ash, beef and tourism.

The imports, he said, were foodstuffs, machinery, electrical goods, transport equipment, textiles, fuel, wood and paper products, metal and metal products and diamonds which he said brought the import bill in 2016 to P66.84 billion.

Mr Tshekedi was addressing business delegates from Mozambique and France in separate conventions.

Of these imports, he said, the diamond industry which included machinery used to mine diamonds constituted 28 per cent of total imported products amounting to

P18.9 billion followed by machinery and electrical equipment imports constituting 14 per cent which translated to P9.2 billion.

He added that fuel imports made up 13 per cent, which amounted to P8.6 billion, food beverages and tobacco cost 11 per cent, which amounted to P7.5 billion while chemical and rubber products constituted 10 per cent amounting to P6.6 billion.

This, he said, necessitated the need for FDI in various sectors of the economy, noting that key sectors investors could explore included energy, infrastructure and property development, transport and logistics, tourism and hospitality as well as agro processing.

Contacted for comment, a member of the Russian community in Botswana, Mr Farhad Sattarov said where challenges exist, they presented opportunities for business.

He noted that much has been said about vast business opportunities in Botswana. These, he said, include political stability and predictability of the country's political environment, absence of ethnic and religious clashes as well as border disputes, strong democratic institutions, respect for the rule of law, well-structured understandable legislation and a transparent tax regulation regime, low corruption levels. T

hese are just a few merits of Botswana, though considered as basic pre-requisites for foreign investment in the first place.

"Money likes order, while those who are seeking to invest need to know the rules of the game. Without doubt, one can say that Botswana generally provides both," Mr Sattarov said.

But he hastened to add that while the business environment is conducive, it is not enough to expect an avalanche of FDI for the reason that there were shortcomings that impede businesses to thrive.

"The power outages, shortages of water supply, slow Internet and other infrastructural issues," he noted.

Further Mr Sattarov reiterated that during more than five years of his stay in Botswana, he has witnessed the construction of roads in Gaborone, Francistown and other areas; creation of the Central Business District, renovation of airports in Gaborone, Francistown and Kasane which were also part of the national infrastructure.

Furthermore, he said action taken by government to promote the establishment of Special Economic Zones could be another incentive to make Botswana even more attractive for foreign and local investors.

To the Russian, the shortage of infrastructure, goods and services was a potential business opportunity for investors. He said low levels of Information

Communication Technology (ICT) services in the country could open an opportunity for public and private investment institutions to pioneer on the Botswana market through provision of high speed broadband through construction of a national network of terminals and payment systems.

Furthermore, the advanced ICT networks would facilitate a set-up of automation and robotisation of infrastructural networks, installation of navigation and intellectual management systems where there would be intellectual houses, integrated traffic control, remote monitoring and early warning anti-poaching systems.

He emphasised that there was no need to make a technological revolution, or invent something new nor spend huge amounts of capital as those ideas have already been successfully implemented in Europe, USA and Russia.

"A low level or even absence of competition in some areas can be another bonus for pioneering investors," he stated.

Furthermore, Mr Sattarov said one of the Russian businessmen have been striving to launch a bioethanol production in Botswana fully based on local raw materials and manpower. But as far as the business side was concerned, the environment was friendly and transparent.

With properly prepared documents and following the procedures in place, it was relatively easy to get necessary licenses for a certain type of economic activity.

There was no unfair attitude, let alone bribes or extortions which could be a case in many other countries.

But the biggest challenge for the aforementioned businessman as well as other expatriates, he said, was obtaining a work permit which was a key factor for maintaining a certain level of investment and technology transfer and their further promotion. Despite the fact that he had invested more than P2million, his application was rejected twice before he succeeded. Furthermore, he noted that the investors noticed that there was shortage of skilled people and poor work ethic.

However, he said government had been working on this through allocation of sufficient funds, providing necessary facilities, and encouraging foreign companies to have succession plans and skill transfer policies.

"The problem is not absence of skills, I believe that absence of skills is a natural and variable state of the labour market: today people are non-skilled, tomorrow (after training) they are skilled and the day after tomorrow (with gaining an experience) they are highly skilled," he said.

In an interview, French investor, Mr Jacques Kurkjdjun, who is into manufacturing industry and is Africa Business Development director for Dassault Systemes Company, which primarily deals in aerospace, said there was a lot of business potential in Botswana.

Mr Kurkjdjun added that it was critical for the country to hinge its economic diversification drive on education where young people learned skills and techniques at a tender age and would be able to apply themselves later in life.

"We create software to build cars, machinery and airplanes it will become difficult to set up here because we won't find skilled people to do the job," he said.

Business Botswana president, Mr Lokwalo Mosienyane called for investor confidence.

He wants investors to be export oriented to enable Botswana to attain a higher GDP. For him, the private sector is the engine of the economy, hence the need for government to develop pieces of legislation targeted at enabling business environment.

"Government must take the position of a bow and the private sector should take the position of an arrow," he said.

"Right now it is very difficult for Botswana to do business with other countries, for instance, Ghana because there are no roads. The infrastructure that we have is very colonial and we must identify these areas and work on them," he noted.

He stated that it was critical to identify existing trade nodes and develop them to encourage intra trade within the region. Mr Mosienyane suggested that government should create bonds and investment funds which investors would use to procure shares in companies offshore.

These, he said, would enable them to set up in the country and create jobs for local people and export back to European markets where they would enjoy Economic Partnership Agreements (EPA) and other incentives enjoyed by African markets.

Weighing in on Mr Sattarov's position on immigration laws he said, rigid visa and work permits restrictions must be removed because they make it difficult for someone to work in Botswana.

Meanwhile, government in 2015, through the Ministry of Investment, Trade and Industry introduced Doing Business Reforms.

The reforms seek to make it easier to set up business in Botswana, and they contain a revised tax regime for foreign investors, reduced red tapes and shortened time frame for setting up a company or a business in Botswana.

Therefore, it remains to be seen how the country would fare going forward to reduce its high import bill and increase its exports.

Source : BOPA

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