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Country Commercial Guides
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CHAPTER V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENTTrade data provided by the Botswana Central Statistics Office indicates that major imports for 1998 in descending monetary value were as follows:
- Machinery & Electrical Goods
- Vehicles & Transport Equipment
- Food and Beverages
- Metal & Metal Products
- Chemical & Rubber Products
- Wood & Paper Products
- Textile and FootwearMost large development projects are government sponsored and are funded from existing revenues. The supply of inputs for such projects generates export leads for U.S. firms. Construction activities, particularly for government office blocks, factory shells and primary schools; district council water and sewerage projects; and township services receive a good share of the development budget. The upgrading of hospitals and the provision of medical equipment also provide good U.S. export prospects. In addition, the Government plans investments in secondary road construction, bitumen road improvements, and rural roads. Educational projects and supplies are ongoing expenditures. Other planned projects which have the potential to generate export orders include village water supply and sanitation development projects, rural power supply projects, and civil aviation infrastructure improvements.
A Central Business District (CBD) is planned for Gaborone, Botswana's capital, and the first phase will commence in 1999. This will primarily consist of the construction of access roads, water and sewerage reticulation, ducting and sleeving for telecommunication and power works, traffic signaling, and street lighting. The CBD will be developed in three phases stretching over a 20-year period. It is envisioned as the center of communications and the focus of business, shopping and entertainment for future metropolitan populations. Civil engineering contractors are strongly encouraged to submit tenders for this multi-million dollar project.
Information on Government tenders and reports on market insights are available from the World Wide Web address below:
www.usia.gov/abtusia/posts/bc1/wwwhcomm.html
Commercial opportunities are generally small in scale in the private sector. However, opportunities do exist for trade and investment, and U.S. firms have discovered profitable market niches. The improved political and economic prospects for southern Africa have also brought new opportunities for assembly or service operations targeting the much larger regional market.
In addition to the sectors highlighted above, we consider the following areas as potentially interesting to U.S. firms:
1 - Trade Opportunity: Hospital Equipment/ Pharmaceuticals
The Government has committed Pula 250 million ($55.5million) to upgrading all district hospitals in the country. The campaign against HIV/AIDS receives top billing as efforts to develop human resources continue to be undermined by the pandemic. The effect of this scourge has prompted the construction of clinics and the provision of vehicles, furniture and equipment. Pula 14.5 million ($3.2 million) has been provided for fiscal year 1999 to cover these activities. The Government has also decided to introduce drug cocktails to reduce HIV transmission from expectant mother to unborn child, and has provided Pula 16 million ($ 3.5 million) this year. This scenario presents opportunities for U.S. supplies in the health sector.
Data provided by the Botswana Trade Statistics Unit indicate that there has been considerable increase in the supply of pharmaceutical products over the 1997/98 period. This is an area where U.S. companies might successfully compete, although they will undoubtedly face stiff competition from well established South African firms.
Pharmaceuticals
(Millions of U.S. Dollars)
The above statistics are unofficial estimates. Data are computed at an estimated annual growth rate of 10% and at an average exchange rate of Pula 1 = $0.2625 & 0.2243 (Dec. 1997 & 1998 respectively). Source: Trade Statistics Unit, Ministry of Finance.
1997
1998
1999
A. Total market size 26.7
28.7
31.5
B. Total local production Negligible
C. Total exports
Negligible
D. Total imports
26.7
28.7
31.5
E. Imports from the U.S.
0.041
0.143
0.157
2 - Trade Opportunity: Computers (Hardware and Software)
Due to increased awareness of Y2K and continued efforts to meet international standards, Botswana is upgrading all government computer systems. The Government has approved Pula 112.5 million ($25 million) for the upgrade of internal systems, and implementation is at an advanced stage. Additional funds have been allocated for new hardware, software and training, including consultancy and support services. Local businesses have also dedicated huge sums to upgrade their systems and make them Y2K compliant.
There has been a significant increase in imports due to continuous invitations to tender for the supply of computers and accessories, and computerized business and accounting systems for government departments and local authorities. Details on tenders will be placed on the Embassy Web Page at the internet address below:
www.usia.gov/abtusia/posts/BC1/wwwhcomm.html
Computers (Hardware, Parts, Accessories and Software)
(Millions of U.S. Dollars)
1997
1998
1999
A. Total market size
20.9
24.0
26.2
B. Total local production
Negligible
C. Total exports
Negligible
D. Total imports
20.9
24.0
26.2
E. Imports from the U.S.
1.15
1.08
12.0
The above statistics are unofficial estimates for word processing machines, calculating & accounting machines, automatic data processing machines, other office machines & parts & accessories only. The great majority of products in the computer industry sold in Botswana are of U.S. origin. Typically, the products are exported to a distributor in South Africa and then sent to an affiliate in Botswana for resale, recorded as a South African export to Botswana. Data are computed at an estimated annual growth rate of 10% and at an average exchange rate of Pula 1 = $0.2625 & 0.2243 (Dec. 1997 & Dec. 1998 respectively). Source: Trade Statistics Unit, Ministry of Finance.
3 - Trade Opportunity: Mining Equipment
Botswana's development continues to rely on the country's mineral wealth. The mining sector accounts for about a third of Botswana's GDP. Botswana's three diamond mines have extensive reserves with life expectancies well into the 21st century. The demand for mining equipment, particularly forklifts, earth moving trucks, bulldozers, graders, scrappers, derricks and cranes, remains inevitable. Data provided by the Botswana Trade Statistics Unit indicate that there has been a significant increase in imports over the 1997/98 period.
Heavy Duty Machinery
(Millions of U.S. Dollars)
1997
1998
1999
A. Total market size
66.902
71.249
26.2
B. Total local production
.002
0.045
0.049
C. Total exports
2.48
4.3
4.73
D. Total imports
66.9
64.7
71.2
E. Imports from the U.S.
2.45
1.92
2.11
The above statistics are unofficial estimates. Figures cover heavy-duty equipment only and exclude dump trucks. Data are computed at an estimated annual growth rate of 10% and at an average exchange rate of Pula 1 = $0.2625 & 0.2243 (Dec. 1997 & 1998 respectively) Source: Trade Statistics Unit, Ministry of Finance.
The expansion of the Orapa Mine to double its production capacity by 2000 remains on schedule. Similarly, continuous operations at all three mines (Jwaneng, Orapa and Letlhakane) involving a seven-day production week as opposed to a six-day production week have been introduced. Such developments will create increased and consistent demand for off-highway mechanical trucks to sustain these projects.
U.S. equipment is not new in this field, with Caterpillar capturing a sizable portion (65%) of the market. Equipment is supplied by distributors, and recorded as imports from the country of supply and not as imports from the country of origin, hence the understated value of U.S. imports. Other competitors are Euclid, Dresser and Komatsu. All heavy equipment and machinery is imported, as there is no local production or assembly.
4 - Trade Opportunity: Telecommunications Equipment & Supplies
Botswana's telecommunications infrastructure is one of the most modern in Africa. Increasing customer connections and expanding the network rate high on the development plan of the Botswana Telecommunications Corporation (BTC). The Corporation intends to increase the number of direct exchange lines from 97,000 lines to 214,000 by the end of 2003. With the introduction of two cellular phone operators, cellular phones represent sales prospects. Direct exchange lines will be augmented by about 60,000 cellular numbers. BTC is also expected to double the existing network to 130,000 new lines in the next three years, and the first phase of the project includes the installation of 10 new exchanges every year.
Details of tender invitations for these projects are made available on the internet at:
www.usia.gov/abtusia/posts/BC1/wwwhcomm.html
The telecommunications industry also has a potential to purchase telecommunications products such as feature and cordless phones, car phones, and pocket service phones. U.S. businesses normally access the market through joint ventures with either the Botswana Telecommunication Corporation or local investors, although this route is by no means mandatory. Sales to the Botswana Telecommunications Corporation (BTC) have been dominated by European firms due to European Government assistance and Botswana's technical standards.
Electrical Apparatus for Line Telephony & Telecommunications Equipment
(Millions of U.S. Dollars)
1997
1998
1999
A. Total market size
6.15
15.39
16.93
B. Total local production
Negligible
C. Total exports
0.16
0.23
0.25
D. Total imports
6.15
15.39
16.93
E. Imports from the U.S.
0.126
0.18
0.2
The above statistics are unofficial estimates. Data are computed at an estimated annual growth rate of 7% and at an average exchange rate of Pula 1 = $0.2625 & 0.2243 (Dec. 1997 & 1998 respectively). Source: Trade Statistics Unit, Ministry of Finance.
5 - Investment Opportunity: International Financial Services
Botswana is in a position to expand its financial sector and develop an International Financial Services Center (IFSC), as a result of progressive economic liberalization, the complete abolition of exchange controls, high foreign exchange reserves, and the maintenance of a favorable macroeconomic environment. The review of statutory, fiscal and regulatory structures to facilitate the establishment of an IFSC is on schedule. The required legal framework and amendments to existing legislation will be presented at the next sitting of Parliament this year. The Collective Investment Undertakings legislation has been enacted and several unit trusts have been launched to encourage savings.
IFSC operators will be granted a certificate from the Bank of Botswana, which has been appointed the regulator of the IFSC, entitling them to certain tax benefits, notably a 15% (as opposed to the normal 25%) corporate tax and relief from withholding tax. To qualify for the special tax benefits, IFSC operators would be required to obtain a tax certificate by a Certification Committee after being granted licenses from the regulator. Expected services to be provided by an IFSC in Botswana would include collective investment undertakings, corporate treasury operations, captive insurance business and international holding company administration.
After all the necessary policy reforms and regulatory framework have been set up, Botswana will present a potentially lucrative business opportunity for U.S. companies interested in operating off-shore banking, insurance and accounting facilities in Southern Africa.
6 - Trade Opportunity: Equipment for Water Supply
Botswana has developed a National Water Master Plan, encompassing a compilation of all known water resources with estimated water demand over a 30 year planning period. The North South Water Carrier Project (NSWCP) is ongoing with contracts for its 9 components generally on schedule and should be completed by July 1999. It is classified as the biggest single construction project ever undertaken in Botswana at an estimated cost of Pula 1.4 billion ($304.3 million). This is the first phase of the project, and projections indicate that it should meet the country's demand until the year 2010.
For further augmentation beyond this period, construction of the Lower Shashe Dam is planned as Phase 2 of the project, aimed at ensuring supplies up to and beyond the year 2020. In addition to the NSCWP, the Government has embarked on a number of other water development projects around the country. During the 1999/2000 financial year, $1.51 million has been made available for dam designs at Ntimbale, Polometsi, Thune and Lotsan. A further $1.5 million has been set aside for ground water studies and surveys. This should generate opportunities for the supply of pipelines, construction, and/or provision of materials for pumping stations and dams.
7 - Trade and Investment Opportunity: Solar Energy Equipment
Botswana has abundant renewable energy resources, mainly in the form of solar energy. The Government is looking into how to increase the contribution of solar energy to the national energy balance. The Government has developed the National Rural Photo-Voltaic Electrification Program to assist communities with loans repayable over four years, to purchase and install quality photo-voltaic (PV) systems for household use. The demand for solar energy equipment including PV components is rising. Imports are mainly from the U.S., Europe and South Africa.
Botswana is also seeking joint ventures or licensing agreements between U.S. and Botswana companies for the manufacture and or assembly of PV components.
8 - Trade Opportunity: Consulting, Resource Management and Design Engineering Services
Provision of design and consultancy services, including feasibility and impact studies, and the sale of follow-on project management skills, remains an area of great potential in Botswana for U.S. firms. Ongoing and planned infrastructure development projects in the areas of water resources, roads and power generation are likely to proceed even if economic growth becomes flat. A reputation for quality, international experience, and cutting edge technology are the U.S. design and consulting firms' biggest advantages in bidding on major infrastructure development projects in Botswana.
European, particularly British, and South African design and consulting firms with long established ties to the market through Botswana-based affiliate offices can have a strong advantage over U.S.-based competitors. A U.S. firm may find it useful to enter into partnership with a locally based firm.
9 - Investment Opportunity: Tourism
The development of tourism remains one of the country's priorities. Tourism is a relatively new sector with considerable investment potential. The Government has adopted a policy of providing relatively high-value, low-volume facilities for tourism. 17% of the country has been allocated to National Parks and Game Reserves and a further 21% of land surrounding these areas is devoted to wildlife management areas which provide additional sanctuary to animal populations. Botswana affords many possibilities for tourism investment and, while there is a push for more ownership and investment by local people, foreigners are welcome, especially those with experience and the ability to provide employment and ecologically sustainable development of Botswana's natural resources. Providing facilities such as mobile safaris, elephant safaris, horseback safaris, hunting and fishing safaris and photographic safaris are areas with potential.
From 1992 to 1997, the number of holiday visitors grew nearly 14% per annum. The National Development Plan 8 (NDP 8), the five-year plan for the economy (1997-2003), has identified wildlife and tourism as a key sector for economic growth. The Minister for Commerce and Industry predicts tourism will be a one billion Pula ($250 million) industry within five years. The Government makes funds available through the Financial Assistance Policy (FAP) for tourism development. In addition to FAP financing, the Government is embarking on a Tourism Development Program during NDP 8.
At present, joint venture partners are being sought for hotel expansions and start-ups along the Trans-Kgalagadi Highway joining Botswana and Namibia. Dynamic growth sectors with unique areas for multipurpose use are in areas such as the Kgalagadi Desert, the Nxai and Makgadikgadi Pans, the Okavango Delta and Chobe National Park.
10 - Investment Opportunity: Motor Vehicle Assembly
The automobile industry remains a priority sector through which the Government hopes to intensify its economic diversification efforts. Vehicle assembly is now the country's second most important industry, and in 1997, contributed more than Pula 1 billion ($250 million) to the country's export earnings. The growth of the vehicle assembly industry is also stimulating significant spin-off business. Opportunities identified include (a) automobile assembly, (b) brake linings, pads, pressure and clutch plates, (c) car batteries, and (d) tire manufacturing.
11 - Other Investment Opportunities
Botswana welcomes investors who provide foreign direct investment for industries that offer prospects for import substitution and export potential. The 1999 Official SADC Trade, Industry and Investment Review presents the following sectors as having potential for foreign investment:
Technology:
Electronics components supply and product manufacture; engineering plastics and packaging industry; food processing; water conservation, waste water rehabilitation and re-use; building materials and affordable housing;
Manufacturing:
Garments and textiles, consumer products, pharmaceutical, leather and leather related products and ostrich faring.
Agro-industry: Opportunities in this sector include: (a) the processing of hides and skins into finished products. The annual stock of raw skins from the Botswana Meat Commission (BMC) is about 250,000. Skins are processed up to the wet blue stage and then exported for final processing; ( b) processing of edible vegetable oil; (c) manufacturing of livestock feed for poultry and cattle. Botswana's cattle population is about 2.5 million; (d) cattle by-products from the BMC.
Due to the small domestic size of the economy, export-led industries are a must. The southern Africa region constitutes an immediate export market. The move towards freer trade among the 14 member states of the Southern African Development Community (SADC) supports the ability of investors to utilize this wider market. Several firms -- Owens-Corning (water pipes), Hyundai (mainly responsible for Botswana's substantial export figure for vehicles and parts in 1997) and numerous apparel firms -- have been successful in penetrating into the regional export market.
The Government of the United States acknowledges the contribution that outward foreign direct investment makes to the U.S. economy. U.S. foreign direct investment is increasingly viewed as a complement or even a necessary component of trade. For example, roughly 60% of U.S. exports are sold by American firms that have operations abroad. Recognizing the benefits that outward investment brings to the U.S. economy, the Government of the United States undertakes initiatives, such as the Overseas Private Investment Corporation (OPIC) programs, investment treaty negotiations, and Business Facilitation Programs that support U.S. investors.
12 - Agriculture: Trade Opportunity - Corn, Sorghum, Wheat, Rice
Rainfall has been low, poorly distributed and erratic with prolonged dry spells. Drought coupled with high temperatures has adversely affected the growing season, and has contributed to low crop yields. This has led to a decline in the amount of land under cultivation. Only 88,154 hectares of land (52%) was cultivated in 1998 compared to 170,610 hectares the previous year. The total area planted was only 18% of cultivatable land in a normal year. The publicity given to the El Nino phenomenon is partly responsible for discouraging many farmers from planting.
The total crop production forecast, for both the communal and commercial sectors for 1998, was estimated at 13,009 tons, which is only 38% of last year's production, registering a severe shortfall, as the country's total cereal requirements for the 1998/99 fiscal year are 302,154 tons. The Early Warning Report of August 1998 indicates that the country will require 300,105 tons in cereal imports. This is detailed as follows:
- 110 000 tons of maize
- 82 100 tons of sorghum
- 80 005 tons of wheat
- 28 000 tons of riceAs large importers of cereals (maize, sorghum, wheat and rice), Botswana grain dealers (Botswana Agricultural Marketing Board, BAMB and Food Relief Services, FRS) have invited tenders for the importation of sorghum and maize.
Local importers have expressed interest in diversifying supply and seeking U.S.-sourced products. Trade statistics show that, last year, cereal imports (wheat, meslin and grain sorghum) from the U.S. amounted to $51 million. South African suppliers have traditionally dominated supply of foodstuffs to Botswana, either with South African produced goods or through re-exports of imported goods.
Although agriculture contributes only 4% to Botswana's GDP, it is an important source of food, income, employment and capital for the population. The Ministry of Agriculture is preparing a National Master Plan for Agricultural Development (NAMPAD) which will be used to guide investments and increase productivity.
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[end of document] Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title17, United States Code.
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