As of November last year, 24 515 operational businesses have been registered in Botswana.
The most dominant economic industry, Wholesale and Retail, constitutes 9 779 (39.9 percent) of all operating establishments. The second biggest industry, Construction, comes in with 2 557 (10.4 percent) active establishments. Manufacturing is the third largest industry, accounting for 2 366 (9.7 percent) operational establishments.
From these numbers, Small and Micro Enterprises make up about 91 percent of active businesses, meaning that there is a possibility that SMEs are the largest employers of the active workforce in Botswana. In this regard, and rustically speaking, if we were to think retrospectively about our approach and theory on SME development, these figures kind of force a change of outlook in how we should now approach structuring small businesses. Maybe our analysis and policy-making must be based on the impact of business activity on workers, and most probably mitigating risks posed to workers by business activity, rather than the impact of business activity on businesses.
From an analytic perspective, our approach has always been to assess possible market gaps and import substitution. One could argue that it has been working, to some extent, seeing that there has been some growth in operational establishments locally. This ‘fill in the gap’ approach, however, has seen a development of what we call an agglomeration economy. This can be concluded from the rapid increase in construction companies due to a rise in retail and wholesale establishments, as well as a rise in manufacturing activity.
However, lessons that can be learned from these developments is that they are centralised around very densely-populated areas as it has been published that Gaborone and Francistown are leading geographical areas with more operational businesses than other areas. One rustic question would be whether this approach incentivises the creative use of solutions that can mitigate risks posed to businesses that can directly affect workers? Or has this approach catalysed an opportunity for an industrial policy that creates a value chain devoid of specialisation for the future?
I personally do not think that this approach works and have been very vocal about this. And I do believe we will see the impotency of this approach in the coming and continuing participation of the free trade agreement. My skepticism is drawn from a market brief of the Democratic Republic of Congo compiled by a local agency tasked with assisting local businesses with export development.
From this brief, you can see that we still force this narrative of fill-in-the-gaps. I think there is a lot of analysis that needs to be conducted before we could come up with an export list to a foreign market. And yes, I think the potential export opportunities listed on this brief are a little unrealistic. For instance, the brief suggests that we could export a “self-propelled rock-drilling or boring machine” while we import drilling equipment from the same DRC market?
One of the analyses that we can conduct should be based on payment structures that will affect our exporting businesses. As much as the CPI (Consumer Price Index) is imperative in identifying a lucrative market, a payment completes the transaction and thus ensures that the exporting business continues being operational while “workers” are less affected by that particular business activity.
Therefore, before we could suggest potential export opportunities, we need to negotiate for fluid payment or money transfer structures to be in place. This is because as much we are excited about the free trade agreement between African countries, each member state is sovereign, thus macro-economic conditions are different and monetary policies affect trade differently. In this regard, payment has been a constraint to boosting African trade because of the cost of currency conversion.
It is on record that the cost of currency convertibility stands at $5 billion a year. This is a very significant cost hence the suggestion of potent payment structures before export opportunities identification. As the adage says, “Mosele wa pula o epiwa go sale gale” if we are to be ready to weather the storm.
Bame Lesego Boitshoko