Businesses in the restaurant and education sectors are proposing a phased approach to restrictions on the importation of vegetables and school uniforms, saying an abrupt ban stifles their operations.
The plea comes as Botswana rolls out a raft of protectionist measures including imposing restrictions on imports of some fresh produce and school uniforms saying the move is aimed at propping up other sectors to wane the landlocked country from over-reliance on diamond and become self-sufficient in food and textiles and cut its import bill. The ban angered farmers in neighbouring South Africa and sent shocks to local restaurants and education sectors.
On behalf of these sectors, Business Botswana – an advocacy organisation for the private sector – recommended the government to consider a phased restriction strategy to enable the affected sectors to adjust.
According to Business Botswana, in the first year, at least a fifth of the required imports should be restricted. Business Botswana proposes further that in the second year government will double the figure to 40 percent, 60 percent in the third year, 80 percent in the fourth year and 100 percent in the fifth year.
“This will allow capacity development by local producers and cushion against inflationary spikes and smuggling resulting from excess demand,” Business Botswana said, on behalf of the sectors.
The sectors said there is a need to undertake the Regulatory Impact Assessment (RIA) of the restrictions in order to have a view of the possible outcomes of its implementation.
Multinational unsuccessfully resisted the import ban
The Ministry of Investment, Trade, and Industry (MITI) said it imposed a restriction on importing school uniforms to promote local production and enhance the sustainability and competitiveness of Botswana’s textile and clothing industry in 2021. While local textile entrepreneurs welcomed the ban, not everyone was happy. In December 2022 multinational clothing retail stores, among them Pep Botswana and Ackermans unsuccessfully resisted the import ban in court.
UN happy with import ban of school uniforms
Despite early skepticism about the local sector’s ability to meet demand and uphold quality standards, the initiative has delivered remarkable outcomes.
The UN Country Results Report 2023 reveals that the ban has greatly benefited local communities, especially women entrepreneurs, and has stimulated job growth in the textile sector.
The UN report highlights that, in 2023, the import ban catalysed the formation of new textile projects by women entrepreneurs, who began supplying school uniforms in their local communities. This has boosted employment creation, with the number of jobs increasing by 38 percent from 2535 in 2022 to 3500 in 2023.
According to the UN Country Team (UNCT) that complied the report, the shift to local production and consumption has not only created jobs but also improved the livelihoods of community members by keeping employment within the country.
“Prior to the import ban, local business traders imported school uniforms, thus exporting employment opportunities that could have served local community members and improved their livelihood,” the report stated.
Gorata Lekau, then Country Manager, Woolworths Botswana who was participating in a sectorial roundtable session discussing the Supply Development Program in the Retail Industry of both South Africa and Botswana had highlighted that while import restrictions allows the local producers to grow and gives the country an opportunity to export, they can also be exceedingly detrimental to businesses.
But the government took a firm stand, emphasising the importance of increasing domestic consumption and confidence in locally produced products. It stated that the ban is a justified trade policy measure designed to eventually produce excess for the export market.
SA unhappy with ban on veggies
Vegetable ban has also had its fair share of controversy with banned importation of some vegetables from South Africa in 2022 in a bid to compel food retailers to procure from local farmers. Hospitality and Tourism Association of Botswana (HATAB) has been the most vocal about vegetable ban expressing concerns about the recent expansion of the list which now includes items beyond vegetables, such as meat, including pork ribs, and pastries. HATAB which represent the private sector complained that there was no prior consultation when implementing the bans.
Economists at Econsult, a local think tank, observed that the vegetble import ban has added pressure on food inflation.
Botswana University of Agriculture and Natural Resources (BUAN) formally known as Botswana College of Agriculture also noted exacerbated illegal entry (smuggling of produce) of horticultural produce across borders given the inability of growers to meet local/national demand for produce/limited supply of produce.
At the recent HATAB conference, President Mokgweetsi Masisi said he was alive to the challenges brought by the vegetable ban, noting that “we will also deal swiftly with this vegetable issue”.
Production rises, import bill falls
Since its inception, vegetable production has grown from 67 612 tonnes to 82 280 tonnes as at 2023, representing a 21.6 percent production growth, according to government figures. However, Minister of Agriculture, Fidelis Molao said, this is still in short supply, considering the local demand.
BUAN previously told the publication that it anticipated the vegetable ban to increase growth in the horticultural industry/value chain thus substituting imports and saving foreign exchange.
Molao revealed that it “reduced the vegetable import bill by 71 percent from P634 million in 2018 to P182 million by 2023. “This money is now sitting here with small and large-scale farmers,” he said.
BUAN recommends for a middle-ground
BUAN told this publication that the effective approach to mitigate any negative consequences of the ban would be to provide an enabling environment for the growth and development of the horticulture value chain. This includes supporting research and development related to the horticulture value chain, relevant human resource development such as vocational training in the horticulture sector and related fields and capacitating growers to meet national demand through knowledge acquisition (training, benchmarking, information sharing, etc.). BUAN also recommends resource availability (funding, appropriate technology, infrastructure, skilled labour, production inputs, land, water, etc.)
Oversupply impacted farming businesses
Horticultural farmers in Tuli Block urged the government to undertake a comprehensive study on crop production to identify months of oversupply and undersupply in Botswana. Farmers said that these fluctuations adversely affect their businesses. “By restricting imports of specific vegetables, the government encouraged farmers to invest more in agriculture, thus boosting production capacity,” Manjo Krige-Stiglingh spokesperson for the Tuli-Block Farmers Association said to this publication, reiterating the efficiency in meeting consumer demand. However, that investment appears to have had unintended consequences – farmers plant the same crop at the same time.
How about hedging?
To hedge against fluctuations, BUAN advises farmers to coordinate their production through common production plans/programs through farmer/grower groups such as associations and cooperatives. They also recommend establishing relationships with markets through contract farming and reliable supply of produce, adopting a culture of continuous production thus leading to dependable produce supply thus building confidence with the market. They also urge farmers to adopt technology that allows continuous production across seasons and preservation/value addition in surplus produce (appropriate postharvest handling techniques such as storage, packaging, processing, etc.)
With the vegetable ban, BUAN expects spinoffs or growth of other related sectors such as preservation and processing (value additions) and increased employment due to demand for labour across the horticulture value chain.
Red, red tape stifles tourism
Relating to the tourism sector, Business Botswana recommended that government ease travel restrictions to other African countries. Botswana is mulling the idea of allowing nationals from Namibia and Zimbabwe to use national identity cards as travel documents.
Business Botswana also advised the government to attract more airlines to operate in the Botswana skies.
Business Botswana said there is a need to ensure that leases for concessions are renewed immediately after expiry to avoid uncertainty for safari operators as to whether or not their leases will be renewed.
The organisation said mainly experienced expatriates with relatively lower levels of education are affected, which leads to uncertainties when the business wishes to expand.
HATAB recently reiterated concerns by several high-end tour operators in the Okavango Delta who have been operating for years with expired concession leases. “Some have gone for years now, and no one knows whether the leases will be renewed or not,” HATAB Chairman Joe Motse said during the HATAB Conference, adding; “Some operators have applied for new leases, and it has been years now with no responses.” Motse’s primary concern was that the camps and lodges business in the delta requires substantial investments, emphasising that when investors make critical business decisions, they take into account the business climate and other factors that may make them hesitant to invest. It is this hesitance that slows down the tourism sector’s development and uncertainty.
Masisi has promised that “Concession leases will be cleaned out very quickly,” although cautioning operators to invest in the communities they operate in.
Work permits bedevil schools
Business Botswana also expressed concern about work permits for those in the education sector. “For example, a certain school had 24 teachers on a waiver at one point. They didn’t know what the outcome will be. This did not only bring uncertainty to the school but to parents and students as they didn’t know whether or not to pull out the learners or wait for the situation to be resolved. The challenge was, they didn’t know when the situation would be resolved,” Business Botswana said.
The organisation said there is a need to give more consideration to the experience of the work permit applicant instead of focusing more on academic qualifications. b) The work permit evaluators should have experience in working within the sector whose applications are being evaluated.
Booze market foaming at the brim
On other issues, Business Botswana expressed concern about high tax levels (Levy, VAT and excise duty).
“For example, the alcohol levy is significantly higher than that of Eswatini where it stands at 2 percent for local production and 7 percent for imports and Lesotho (15 percent)., although the Lesotho calculation is allegedly a bit convoluted because it is linked to VAT,” Business Botswana said. Therefore the organisation called on the government to reduce tax.
Regarding trading hours (Minister may change anytime, especially when there are health emergencies such as COVID-19), Business Botswana said the government should ensure that the Minister consultants with the industry if there are to be any changes in the trading hours.
During COVID-19, Sechaba Holdings, which partly owns KBL grappled with intermittent lockdowns which impacted its profitability. KBL, a beer maker had also taken the government to court arguing that restrictions were impacting their business as there was no empirical study to prove that the sale of alcohol spread the virus.
Booze producers also faced new laws like the introduction of tax stamps, marking, scanning and authenticating alcohol-excisable goods imported into or produced in Botswana. BURS Commissioner General Jeanette Makgolo said the project aimed at enabling the marking, scanning and authentication of all tobacco and alcohol excisable goods is ongoing. “Following continuous engagements with the stakeholders and the appointed solution provider to facilitate the Design of the Solution during the year 2023/2024, it is expected that the solution will be implemented during the year 2024/2025,” she told media recently.
Business Botswana said there are delays at the border due to the need to open the packaging and marking process, when not marked or verification as to whether the product is marked.
Costs to businesses
This, Business Botswana said, has resulted in increased costs of doing business. “The marking and verification costs will be borne by the operators. This will increase the costs of doing business. It is most likely that these costs will be transferred to the consumers, making it even more expensive for the consumer, affecting the industry profitability in the process,” said Business Botswana.
It said following the stamp marking and verification process, there will be a need to repackage and rebrand the products. “This is unlikely to be as good as factory packaging and branding, which will affect product saleability. The marking and verification centre is likely to be in Gaborone. This means that all products will have to be brought to Gaborone for marking and verification and even if they were imported from the North or west and destined for the northern and western markets,” Business Botswana said.
It added that; “This means that they will then be transported back to the west and north, leading to increased costs of doing business and delays in reaching the final consumer. Increased prices faced by consumers, alongside delayed delivery to the consumer would inevitably lead to smuggling of the products and consumption of illicit substances. The latter has huge implications on consumers’ health”. Therefore, the organisation said there is a need for deep and wide consultations on the introduction of tax stamps.
Business Botswana said it “will take up the recommendations from this forum with Government with a view to addressing the identified challenges to the investment climate in Botswana.”
Economist advocates for regulation on a cost/benefit basis
During the FNBB Budget Seminar recently, Economist Keith Jefferis advised that “We must make it easier to get things across the border, not difficult which is what we have been doing (problems of bans, permits, etc.). “Generally watch how we make too many regulations,” he said adding that new regulations can only be introduced if they clearly have more benefits than costs.
