How the factory production can become an engine of growth

Minister of Finance and Vice President Ndaba Gaolathe says the government remains steadfast in its resolve to advance the private sector as a central driver of a diversified, export-oriented economy and long-term economic resilience. Presenting the 2026 Budget Speech, Gaolathe said the approach is anchored on deepening private sector participation, enhancing enterprise competitiveness and accelerating the growth of scalable firms with strong export potential. Manufacturing, he said, is being strengthened as the bridge between primary production and exports. The government has identified manufacturing projects focused on intensive, assembly-based production, resource-based heavy industry, clean technologies and precision manufacturing. These projects are intended to link agriculture, mining and energy into higher-value goods. The Botswana Exporters and Manufacturers Association (BEMA) has welcomed the government’s ambitions to expand the sector, which is increasingly being viewed as a potential engine of growth. BEMA chief executive officer Mmantlha Sankoloba said the ambition for manufacturing to drive economic growth is realistic over the medium term, but only moderately achievable in the short term without targeted reforms. “Manufacturing growth requires deliberate policy support, competitive input costs, skills development, and market access,” Sankoloba said in an interview. “With focused interventions over the next three to five years, the sector can meaningfully increase its contribution to GDP and employment.” Sankoloba said manufacturing could play a key role in reducing Botswana’s reliance on diamonds by converting raw materials into higher-value products. “This reduces vulnerability to commodity price shocks, creates sustainable jobs, broadens the tax base, and strengthens export resilience beyond diamonds,” she said. She identified agro-processing, including meat, leather, dairy and grains, mineral beneficiation in copper, soda ash and coal-to-products, as well as construction materials, pharmaceuticals and chemicals, textiles and garments, leather goods, plastics, packaging and light engineering as key sub-sectors with growth potential. “These are sub-sectors that are also within our membership composition,” she said. However, Sankoloba said manufacturers face multiple interlinked constraints, including high electricity and utility costs, limited access to affordable finance, skills mismatches, regulatory complexity, high logistics costs and the small domestic market. “It is important to note that manufacturers face multiple interlinked constraints,” she said. She added that skills shortages remain a major obstacle. “While Botswana has educated youth, there is a shortage of technical, artisanal, and industrial skills aligned to manufacturing needs,” Sankoloba said. She called for stronger collaboration between industry and training institutions. “We are proud to share that we are making strides in this regard through recent collaborations with academia,” she said. Sankoloba said policy reforms that could have an immediate impact include competitive electricity tariffs for industry, targeted tax incentives, streamlined licensing processes, improved access to industrial finance and strengthened local procurement policies. She also said regional and continental trade platforms such as the African Continental Free Trade Area (AfCFTA) offer opportunities for Botswana-made products, although competitiveness remains critical. “The AfCFTA presents both an opportunity and a risk, just like any other trade agreement,” Sankoloba said. “It offers access to a large continental market, but local manufacturers need competitiveness support to avoid being outcompeted by imports.” She noted that Botswana-made products are generally of high quality, but their competitiveness is undermined by high production and transport costs. With economies of scale and cost-reduction measures, she believes local manufacturers could compete more effectively within SADC and AfCFTA markets. Sankoloba said support measures should include export readiness programmes, standards certification, access to trade finance, industrial clustering, logistics improvements and stronger trade promotion. “There have to be active commitments and not just have these written on paper only to be shelved in cabinets,” she said. She added that value addition to local raw materials can be strengthened by incentivising local processing, ensuring consistent raw material supply, promoting public-private partnerships, linking SMEs to value chains, and supporting innovation and technology transfer. In his budget speech, Gaolathe said the government has proposed an allocation of P1.31 billion in the 2026/2027 financial year across various programmes to support financing for micro, small and medium-sized enterprises (MSMEs). Dr Pinkie Kebakile, Head of Trade, Industry and Private Sector Development at the Botswana Institute for Development Policy Analysis (BIDPA), said economic transformation cannot occur without SMEs. “Botswana, as we all know, has stagnated in the upper middle-income country since 2004,” Kebakile said during the FNB Budget Review Seminar this week. “It’s more than 20 years. So we need something that can jumpstart the economy so we can transition to a high-income economy by 2036.” She said countries across the world have increasingly turned to SME development as a policy tool for economic growth and job creation, arguing that Botswana must do the same. Kebakile also stressed that BETP projects cannot be implemented without SME participation. “SMEs have to see or identify opportunities from those identified projects,” she said. She said Botswana’s “true north” should be a high-income economy that is digitally enabled, export-driven and diversified. “Our true north is a high-income Botswana that is digitally enabled, export-driven, and economically diversified, where every citizen is employed, empowered, and fulfilled,” she said. She argued that SMEs are best positioned to help achieve that goal, but noted structural weaknesses in Botswana’s exporting profile. “Many exporting firms in Botswana, the majority of them export to only one market, and usually it is South Africa,” she said. She added that while firms exporting to more than one destination account for 91.6 percent of export value, most exporting firms still export only a single product. “Firms that export a single product accounted for the majority of exporting firms in the country,” she said. “Although they are the majority, they account for a mere 0.5 percent of the total export value.” By contrast, Kebakile said firms exporting more than one product account for 99.5 percent of export value, underscoring the importance of multi-product exporters. “This tells us that as a nation, if we want to transition into a high-income economy, our SMEs and other firms should now work towards exporting more products to more destinations,” she said. Kebakile said this would require improved firm productivity and competitiveness, noting that as firms grow, they tend to expand the number of products before expanding into more destinations. She said Botswana’s private sector remains dominated by firms still struggling to break into new markets, largely due to limited competitiveness. “Therefore, to transition to the high-income status by the year 2036, the country needs to nurture and develop exporters that export multiple products to multiple destinations,” she said. Kebakile said this is an area SMEs can tap into, but only after strengthening operational systems, improving productivity and competitiveness, and addressing the country’s manufacturing skills gap. She added that most identified BETP projects offer space for SME participation. “If you take the manufacturing sector, there are opportunities that SMEs can leverage,” she said. She cited the tourism sector as one example, noting that SMEs could supply locally manufactured products such as towels, handicrafts and soaps.

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How the factory production can become an engine of growth

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