- It is inconsistent with global integration – Jefferis
- If we can’t do efficiently, there is no point – Absa economist
- Import ban on veges cripples low-income households – Econsult
While the rise in inflation is due to several factors that include persistent increase in fuel and food prices, an economic think tank argues that it has been made worse by the ban on importation of many vegetable items. In its Q1 2022 report, Econsult found that this has led to sharply higher prices for some items.
“This has, in turn, had a negative impact on households, especially low-income households, who are already struggling with rising prices,” Sethunya Kegakgametse and Kitso Mokhurutshe, economists at Econsult, wrote in the report. “It has also led to shortages, and, as should have been expected, smuggling of basic items such as onions into the country,” they observed.
The government banned importation of some vegetables from South Africa in December last year in a bid to compel food retailers to procure from local farmers. The ban encompassed tomatoes, carrots, beetroots, potatoes, cabbage, lettuce, garlic, onions, ginger, turmeric, chili peppers and butternuts with effect from January this year. The import is reviewed every two years, according to the agriculture ministry. “Farmers and the various stakeholders are encouraged to organise themselves and collaborate towards the use of different platforms that enhance the growth of the horticulture sector locally,” the ministry said at the time.
South Africa is the source of most of Botswana’s imports – both capital goods and consumables. In 2019, 2.8 million tonnes of vegetables were produced in southern Africa. This accounts for only 0.2 percent of global vegetable production. South Africa accounted for 92.5 percent (2.6 million tonnes) of regional production, with Botswana accounting for 3.1 percent.
Government senior policy advisor, Dr. Keith Jefferis, says there is a danger that too much emphasis on protectionism is inconsistent with global integration. While there is an argument in some cases for supporting local activities, Jefferis argued at a recent economic forum that it has to be done carefully and cautiously because export-led growth is about regional and global integration. “That refers to open borders and that’s a fact,” he said. Botswana has ambitions to become a high-income country by 2036 (although the consensus is that this is unattainable), with an export-led economy based on diversification, inclusive and sustainable growth, and high productivity. “We have to be cautious in the extent to which we impose border restrictions that may make trade difficult and expensive rather than easier,” Jefferis said.
Even before the war between Russia and Ukraine, the general observation is that there was already protectionism at play. Countries were starting to look at more local production, part of the reason being that they wanted to build a production base. The question was whether this current war will force countries to rethink policies of food production just to insulate or reduce vulnerability to this kind of crisis. Agricultural economists at the Botswana University of Agriculture and Natural Resources (BUAN) advised Botswana to actively and urgently move to expand domestic supply of food to become self-sufficient and less vulnerable to external market shocks. It has to be handled very carefully,” Jefferis warned, although admitting that it is a difficult thing to get right.
Absa Bank economist, Ridle Markus picked up the cue: “You don’t suddenly close the market for imports and say we must produce for ourselves. Do we have the capacity? Do we have the skill? Do we have the knowledge? There are so many questions to be asked when you do this. If we cannot do it more efficiently and cheaper than the next market, there is no point of doing it. That is going to be costly.” Because of these import substitution policies, First National Bank of Botswana (FNBB) expects local food prices to continue to tick up. The World Bank has predicted that food and fuel prices will remain elevated above the levels that would otherwise have been expected for up to five years.
At the economic forum, Markus narrated how Nigeria botched its plan by imposing restrictions on certain food imports and decided to invest in local production capacity. In his observation, Nigeria had enough arable land and entrepreneurs. “This was a great idea,” he said. “The central bank came up with various schemes and funding through which they wanted to support agricultural production.” The problem, however, was corruption and the funds never got where they were intended to be spent. Another issue he identified was insecurity in the country: there was a lot of displacement from farms and some farmers would not produce. An underlying problem he also turned his mind to which dealt Nigeria a huge blow in its efforts to capacitate local production was lack of proper planning. Seven years later, Markus pointed out, Nigeria still imports most of its food despite spending money building its own productive capacity.