According to Ramaphoi, the platform will serve the same purpose as the Dubai Multi Commodities Centre (DMCC), a hub where different commodities are traded. “Dubai has never mined a single diamond, but they have successfully aggregated commodities from different countries to set up a multi trading platform where commodities can be aggregated from different areas for them to trade,” Ramaphoi told a gathering during the FNBB budget review this week. “Why can’t we do that here. We have a location and corporative advantage. We have got diamonds, agricultural produce etc,” he said.
Ramaphoi said there are eight SEZs, six of them being production zones. He explained that this means their clusters will ramp up production for both local and export market. “The biggest challenge is how the market is structured. What we need to do is how to transition from a grossly informal fragmented commodity trading system to one that is more consulate. The missing piece is a viable ecosystem of players, especially in the agriculture commodities market to drive a functioning system,” Ramaphoi said.
It is for that reason he said the multi commodities exchange is needed as a spatial fix to design and implement the overarching strategy to tackle key market integration and upgrading of value chains and deepening value add as commodities need to be refined or passed to other industries both local and for export markets. The director said the benefits of this system are price hedging, market structure, price discovery and most importantly market access. Ramaphoi said SEZA has already identified a line up of potential investors who have expressed interest, with good record of establishing this multi commodity exchange. Apart from Dubai, he emphasised that this model has already worked in Singapore and Thailand.
The concept of such a platform is not a new idea to Botswana. It 2012, it was introduced by a company called Bourse Africa, which was to “provide a platform for cross-border trade, price discovery and the risk management of African commodities and derivatives” according to media reports at the time. Bourse Africa was to be based in Botswana, but the idea eventually vanished. Ramaphoi said Botswana needs to commodify its products.
The idea of such bodes well with government aspirations to transform and industrialize. Botswana wants to transform from a resource based company to a knowledge based economy as it transitions into an export model growth. The hard facts about Botswana are that primary commodities are beneficiated and processed in foreign countries. E.g. diamonds. More than 80 percent of exports are raw materials. “The question that arises is, what is the implication of this in the economy. All it means is that production of raw materials and their exports have come at the cost of industrial development,” Ramaphoi said. Yet he said this is the basic building block for economic development. In his views, this also means that we have been exporting raw materials at the expense of industrialisation and by extension at the expense of creating jobs.
The director also said the journey to transform must be laid to developing primary commodities, primary commodities markets particularly the agriculture sector as well as the minerals. At the same time, he said there is a critical need to ensure that SMMEs, in particular the agriculture small border producers cannot be ignored to drive this transformational agenda.
SEZA found that lack of serviced land and infrastructure are the biggest constraints to investment in Botswana. Many of the times, land is not availed or it is it not fully serviced, Ramaphoi said noting that this means the investor has to incur costs. Minister of Finance Peggy Serame in her budget speech said the government will embark of serving land before allocating. But one of the challenges, as observed by both Ramaphoi and Serame implementation and reforms.
SEZA also singled out issues of digital competitiveness that need to be addressed for the country to be globally competitive. “Most importantly, when you talk about the agriculture sector, we have seen grossly informal and fragmented value chains and this implies they become barriers to market access efficiency and information,” he said. SEZA discovered specific entry barriers to value chains. One of the things identified was the prohibitive collateral requirement. A law has been passed to address this.
There eight areas formally designated as SEZ. Their designs have been conceptualized to create forward linkages to promote investment opportunities. The also provides backward linkages to encourage investment in facilities that enable projects to succeed. “This happens for good reason because when you look into past experiences, for those countries that succeeded or failed in adopting this concept one of the challenges is SEZs were operating as enclaves. There was no emphasis on creating linkages with the rest of the economy,” Ramaphoi said.
SEZA provides incentives and privileges to investors, the primary objective being to create a business environment that is effective or rather lenient in a way for a policy perspective but efficient. “For every land we acquire we provide outside infrastructure. Over and above, we provide social infrastructure. Every zone will have an investor service center which will position the SEZ as a one stop shop,” Ramaphoi told a gathering.
SEZA targeted investments opportunities in agro-processing. Ramaphoi said Botswana still does not beneficiate. “We are the meat country, we cut, we freeze and we export,” pronounced a concerned Ramaphoi. In Lobatse, they are targeting beneficiation of meat and leather and of course will be targeting processing of other agriculture produce. SEZA will promote manufacturing in general, international travel services including tourism, and warehouse distribution and logistics. “These are opportunities available to developers and investors and of course funders,” Ramaphoi said, emphasising that all special economic zones aim to promote downstream processing of raw materials to create value added products.
“We have two strategies, we will be prioritising value chains in development of SEZ and as part of licensing requirements we will ensure that every investor creates business opportunity for other companies,” Ramaphoi said. Over and above this, there is a strategy tailored to promote domestic production. “We will be having an inclusive business model. That will ensure that we create opportunity for the SMMEs who can be integrated for the greater value chains.”