Trade Rifts: Masisi Guides Botswana Away from Reliance on South Africa

The South African economy has experienced a series of downturns primarily driven by an energy sector crisis, low investor confidence, and corruption. These issues have had a significant spillover effect on the region, prompting countries like Botswana to seek greater independence from the once-thriving South African economy.

Recently, the heads of state for Botswana, Zimbabwe, and Mozambique signed a $6.5 billion rail and port deal to boost regional trade and reduce reliance on South African ports, which are fraught with issues. While the deal poses no immediate threat, it signals a shift away from South Africa’s struggling economy, highlighting the region’s growing discontent with South Africa’s diminishing role as an economic leader.

The South African ports have been overwhelmed with challenges in the past few years, causing delays in operations and financial losses. In 2022, the Container Port Performance Index by the World Bank ranked the port of Durban 341 out of 348 ports in the world and the Port of Cape Town was ranked 344, signifying the detriment South Africa’s troubled economy has been in the region.

The economic ties between Botswana and South Africa date back to 1899 when the protectorate administration, headed by the Cape Town-based high commissioner introduced the Hut Tax for the Botswana, Lesotho, and Swaziland (BLS) countries. The tax would force young Batswana males on an exodus to South Africa mines in a bid to support their families through remittances. By the mid-19th century, remittances accounted for over 15 percent of Botswana`s GDP, curating the start of Botswana’s reliance on SA.

Last year during a groundbreaking ceremony for a coal-powered power station, President Mokgweetsi Masisi, emphasising the need for economic autonomy, particularly in the power sector, expressed what critics across the border quickly deemed unpopular views. “Clearly, reliance on power imports to meet our increasing electricity requirements is no longer an option as this poses a huge risk to our economy,” Masisi said. After expressing his views on national interest during the launch of the Jindal Mmamabule Power Station, Masisi’s sentiments were emphatically made clear during a Botswana-SA business round table discussion last year. Acknowledging the skewed trade balance, he called for a change in trade rules. A comprehensive view of government policies reveals Botswana’s reluctance to rely solely on SA’s economic largesse. Import restrictions that have angered SA are just the tip of the iceberg. 

As it is, Morupule B has a baseload capacity of 600MW but is presently generating well below that as it undergoes an overhaul. Botswana’s peak energy demand, which occurs during winter, is more than 700MW. The difference is sourced through imports from the bilateral import agreements with SA’s Eskom, other regional utilities, and purchases from the Southern African Power Pool.

In 2022, a ban on 16 types of vegetables was enforced to bolster the local horticulture industry, which primarily affected SA imports. The stiff competition had rendered the local market impenetrable for Botswana’s farmers. As of August 2023, Statistics Botswana valued vegetable imports at over P81 million, with the majority coming from SA. Government’s decision to embargo the entry of 16 vegetable types into the country sent pain directly to South Africa where large-scale farmers have been thriving economically. The vegetable ban stirred discontent in SA, with farmers expressing dismay and threatening a potential trade war. According to the Observatory of Economic Complexity, in July 2023, South Africa exported P4 billion to Botswana but only imported P622 million, resulting in a negative trade balance of over P3.3 billion for Botswana. Self-reliance has been a consistent goal for Botswana, with past administrations attempting economic diversification. However, the intricate web of dependence on SA remains evident, with the neighbouring country serving as a crucial logistics corridor. Statistics Botswana shows SA as Botswana’s primary trade partner, supplying 67 percent of all imports, challenging the feasibility of achieving a “trade on equal footing agenda.” While Botswana seeks a more balanced trade relationship, the sheer economic and political might of SA, with an annual GDP exceeding a trillion rands, poses challenges. The recent discontent voiced by industrial farmers in South Africa, accusing Botswana of betrayal, underscores the complexities.

Despite Botswana’s efforts to assert its economic independence, the path to a more equitable trade balance remains uncertain and subject to SA’s response to Botswana’s initiatives. The recent displeasure of industrial farmers in SA conveyed through the National Agricultural Marketing Council, that Botswana is betraying its affiliation with the Southern African Customs Union (SACU). “This is unfortunate and raises greater concerns about creating the “Africa We Want” – the aspiration of the Africa Agenda 2063, which is promoted through the African Continental Free Trade Agreement, Comprehensive Africa Agricultural Development Programme and other tools that the African Union is promoting to create a single market that caters for all Africans.” 

It appears it’s not just Botswana that is discontent with the way the economic balance stands, late former President of Namibia Heigh Geingob’s spewed resenting sentiments against South Africa, after recruiting Botswana to join in the war against what they deem an unfair revenue structure. The onslaught against the current structure of SACU and his country’s under-industrialisation, were triggered by what he said was the decision by the French automaker, Peugeot, to close an assembly plant in Namibia. According to The Namibian newspaper, Peugeot had filed a lawsuit against the Namibian government for its alleged failure to ensure that Peugeot’s joint venture, Peugeot Opel Assembly Namibia, would be exempt from excise and customs duties, taxes and levies for exporting vehicles assembled at Walvis Bay to SACU and SADC.

Critics of SACU largely say it was structured deliberately from inception to facilitate industrial imbalance between South Africa and its four smaller members. South Africa has benefited the most from the union’s position as a common bloc for trade with the world. 

Part of the imbalance stems back to the apartheid era, where economists such as Roman Grynberg said authorities at the time included a secret clause where member states could not seek infant industry protection within the union unless capable of supplying 60 percent of the SACU market. The Revenue Sharing Formula, set up in part to monetarily compensate the smaller members for this industrialisation imbalance has been pending revision for several years, even though one of the agreed principles is “economic convergence” among members states.