Is BDP Government serious about improving business environment in Botswana?
by Anna Motlhagodi
I read in a local weekly and with much interest about the government’s intention to partner with the private sector to re-look into the government’s processes with a view to improving the business environment in Botswana. President Khama is reported to have indicated at the High Level Consultative Council that government is willing to improve the business climate.
At first glance this initiative may appear to be a commendable initiative at this juncture, given the declining rating of Doing Business in Botswana. However, I am of the view that this is a matter that needed closer scrutiny given the previous initiatives, reports, findings and recommendations with respect to the same subject matter. Does the fact that there is need to “re-look” into government’s processes suggest that previous efforts have failed? Government has spent a great deal of taxpayers’ money commissioning reports to improve the business environment and now is the time for the nation to ask what the government of the day did with the findings and recommendations in such reports.
To give a little background to this discussion, I should indicate that there have been several previous attempts by government to look into government processes with a view to improving the business environment. One such instance was in 1982 when the Presidential Commission on Economic Opportunities made a report. In the report it was stated that “Almost all regulations are discriminatory in their impact; compliance is more difficult and relatively more costly for the poor, the uneducated, those in a rural environment, small business and citizens than it is for the wealthy, the educated, urban dwellers, large enterprises and non-citizens. The case for deregulation is that it should both increase the number of economic opportunities and improve their distribution”
Twenty- one years down the line, in 2003 the Ministry of Trade and Industry requested the Foreign Investment Advisory Services (FIAS) to conduct an overall review of the business legal framework in the country and a detailed study of the regulatory and administrative barriers to investment in Botswana. On page A-6 of the said report it was stated that “Both the business survey and the field investigation of this project suggests that processes to obtain land and work permits are the two most significant bottlenecks to investment. The government should make the resolution of these bottlenecks its highest priority. In addition, sector-level licensing, especially reduces the freedom of business entry, and should be seriously addressed by government”
In 2006 the government appointed the Business and Economic Advisory Council which came with a report entitled “A Strategy for Economic Diversification and Sustainable Growth” which also looked into government’s processes with a view to improving the business environment. The recommendations made by the Council were, inter alia, creation of a simple, fast business license process-granted within 7 days, introduce unlimited period business licenses, subject only to annual fees and inspection where deemed necessary, change BEDIA’ investment approach to a highly focused selectively targeted or company specific investment promotion effort, enable BEDIA to offer complete license, land work and residence company permit package to investors and guarantee 7 day turn-around times for strong investors.
Former President of BOCCIM Iqbal Ebrahim, who should be commended for fighting tirelessly for deregulation, also presented an article in 1994 in a Botswana Society publication entitled “Botswana of the 21st Century” where he addressed the subject of the negative impact of government red tape and defined red tape as, “not only the number and volume of measures of government interventions, but also the manner in which the regulations are administered, interpreted and implemented.” Andrew Briscoe in his book entitled “Small Business Support in Botswana” (1995) extensively addressed the matter of government processes particular emphasis on the licensing regime and similarly made a number of recommendations on the subject matter.
As the above background will show, it is now many years that the subject of the negative impact of legal and regulatory framework and government red tape is being discussed. Recommendations have been made but have not been acted upon How much more tax payer’s money is still going to be wasted on commissioning reports on improving the business environment only for those reports to gather dust on government’s shelves with no improvement to the situation? The government’s inertia, lack of responsiveness and downright negligence is a serious cause for concern. Recently we learnt (Sunday Standard (March 25-31, 2012) that the government has appointed a National Doing Business Committee to look into improving the business climate in the country. According to the Sunday Standard report the committee was making strides in coming up with reforms. Now doubt the committee was appointed as a knee jerk reaction to the alarming decline of Botswana’s rating in Doing Business of 2011. Now we learn that there is yet another initiative where government and the private sector will be partnering with the same objective of improving the business environment. One wonders if these disjointed and haphazard attempts will bring about the intended results this time around.
The Botswana Government, in an effort to promote investment has made pronouncements such as “Botswana is open for business, and welcomes foreign investment” (Ministry of Commerce and Industry, Botswana: A Strategic Investment Opportunity) Pronouncements by the Minister of trade and industry that Botswana wants to create a conducive environment for business, attract direct foreign investment, promote local investment and diversify the economy. (Mmegi, 15th September 2006, B3). However, for government to achieve this objective it must take specific actions. Such actions include, but are not limited to, resource allocation, innovation, education, trade, FDI competition, fiscal and monetary policies, exchange rates, setting up and maintenance of an efficient legal system and commercial infrastructure. There is a strong influence between government actions, strategies and policies and the way investors behave or respond.
With respect to FDI, before an investor decides to invest in a particular country, it will appraise the business environment of that country. In making such an appraisal the potential investor will seek strategic opportunities and avoid certain environmental threats. The potential investor will look at the political, economic, technological, social and legal environment of a particular country before making an investment decision.
Recently, I read that (Sunday Standard, March 25-31, 2012) the Minister of Trade and Industry, Dorcas Makgathu Malesu, went on a mission to South Africa to woo investors to Botswana. What immediately came to my mind was - what a waste of money! What purpose does it serve to invite investors to Botswana only for them to face a mountain of legal and regulatory barriers when trying to invest here? The legal and regulatory framework has been researched on and reports with findings and recommendations have been made to the government but instead of the situation getting better, it is getting worse. The response of government to such recommendations is to say the least, indifference and carrying on with business as usual. In 2003 the Botswana government, no doubt at a huge cost, commissioned the Foreign Investment Advisory Services (FIAS) report to look into the legal and regulatory barriers to investment in Botswana. The report came up with a number of recommendations to improve the business climate but few have been acted upon.
Also, no doubt at a huge cost to the tax payer’s money, in 2006, the government established the Business and Economic Advisory Council which came up with a report entitled “A strategy for Economic Diversification and Sustainable Growth”. The report came up with a number of findings and recommendations for improving the business environment. What happened to those recommendations? Government is sitting on the report while the situation is getting worse and Botswana’s Doing Business rating is systematically declining over the years. The report noted that the process of applying for a work and residence permit in Botswana is “harrowing”. The report accordingly made a number of recommendations specifically towards making the procedure easier and investor friendly. One can only imagine, after the advent of DIS, the procedure for acquiring work and residence permits became something worse than “harrowing”. Since DIS came into the picture every work and residence permit is declined for “security reasons” How the potential investor poses a security threat to the country will be known only to the department of immigration.
I concur with Tshekedi Khama, on his on his first sensible contribution to the debate in parliament, concerning the acquisition of work and residence permits. Obviously in an environment such as the one obtaining in the department of immigration the situation is quite conducive for corruption to take place. In a International Finance Corporation and World Bank report by Emery JJ, Spencer M.T., Wells L.T., Buehrer, T.S (2000) entitled “Administrative Barriers to Foreign Direct Investment: Reducing Red Tape in Africa” wrote ”In particular, approvals, permits and other requirements that result in undue delays and unforeseen costs, encourage bribery and corruptions, foster an environment of pervasive uncertainty for all investors. These administrative constraints to investment, which have their origins in the earlier era of extensive state control over private investment persists in spite of a substantial opening up of the economy”
However, what has Tshekedi Khama’s government done about the regulatory environment since the recommendations of the Presidential Commission in 1982, FIAS report of 2003 and the BEAC report of 2006? The nation is losing time and opportunity costs while the government acts with no sense of urgency. In the good old days when Botswana was earning huge diamond revenue the government merely paid lip service to diversifying the economy. It was not concerned about the relatively unskilled
population, low technological know -how, the thousands of unemployed citizens roaming the streets and high levels of poverty. Now that the country is in a desperate situation with declining revenues from diamonds the government is running helter skelter trying to come up with hastily cobbled up initiatives.
In the 2003 FIAS report it was noted that “The slow and inefficient process by which legislation is enacted in Botswana does not serve the country’s interest in speeding up the modernization process… The present process of legislative change, which drags on for unacceptable periods of time, defeats the whole purpose of change. It must be accelerated.” Government obviously turned a blind eye to this suggestion.
The BEAC report of 2006 also recommended the establishment of a Law Reform Commission to do the following:
• Systematically overhaul all legislation in Botswana
• Identify and eliminate all inhibiting, unnecessary, cumbersome laws
• Examine all legislation and regulations for compliance with new BEAC recommended principles of open, outward oriented economy
• Completely replace current Civil Service Act, Employment legislation, immigration legislation with new revised and modernized Acts.
In 1982 the report of the Presidential Commission on Economic Opportunities recommended that a permanent Regulations Review Committee be established with a mandate both to review existing legislation and to screen new legislation. What happened to this initiative? It gathered dust on the shelves on government offices and was never acted upon. Government has completely forgotten about the 1982 Presidential Commission and has merely come up with another animal with a different name. A lot of laws that have a bearing on investment were enacted decades ago and are outdated or have outlived their relevance in a modern day economy. For a country that is trying to encourage entrepreneurship the situation is pathetic.
The potential investor will want to ensure that his investment is safe. The potential investor wants certainty. If Botswana has immigration laws that permit the state to declare a person persona non grata and give him 48 hours notice to leave the country for undisclosed reasons, there is a high likelihood that such a law will act as a deterrent to invest in Botswana. In fact such a law will send chills down the spine of a potential investor. How safe is the investment of a person who has been granted a waiver renewable every three months pending determination of his application for work and residence permits. Imagine the pervasive uncertainty for a protected period of time not knowing his fate. This has happened to countless people who invested heavily in this country only to be told that their application for a permit has been declined. We have no investment objectives that can give guidance on what kind of investment Botswana wants. No wonder Botswana attracts people all the way from Asian countries only to sell chips and magwenya here.
So far Botswana has succeeded in being a country which at one point had the highest economic growth rates. Such growth was a jobless growth. Botswana boasted of being a middle income country yet it had one of the highest income disparities. Botswana has established an open economy to encourage foreign investment such as a wide range of tax concessions, financial assistance, no restrictions on foreign exchange or flow of funds in and out of the country but these initiatives have not proved sufficient enough to attract investors to Botswana. Botswana faces the challenge of skills transfer, transfer of technological know-how, diversification of the economy, employment creation and poverty reduction. In order to overcome these challenges the country it is imperative for government to overcome remaining barriers to investment by creating a conducive environment both for the foreign and local investor to do business.
The creation of a conducive business environment has not been undertaken with enough political will, drive and energy. Clearly the government of the day has been sleeping on the job. It is lethargic and unresponsive and out of step with the demands a highly competitive globalised world. The captain of the ship has lost the compass and the ship has completely lost direction. The ruling party says there is still no alternative but this is how it acquits itself. The BCP, the party of choice, is a compelling alternative to the moribund Domgrag.