Tuesday, January 18, 2022

Botswana could do roaring trade with Madagascar

On the basis of description by the Minister of Foreign Affairs and International Cooperation, Phandu Skelemani, some Batswana would probably know Madagascar as a country with a “deejay” president who was denied VIP treatment when he visited Botswana in 2011. From the analysis of a Zimbabwean economist, the country that this DJ leads has the “highest unrealised trade potential” with Botswana in Southern Africa.

Dr. Albert Makochekanwa of the University of Zimbabwe carried out a study assessing the impact of trade facilitation on the Southern African Development Community’s intra-trade potential. While not discounting the commonly cited problem in SADC trade (cost of transportation), the study indicates that trade facilitation involves other equally important factors.

Makochekanwa used a model that measured a set of indicators of trade facilitation: port efficiency, customs environment and e-commerce use by business. Port efficiency measures the quality of infrastructure of maritime and air ports; customs environment measures direct customs costs as well as administrative transparency of customs and border crossings; and, e-business usage measures the extent to which an economy has the necessary domestic infrastructure (such as telecommunications, financial intermediaries, and logistics firms) and is using networked information to improve efficiency as well as to transform activities to enhance economic activity.

On the whole, the study found that a 1 percent increase in use of e-business in both importing and exporting SADC countries will cause intra-regional export trade to increase by 0.43 percent and 0.31 percent, respectively.

Botswana has ratio values of greater than one with 11 out of the 12 SADC trading partners (except Zimbabwe) with the highest unrealised trading potential suggested with Madagascar. The ratio value of such potential is 142.4. The study shows that Botswana and its 11 SADC trading partners are trading much less than what the model predicts, implying that the country has untapped trade with those countries. Next on the list of Botswana’s unrealised trading potential with SADC countries are Swaziland (23.6) and Lesotho (22.2).

“This scenario suggests that it will be to the advantage of Botswana if the country continues to make all efforts to improve trade facilitation efforts. The benefits of trade facilitation will be further enhanced if, on the other hand, the 11 SADC member countries with which Botswana has untapped trade potential also implement regulations to improve trade facilitation from their respective trade regimes,” says Makochekanwa who first presented his findings at the African Economic Conference (AEC) in Johannesburg last October.

This study, and many more, has been incorporated into an African Development Bank report on regional integration.

Botswana has almost exhausted its trade potential with Zimbabwe but as the study notes, the language may be deceptive.

“Exhaustation of trade potential does not imply that these countries should not trade, but only implies that it may be difficult to increase the levels of trade between such trading partners,” explains Makochekanwa, adding that exhaustation of trade potentials indicates a successful partnership among trading countries.

South Africa and Zimbabwe have also exhausted their respective trade potentials with regional trading partners.

The AfDB says that while still sluggish, Madagascar’s economy grew slightly faster (2.6 percent) in 2013 on account of mining and should speed up in 2014 (3.7 percent) and 2015 (5.4 percent) as the political situation normalises. The latter turned abnormal in 2009 when a former mayor of the capital city, Antananarivo, and former nightclub DJ, Andry Rajoelina, toppled Marc Ravalomanana in a military-backed coup. When Rajoelina visited Botswana in 2011 for a SADC summit, he was denied VIP courtesies and the explanation from minister Skelemani was that Botswana didn’t recognise him as a head of state but as “just an ordinary Madagascan citizen.” In the event the two countries were to establish trade ties, this politics will definitely play into the economics.

RELATED STORIES

Read this week's paper