Wednesday, December 8, 2021

Botswana has low service exports compared to its development level

At a time when service exports from African countries are increasing, the latest African Global Competitiveness Report adjudges Botswana to have low service exports relative to its level of development.

The other African countries with a similar problem are C├┤te d’Ivoire, Nigeria and South Africa. On the other hand, service exports from Cameroon, Egypt, Mauritius, Morocco, and Tunisia are above average. The report’s analysis is that transport, distribution and trade are among the main service exports of Africa. Transport services represent a significant percentage of total service exports in nearly all countries. However, their importance diminishes when measured in terms of value-added. The decline in the share of value-added indicates weak links between transport and other service sector exports. By contrast, distribution and trade services (which include hotel and restaurants) and other business services (which include ICTs and professional services) tend to have stronger links to other export sectors.

The availability of electronic infrastructure and tertiary education enrollment also affect service exports significantly.

“For developing countries,… the electronic infrastructure does not seem to have been critical in promoting service exports, whereas the effect of schooling is larger. The ability of large service-exporting firms in developing countries to create their own electronic infrastructure or to get access to dedicated infrastructure may reduce the relevance of economy-wide access indicators. In addition, bilateral goods exports are found to positively affect service exports. The effects of distance, language, and colonial history are significant as well:
distance negatively affects service exports whereas common language and colonial history have a positive and statistically significant effect. The negative effect of distance suggests that, despite the growth of electronically delivered services, proximity between suppliers and consumers still matters,” the report says.

Not too long ago, a Cape Town-based consultancy firm called Imani Development (International), revealed that although services are the future of Botswana’s economy, they are generally neglected. The Botswana International Trade Centre (established by merging the Botswana Export Development and Investment Agency with the International Financial Services Centre) is doing what is humanly possible to attract foreign direct investment (FDI) into the country but on Imani’s report card, it scores very low marks.

“BITC’s facilitation has a main focus on manufacturing and they are losing out on the window of opportunity on services that Botswana has at the moment,” the Imani says.

The consultancy conducted a wide range of interviews with Botswana companies to assess Botswana their interest in the Tripartite Free Trade Agreement market (comprising the Southern African Development Community, the Common Market for Eastern and Southern Africa and the East African Community) and outline key constraints to production and trading capacity. The two key constraints that Imani identified are internet connectivity and good telecommunications infrastructure.

“Though Botswana’s broadband tariffs are said to be among the top 5 lowest in Sub-Saharan Africa (defined as a connection of 256 Kbit/s) at a cost of USD 29.64, it is however, close to triple the cost of broadband in Egypt. Botswana’s internet speed is not among the top 5 in Africa; it is led by Uganda, Senegal, Mauritius and Namibia which are also among the top 10 cheapest countries therefore making Botswana’s internet not competitive among the top players in the TFTA,” Imani says.

A services sector report prepared for the Botswana Institute of Development Policy Analysis by the Overseas Development Institute (ODI) in the United Kingdom has demonstrated how costly Botswana’s relatively poor quality of general IT infrastructure is to the economy. The report says that poor data exchange processes were a major cause of Barclays Bank Botswana’s decision to relocate part of its back office operations away from Botswana.

“Barclays were not able to get the right calibre of staff on an ongoing basis and the IT infrastructure did not match the requirements of the company. Thus small standalone units without appropriate support services may not work. The skills and IT framework needs to be fully up to scratch to international standards. Other banks also listed the lack of skilled labour as one of their primary concerns. The Standard Chartered back office services for Africa are located in Kenya. Hence, while trade commitments should be considered it should go hand in hand with complementary policies,” ODI says.

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