Trade data released for January 2014 shows a disturbing trend ÔÇô exports of diamonds and copper now make up the bulk of Botswana’s exports, with most other sectors having fallen sharply over the past few years. According to Capital Management Botswana (CMB), diamonds and copper now make up roughly 90% of the country’s exports. CMB director Tim Marsland notes that it is very important to reverse this trend. He says that in 2010, diamonds made up 68% of exports. By 2013, diamonds’ share of exports had jumped to more than 83%. Meat, for example, has dropped from 3.4% to 0.5% in the same period. “A lot has been said about the need to diversify the economy. What we are seeing is the situation is getting worse, not better.
The economy is now almost totally reliant on diamonds,” says Marsland. Marsland says the solution is to embrace what Botswana naturally is. “Botswana has done a lot of things right since independence. One issue that gives it a huge edge over its competitors has not been exploited. That is the development of Brand Botswana Inc as a premium brand.”
Marsland says Botswana has positioned itself as an exclusive brand in the same league as Luxembourg, Monaco, and even Switzerland. Botswana shares a lot of similar characteristics with the reference group, such as a small but well educated population and a large dominant product (diamonds in the case of Botswana, financial services in the case of the others). Marsland says that deliberately positioning Botswana as a premium brand is a very good growth option for Botswana to pursue. This means that Botswana will mostly target the wealthy as its customers. “Worldwide, the rich stay rich. Right through the recent economic crisis, little happened to the fortunes of the wealthy. Most wealthy added to their fortunes, while the less fortunate fell closer to the bottom of the tree,” notes Marsland.
CMB director Rhys Carr notes that Botswana already plays in the exclusive space. “We produce top-quality, conflict free diamonds. The finest stones are cut in Botswana. That is all aimed at the high end market. In tourism, we have done very well. Botswana’s lodges command a healthy premium over its competitors and are easily rated among the best in the world. With premium reputation comes a premium price. The tourism industry is testament to the benefits of premium reputation,” Carr notes. “The recent ban on hunting rightfully built on Botswana’s image as a premium conservation destination. We need more of this,” he says. Marsland says Botswana should unashamedly position itself as a premium brand. An industry that would benefit from the premium label is the meat industry. “Few in the world would argue a fine cut of Botswana beef is not among the best, if not the best, in the world,” says Carr, whose family has a long history in the butchery industry.
“We have a huge edge over competitors because we are one of the few countries left that produces wild-raised, chemical free beef. The fact is, the world is becoming more health conscious. Those that can afford to buy chemical-free beef are willing to pay a premium for the product,” says Carr. “People have become more health conscious. They do not want to be eating beef that is full of chemicals such as antibiotics,” he says. Marsland says the apparent trend towards feedlots to compete with Botswana’s neighbours is at odds with Botswana’s potential. “Perhaps there is a place for mass-produced beef, but the market for a premium product is more important. We need to market our wild-grown beef world-wide as a premium product”. Carr notes that foot and mouth disease is a major, but not insurmountable, issue. “We have to make sure that the proper procedures are in place.
Infrastructure such as fences need to function. We need to make sure animal movement is controlled, says Carr. “The system needs to work together. With this in place, our beef industry can be in high demand at the finest restaurants across the world,” says Carr. “I look forward to demanding, and receiving, a fine Botswana fillet in the best restaurants in London and New York,” says Carr.
Marsland says the achievement of these economic objectives is very possible. “We already have excellent foundations on which to build. Now we need to build. We need to deliberately market Botswana, not as an investment destination, but as a premium country. And not say it is the best in Africa, but say that it among the best in its peer group in the world”, says Marsland. Building these foundations requires investment in the economy. Marsland says that if Botswana wants to attract the international interest that it deserves, then it needs to have the confidence to first invest in its own economy.
“Independence in 1966 and the discovery of diamonds were huge milestones in the development of Botswana. But in 2003 an equally important event took place, which was the launch of a fully funded government pension fund,” says Marsland. “Today, that fund has an arsenal of P40 billion to invest. That event should have taken Botswana to new heights, but instead most of the money is sent to other countries to develop their economies and their financial services industries,” says Marsland. Carr says that the policy does not make sense. He says that Botswana is suffering from a massive power deficit and is at the mercy of Eskom. “And yet, we send our money to SA and some of it is bound to find its way to Eskom, directly or indirectly. Why not keep that money at home and build our own power stations and sell our power to Eskom,” asks Carr. The spin-offs would be dramatic. “Not only would we be building power stations, but we would develop the coal industry as well. Plus a number of businesses would spring up to service those industries,” he says.
Carr says the argument that Botswana doesn’t have enough decent investment opportunities doesn’t make sense. “If that were so, why are there five international banks making huge profits in Botswana? If the banks are able to find enough projects to lend to, why can’t investment managers? We have people coming to see us all the time with very viable business plans. But they just cannot find the financial backing to get the projects off the ground. They are desperate,” says Carr. The government pension fund is overseen by the Botswana Public Officers Pension Fund (BPOPF), which Marsland notes has done a sterling job since inception. “The BPOPF saw an opportunity to develop Botswana into a world-class financial services hub. So it appointed a number of private sector asset managers (most are foreign) to manage its assets.
“With the fees that have been paid, surely that should have resulted in the development of a world-class financial services industry right here in Botswana,” asks Marsland. Carr says that recent changes at the BPOPF are very encouraging for Botswana. “The BPOPF is pushing asset managers to invest more in Botswana. This is excellent news for all of us in Botswana. We need to develop our infrastructure, not South Africa’s,” he says. Carr says CMA knows what it is talking about: “We’ve been active in Botswana for 10 years. We have absolute faith in this country. We have pretty much invested 100% of our clients’ money in Botswana.
“We have pumped more than P2 billion into Botswana projects and investments,” says Carr. Every single investment has performed well. “Our faith in Botswana has been well-justified. Our returns are excellent and we would not consider investing anywhere else,” says Carr. “Botswana has an excellent story to sell. We just have to believe in ourselves,” says Marsland. Asked how CMB would advise its competitors, Carr says: “Guys, have faith in the Botswana economy. This is the place to invest. We know it costs more money to invest here rather than to ship the money offshore. But at the end of the day, if we don’t put Botswana first who will? We need to have faith.”