Local engineering companies have cried foul over unfair business practices and trade barriers in Botswana, which have resulted in many of them operating at a disadvantage. In the 2013 annual report of Botswana Confederation of Commerce, Industry and Manpower (BOCCIM), engineering sector chairperson Obed Motsumi revealed how South African companies obtain Africa-wide agency status from international Original Equipment Manufacturers (OEM) and later use their status to block out Botswana companies.
He said these companies then dissuade or prevent the OEMs from arranging direct procurement deals with local companies, thereby escalating avoidable costs to Botswana’s economy while preventing Botswana companies from building international trade links. He lamented that such a scenario raises issues of warranties and business flexibility and also makes the value chain unnecessarily long and costly. Local companies are further disadvantaged when they have to compete for bids with the so called agents for works awarded by the PPADB and other parastatals.
“Even where the South African companies lose tender bids, they are still able to evoke their OEM agency status to have a stranglehold on Botswana companies. We believe this should be nullified, but individual Botswana companies have no capacity to do this,” said Motsumi.
The South African companies also stand accused of masquerading as OEM agents when in fact they are just middlemen who have repeatedly fleeced the government of Botswana in the supply of spares, repairs, calibration of specialized equipment and building of local skills and knowledge. Motsumi also revealed that some of the South African companies have influenced overseas OEMs into not entertaining any requests for direct trade links from Botswana by misleading them into believing that Botswana is part of South Africa. He called on government and BOCCIM to promote the interests of Botswana-based and citizen companies by giving them greater opportunities to participate in the local economy and do business in neighboring countries. He said most of the engineering works in Botswana are awarded to foreign companies, at least judging from the capability of local companies and the amount of work they do when compared to all engineering works in the country.
“We are not saying foreign companies should not be given work. Rather we want to highlight and show the capability of local companies so that they become the first point of call, in areas where they have competencies and can deliver products and services more cost-effectively,” said Motsumi.
He called for greater participation of local companies in major works such as expansion of power plants to facilitate skills and knowledge transfer. Motsumi said this would ensure that in the long term Botswana saves money, enhances local proficiency and skills building and reduces dependency on imported skills.
In response to a questionnaire from Sunday Standard, the Competition Authority (CA) said it is aware of the plight of local companies and revealed that it has previously intervened in a case where the exclusive distribution rights granted to one enterprise had prevented a successful bidder in a government tender from performing its contractual obligations.
“Nothing stops a non-designated OEM supplier from accessing the business of the OEM where such non-designated supplier has won a tender to supply the product. The licensed OEM supplier cannot claim interest in a tender that it did not participate in or did not win,” said the CA.
It further said exclusive OEM dealerships are subject to competition law where their conduct substantially lessens competition or where there is an apparent abuse of monopoly power by the OEM or the exclusive dealer. Asked whether the alleged actions of the South African companies are in contravention of Botswana laws, the CA replied that refusal to deal or supply is a conduct that is covered in section 30 of the Competition Act of Botswana. However, said the CA, contravention of this section will only stand where the OEM or their licensed dealers exercise substantial market power and/or where there are no alternative suppliers. While it confirmed that it has received numerous reports relating to exclusive distribution agreements, the Authority said it does not have jurisdiction in cases where the OEM or its licensed dealer is located outside Botswana.
“Even if they had jurisdiction, neither the CA nor the Competition Commission could make an effective directive or order. The CA in Botswana will at best engage with their counterparts in the respective country and refer the case to them under any existing cooperation arrangements. In the absence of such cooperation arrangements or where there is no response, the best recourse that the disadvantaged business in Botswana has is to directly complain to the competition authority in that particular country where the OEM is located,” said the CA.
It further said such situations can be avoided if government signs relevant trade or investment treaties which have provisions for mutual assistance and cooperation in competition policy. For example, said the CA, Botswana has signed a bilateral agreement with Mozambique that covers cooperation on competition policy. A draft agreement with South Africa also contains a cooperation article on competition policy while similar provisions have been proposed in the Economic Partnership Agreement (EPA) with the EU.
The CA also urged the private sector to harness existing competition laws to resolve business disputes and also raise complaints with relevant competition authorities internationally. The CA said it has organized numerous stakeholder informational and advocacy programs in the country.
“A critical part of the Authority’s work is to assist businesses to deal with competition problems they encounter within or outside Botswana. The competition law can actually be effectively used to promote and protect the competitive advantage of a business,” said the CA.
It further revealed that its flagship advocacy and informational forum is the National Competition Conference which is held every March. The CA further said it is ready to provide free lectures BOCCIM members on competition law and how it can be used productively to further business interests in matters such as merger and acquisition application process and review, cartel leniency policy, bid-rigging/collusive tendering and how it affects business access to market opportunities, and how to identify and report matters of abusive exercise of market power as the case is for the OEMs.
“We have signed MoU’s with the PPADB, DCEC, CAAB, NBFIRA and Bank of Botswana to assist with cooperation and information sharing in investigations. We have been profoundly successful in sharing information and educating public officials on bid-rigging/collusive-tendering in our MoU with DCEC and PPADB,” said the CA.