The United Nations Conference on Trade and Development (UNCTAD) predicts that Foreign Direct Investment (FDI) flows to Africa will contract by 25 to 40 percent in 2020.
The Botswana Investment and Trade Centre (BITC) – an agency set up to lure investors to Botswana says the mineral revenue dependent country will be equally affected by the decline in FDI flows due to Covid 19 pandemic.
BITC Chief Executive – Keletsositse Olebile says the world trade is expected to fall by 13-32 percent as the Covid 19 pandemic disrupts normal economic activity and life around the world. As a result, Olebile says Botswana is likely to register a decline in her FDI inflows.
The UNCTAD’s World Investment Report 2020 shows that FDI inflows in Botswana decreased from $286 million in 2018 to $261 million in 2019. The total stock of FDI in Botswana reached $5 billion in 2019. FDI [primarily comes from the Southern African Customs Union (SACU), the European Free Trade Association (EFTA), Canada and Zimbabwe.
On the other hand, the UNCATD data shows that in 2019, most of greenfield FDI projects to Africa (US$41 million) went to the services industry (construction, electricity, gas, steam & air conditioning supply, ICT, transport and storage). The manufacturing industry (chemical products, coke and refined petroleum products, food, beverages, transport equipment) received US$32 million in greenfield FDI projects, while the primary industry (mining and quarrying) received US$17 million.
Talkmore Chidede – an international trade expert says overreliance on commodities makes African countries such as Botswana more susceptible to any commodity-related shocks. He says the structural transformation of the continent is urgently needed.
“Countries should attract FDI that contribute to the diversification of the economy across sectors – agriculture, industry and services. Promoting investment in domestic value addition, can increase participation in global value chains”, says Chidede.
BITC’s Olebile agrees that the Covid 19 pandemic has resulted in an increase in competition for FDI hence the need for investment incentives including reshaping doing business environment.
Olebile says Botswana is currently providing investors with preferential access to the Southern African Development Community (SADC)’s entire marketplace with over 393 million people.
The private sector mouthpiece, previously BOCCIM, now Business Botswana has in the past called on the government to consider marketing Botswana not alone but rather at regional level.
This was after the realisation that Botswana has done much in pursuing its own strategies and assembling its own baskets of incentives to attract new investments, however, not much FDI inflow has been realised to date.
Available data shows that for the three-year period of 2016 to 2019, Botswana experienced declining inward and outward Foreign Direct Investment (FDI) outflows. Amid Covid-19, global FDI flows are expected to drop by more than 30 percent in 2020, before rebounding by the end of 2021.