Tuesday, December 7, 2021

E-commerce: A powerful tool for private sector development and sustenance

While e-commerce has been on Botswana’s development agenda for the past two decades, progress to date has generally lagged and faced challenges of gaining momentum.

The Botswana National E-Commerce Strategy states that “by 2026, we will have harnessed the power of our private sector, the talent and capabilities of the Botswana people, our mastery of ICTs, and our vibrant e-commerce sector to make our products and services a Botswana brand of excellence across the world” and “leverage e-commerce to accelerate economic growth and diversification, unleash Botswana’s productive capacity and reach high-income country status”.

According to the United Nation Conference on Trade and Development (UNCTAD) sponsored National Policy Review and E-Commerce Strategy for Botswana 2021, with a solid backbone of widespread use of mobile phones and rising internet penetration rates, Botswana now stands well-positioned to leverage its investments in the national  broadband into greater internet usage by individuals, households, businesses and industries and vigorous growth of its e-commerce.

The strategy acknowledges that although e-commerce is still in the relatively early stages in the country, “growing e-commerce awareness among micro, small and medium-sized enterprises in traditional and budding technology-related sectors has led to efforts to venture into ICTs and e-commerce in order to improve efficiencies and enter new markets”.

E-commerce offers potential benefits to Batswana enterprises in the form of increased participation in international value chains, greater market access and reach, and improved internal and market efficiency, as well as lower transactions costs. However, many of these potential benefits have yet to be fully tapped by Botswana businesses.

The strategy also notes that the country has in the past two decades made extensive investments in ICT infrastructure – especially broadband – to build its national backbone, coupled with market liberalization measures and initiatives to set up ICT service centers throughout the country.

This has led to significant progress in promoting universal access to ICTs and the embrace of these technologies. In the past decade in particular, Botswana has witnessed dynamic growth in ICT use, driven largely by mobile devices but also by the rising use of landlines, the internet and personal computers, especially in urban areas.

Further initiatives are currently underway to provide last-mile connectivity and broadband wireless technologies connecting business, hospitality, government office parks, shopping centers and industrial areas.

The strategy also reckons that the country is well-positioned for e-commerce growth as a result of a large number of e-commerce ready users with smartphones, who use broadband and can serve as the initial segments of the population that will spearhead the spread of e-commerce. The country has a growing middle class and a large segment of social media-using youth who can serve as the early adopters of e-commerce.

The other advantage the country enjoys is a world-class, globally competitive diamond industry, which has been the country’s main foreign direct investment (FDI) and foreign exchange earner and played a critical role in growing the economy, generating revenue and jobs. The country’s high-end tourism has been developing and shows strong potential growth.

Moreover, preferential trade agreements provide Botswana with market access to large developed markets. This access, facilitated through trade agreements, “can benefit Botswana e-commerce businesses.

“In addition, the closer geographical proximity of Botswana and the entire African continent to certain markets, such as the United States and the European Union, also offer the opportunity for lower logistics costs – should these shorter trade routes be capitalized on, optimized and made cost-efficient – for international trade with these markets, in contrast to Asian countries, which must cover the logistics costs for far longer distances”.

It is also recognized by the strategy paper that Botswana has high literacy rates and a high percentage of the population with at least a secondary school education also helps to ensure a population that is e-commerce ready. Widespread use of English and exposure to ICT devices also position Botswana workers and citizens to be able to plug into global networks.

The well-developed legal and regulatory framework for electronic payments, its robust ICT and e-commerce related laws and recently updated regulations also constitute an important pillar for creating an environment favourable to e-commerce development.

According to the strategy paper, government has made private sector development a key component of its economic development strategy. The Botswana Industrial Development Policy of 2014 specifically states that the private sector should drive the country’s industrialization programme and also identifies key areas for private sector development, including: capacity to build and develop entrepreneurs; skills development  to meet private sector needs; technology adaptation training; and public-private-partnerships, particularly in the infrastructure development.

In 2013, government launched its Private Sector Development Strategy as part of Botswana’s Economic Diversification Drive. Its aim was to create a business environment conducive to private sector growth and to boost the growth and competitiveness of the sector.

It is acknowledged by the strategy paper that the private sector is vital to driving economic growth, generating employment, improving livelihoods, reducing poverty and stimulating economic diversification.

Private sector businesses provide critical capital, knowledge, innovation, taxes, opportunities for partnerships and risk mitigation essential to a country’s economic development.

“A dynamic private sector is key to the sustainable growth of an economy and, working hand-in-hand with the public sector, can help it better fulfill its mission”, states the strategy paper adding that “opportunities are available to leverage ICTs and e-commerce in support of the private sector development.

“ICTs have emerged as powerful tools to support business growth, increasing operational efficiencies and productivity across sectors, complementing pro-poor growth activities, enhancing citizens’ livelihood capacities and helping to address developing countries’ extensive barriers to growth”.

It is also observed that e-commerce can play an important role in helping developing countries grow trade and industry, boost productive capacity and facilitate integration into global value and supply chains.

The strategy paper is also alive to the fact that the ICT sector plays a key role in providing crucial technology services required to drive and support the growth of e-commerce. By providing technology and services for the e-commerce sector, it can help facilitate e-commerce adoption by businesses and consumers, including through outsourcing from other countries.

By marketing e-commerce solutions, the ICT sector can inform businesses about the benefits and opportunities offered by B2B and B2C e-commerce. There is a growing demand on IT-related functions from Botswana’s local market. In addition, the government is expected to provide more support for training initiatives, SMMEs and innovations that could be scaled up to support e-commerce.

“Yet, while Botswana’s telecommunication sector has grown over the past two decades and is making good progress, its IT sector remains fragmented and largely small-scale despite the country’s high number of IT graduates”, laments the strategy paper adding that “Botswana has many strengths that can be leveraged for e-commerce, but its potential is still far from being full tapped”.

The country is further urged to take the necessary steps to leverage e-commerce to empower its citizens and entrepreneurs, improve the quality of life and well-being of its people, grow its private sector and create jobs, diversify its economy and ensure inclusive, sustainable development and accelerated economic growth.

On trade performance, it is reported that over the past decade, the country has witnessed a marked increase in exports, moving from just over US$4 billion in 2005 to nearly $8 billion in 2014.

Imports exhibited a much larger increase in the same period, moving from around $3 billion in 2005 to $8 billion in 2014 (ITC). After 2008 the trade surplus turned into a deficit but by 2017, both imports and exports hovered around $5.5 billion.

It is further reported that Botswana is heavily geared to exports and export-driven manufacturing in areas ranging from diamonds and beef to harnessing textiles and handicrafts.

The country has also taken a number of steps to tap global markets to export locally manufactured goods and services, encourage value addition and create jobs, especially for the youth. Support for e-commerce can play a role in boosting export growth in Botswana and accelerate the country’s export development.

The dynamics driving e-commerce can vary widely within and among countries. E-commerce exports can serve different purposes for different types of businesses, different industries and across countries.

In some countries, businesses and firms are able to produce more goods than be consumed at home, leading to a drive to tap foreign markets to sell this “excess” production, also known as “production surplus”.

While e-commerce business models are evolving, in the past e-commerce tended to work best under conditions where there was an abundance of good tradeable products and growth-oriented businesses committed to scaling up. Countries with supply capacity for a surplus of tradeable products tend to be well-positioned to benefit from e-commerce.

By drastically reducing the starting up costs and running a business, e-commerce facilitates business opportunities for aspiring entrepreneurs lacking financial resources.

In contrast to earlier times when starting a business required significant capital, financing and sunk costs, “today e-commerce businesses can be started with minimal investment. E-commerce also substantially reduces the operating costs of running a sustainable business”.

Its ability to expand a business’s market reach, particularly into foreign markets , at minimal costs and with minimal effort further alleviate business cost burdens on entrepreneurs with limited access to financing. For example, e-commerce provides several tools that can dramatically reduce the costs normally involved in expanding a business’s client base.

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