Wednesday, July 28, 2021

Lack of local support undermines government’s EDD policy

Scores of businesses financed by government investment arms, like the Botswana Development Corporation (BDC) and the Citizen Entrepreneurial Development Agency (CEDA), are bemoaning lack of support from local companies, including government ministries, departments and local authorities in their procurement of goods and services.

The lack of support is further compounded by the fact that there is no formal networking between companies funded by the same institutions in preference of foreign suppliers or companies. It is feared that lack of support from local enterprises is inhibiting economic development and thus defeat the noble ideals of the government’s Economic Diversification Drive policy aimed at import substitution.

Some of the companies that were financed by the government investment arms and facing foreclosures have cited lack of local support as the main reason underlying their predicament and imminent foreclosure.

“It is difficult to understand why domestic companies are not supporting each other. They continue to import a lot of raw materials that are available locally to the detriment of local companies.

The propensity to procure goods and services from foreign firms is no doubt undermining the government’s EDD policy. A lot of money that should be revolving and sustaining the local economy is leaving the country’s shores at alarming rates.

“There has to be deliberate government policy aimed at the protection of local companies and industries. Could this be a result of the pull-down syndrome or envy? Whatever the motive, it is definitely impeding development of local enterprises. It is also denying local companies the leverage to employ more Batswana. Local companies are clearly not supportive of economic diversification initiatives,” said a disgruntled entrepreneur who did not want to be named.

This view is shared by other Botswana businesses who bemoan lack of local support. Some argue that the strength of the Pula against the South African Rand is a factor, especially in the procurement of large quantities of raw materials.

“If it is cheaper to source from outside, why spend more locally? It is some of those difficult business dynamics that local companies are facing. We are not saying it is right. But if it turns out to be cheaper to import than to buy locally, it is the most sensible thing to do for as long as it comes with a bit of savings which translates into some form of profit,” said another entrepreneur who concurs that the tendency undermines economic diversification efforts.

Asked to comment on the issue, Botswana Development Corporation (BDC) spokesperson, Gomolemo Zimona, acknowledges the problem. He said BDC, as the country’s main agency for commercial and industrial development, encourages entities that it financed to work together but “cannot force them to do the same”.

“These are independent companies which procure goods and services from competitive markets where the rules of demand and supply are determined by market forces.”

On what the corporation is doing to support the companies it has financed, Zimona replied that their business model is supportive and provides mentorship to the companies it has financed, be it those which got loans or equity, because without such support they will not be able to pay back the loans and create wealth for shareholders. He said some companies got top up loans from BDC for expansion of their projects and establishment of new ones.

“For companies which joined hands with BDC (joint venture companies), BDC offers technical assistance and has a representation at board level to assist in strategic direction of such companies, especially its subsidiaries and ancillaries.”

On the issues of government support to its subsidiaries, he said government owns 100 percent of the issued share capital of BDC as well as other parastatals and, therefore, sees other government departments, ministries as well as local authorities as strategic partners in its quest to diversify the economy of the country.

To this end BDC organizes and continues to hold workshops, stakeholder engagements conferences and council meetings to consult and discuss issues of development projects and, to a large extent, works closely with all these stakeholders in all its projects and undertakings.

With regard to the policy on foreclosures, he said BDC follows the legal processes and requirements of the laws of Botswana if any of its debtors fails to honour its contractual obligations pertaining to loans and there is rigorous process that starts with meetings to determine the cause of the problem and how it could help. The process includes follow up meetings, follow up letters and eventually court orders if the debtors prove to be a problem debtor.

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