The private sector knows what to change, what is left is for government to let go and allow reforms
As Botswana readies itself for an exodus, of particularly the hegemonic role of government in economic activities, a comprehensive analysis of the challenges and opportunities presented to the private sector in such an undertaking is quite as necessary as the steam engine was to the industrial revolution.
The situational analysis of various potential sectors is aptly captured by the Private Sector Development Programme (PSDP) as part of the partnership between the Centre for the Development of Enterprise (CDE) and the International Trade Centre (ITC) in what it refers to as value chain studies.
PSDP produced the studies across six respective sectors namely morula wild/ natural product, leather, piggery, poultry, horticulture and tourism industries. The studies identified the bottlenecks and constraints in the various sectors’ value chains, in particular regard to exports and Small, Micro and Medium-Sized Enterprises (SMME), and hence made recommendations on how such constraints can be addressed. This article will focus on tourism and leather value chain analysis.
A sector which Botswana is pinning its hope on to diversify the economy given its revenue potential is the tourism industry. The diagnostic tourism value chain analysis and action, 2015-2020, cites that in 2014 the direct contribution of travel and tourism to Botswana’s Gross Domestic Product (GDP) was estimated at 3.3 percent (P6.1 million) and the total contribution (including indirect spending) contributed 8.5 percent to GDP. It notes that the 10th National Development Plan (NDP 10) sought to increase the tourism contribution from 5 percent to 12 percent through among other outputs, diversifying tourism products, increasing private sector involvement in foreign direct investment (FDI) and increasing the number of tourists.
The study defines that the value chains is a combination of services (e.g. accommodation, catering, excursions, transport), in which commodities play an important role (e.g. agricultural products, craft etc.) many of which occur at the same time within the tourist destination.
The constraints relate to supply, the quality of the business environment, market entry bottlenecks and long term sustainability issues. The study identified a weakness within transportation, in terms of its limited network, citing as an example that Air Botswana was the only domestic flight provider in the country and also that inner city transport does not match the quality expectations of international travelers.
Another challenge is the mismatch between the product quality and customer expectations, citing the example that outside the safari accommodation in the Okavango Delta and Kasane, the quality of products and services drops significantly. “As Botswana is currently attracting a high-end customer, this misalignment is decreasing the potential spend directly into the local market and thereby decreasing linkages in the value chain,” it posits.
Communication and marketing of activities was also identified as a weakness. The study recommends that to increase the performance of the sector, the strengthening of the delivery of products and services to the tourism market from SMMEs and their promotion needs to be urgently done, including prioritising the development of heritage and cultural products, while maximising the amount of tourism expenditure in the local economy through SMMEs; attracting investors to tourism-related opportunities, with due consideration to tourism-related offerings that are still under-utilised and as well as sustainably managing the impacts of increased tourism.
The leather value chain, which forms part of the beef sector, thus depicting its potential to become a mainstay of the economy, presents its own dynamics. The study notes that the sector’s main actors, as at 2011, are concentrated in the Kgalagadi district (27 percent), Central (12 percent), North (11 percent), and Kweneng district (10 percent), citing that collection of hides and skins comes from commercial slaughter houses, butcheries, collectors and tanners.
It identifies glaring gaps within the value chain, which involves obtaining inputs, which move into primary production, then to processing and lastly finding a market. The study reports a collection of 359 611 hides/skins, the majority of which (320 135) are exported as wet salted hides, citing however that there is no commercial tanning industry in Botswana at present.
“In Botswana only 2.6 percent of hides/skins are processed into final products. With this low level of leather utilisation in manufacturing, the share of employment is only 14 percent (or 185) of total employment in the sector. Raising manufacturing levels may increase employment in Botswana but given the low level of earning per employee, it may not be the best economic strategy,” it says.
In terms of inputs the study observes a challenge of high cost for recapitalisation. It gives an example that BMC stopped tanning and now only practices hide preservation. It cites that one of the constraints identified is the low capacity in human capital to effectively market locally produced leather at competitive prices.
Regarding primary production, the study indentified a difficulty in accessing hides by local collectors and exporters, noting that BMC preserves hides recovered from its slaughter facilities, which excludes a significant number of small stock slaughtered at home because of the ease with which it is done. In processing, it was established that there’s little benefit, economically, as raw hides/skins are the lowest value product in the value chain. In terms of manufacturing, the study observed that “largely because the current structure of the sector leaves little opportunity for value addition there is, currently, little demand for finance to develop final goods manufacturing.” It cites that the leather industry is struggling because a large number of enterprises are at micro level which presents a challenge of limited growth opportunities relating to the market.
The study makes recommendations which include organisation of the sector, involving all its actors to represent and promote its interests; facilitation of increased collection of hides/skins, for example, through developing a pricing scheme for farmers; encouraging processing and value of hides/skins and developing leather products manufacturing sector which it suggests can be done through increasing the number of leather products design and production entrepreneurs and organising a national campaign for locally produced leather products.
Perhaps a solid starting point may be the forthcoming 14th National Business Conference (NBC), organised by Business Botswana (BB) in partnership with government, expected to draw in luminaries from both government and the private sector to formulate economic and business reforms so as to aid the change. The NBC is scheduled to take place from September 11 to 13, 2016. An important focus of the NBC, under the theme ‘Botswana at Fifty: Celebrating success and strengthening the public-private sector for sustained prosperity,’ will be a reflection on the past private sector role, and in part batting ideas on how such a role can be given impetus to address the future needs of the economy. Expected to present a case study on how government can shed its significant economic role to allow the private sector to take it on will be Seetanah Lutchmeenaraidoo, the Minister of Foreign Affairs, Regional Integration and international Trade, from Mauritius.