The multimillion dollar project to build the Kazungula Bridge has been completed. Built on the North–South Corridor in the Southern African Development Community (SADC) region, the project forms part of the corridor-long infrastructure improvement programme intended to boost regional integration. The 923 meter long, 18.5 meter wide extra dosed bridge with 687 meter long access road and a 2170 meter long single track railway, connects Zambia and Botswana by improving the transportation and logistics infrastructure around the region.
As borders prepare to reopen, the bridge stands as a spectacular milestone to officially welcome tourists back. A site for sore eyes, this breathtaking piece of architecture benefits will not only be limited to tourism, but also serves as a huge nod to promotion of economic growth through regional integration. Botswana and Zambia equally serve as major member states of SADC and both play key economic roles in the region. Nevertheless, free movement of trade goods and people between the two countries had been constrained due to the lack of a reliable road network across the Zambezi River. The completion of Kazungula Bridge would significantly contribute to easy movement of goods and services within the region hence promote regional integration.
In 2007, the economic growth for the region was projected at approximately 7 percent. Zambia’s real GDP growth in 2006 was estimated to be 5.8 percent, while Botswana had a real GDP growth of 5.4 percent in the same year. The SADC region is endowed with untapped natural resources of minerals, fuels and vast agricultural lands that can enhance economic development in the future. Structural adjustment efforts and deregulation policies adopted over the past decade may also function as a catalyst of future economic development. It should also be noted that the potential gains generated from this structure is however not just limited to the SADC region, but could also play a crucial role in the recently signed African Continental Free Trade Agreement (AfCFTA).
African countries are separated by more than 100 bilateral borders, which have created constrain of trade and economic integration among the states. AfCFTA comes at a time when Africa’s intra-regional trade was ranked as one of the lowest in the world. As such the African Union (AU), within its Agenda 2063 framework, developed continental frameworks and flagship projects aimed at adding value to Africa’s commodities, and reducing/removing barriers to intra-African trade and creating a larger market for African goods and services. Using its leverage of its population of over one billion people, the vision is quite comprehensive, covering issues of: identity, self-determination, political independence, and socio-economic development in the context of globalization.
The establishment of the AfCFTA is a remarkable political accomplishment indeed, however it needs to be supported with action to ensure that Africa’s businesses and citizens essentially benefit from it. While the July 1st 2020 start date for trading under the AfCFTA was delayed due to the COVID-19 pandemic, the economic boost the AfCFTA is meant to provide has become even more critical given the devastating socioeconomic impact COVID-19 will have across Africa. By promoting economic growth and diversification the AfCFTA could make African economies more resilient to such shocks in the future.
How can Botswana tap into AfCFTA successfully?
As a landlocked country, how can Botswana position itself to enjoy the perks of a single continental market for goods and services despite the pandemic? To tap the potential benefits of the AfCFTA, there are two areas that need to be tackled urgently.Firstly by reducing the infrastructure deficit (particularly in roads, power and ports). Secondly reducing other critical Non-Tariff Barriers (NTBs), such as customs and administrative requirements that directly affect the capacity of economies to move traded merchandise within and outside their borders.
Reducing infrastructure deficit
The completion of multimillion-dollar Kazungula project, is a step in the right direction addressing the infrastructure deficit. The projects falls in line with the country’s efforts to scale up existing continental infrastructure aimed at strengthening rural-urban links and developing trade corridors. This effort is particularly important for reducing trade costs in landlocked countries. Furthermore, Botswana still faces a challenge of financing those infrastructural services and connecting its transportation system to regional and international markets.
In addressing the financing gap across infrastructure sectors, historically Botswana relied on multilateral development banks (MDBs) for financing. MDBs have been the largest source of external financing in Botswana since 2009, suggesting a higher level of satisfaction with MDBs than with bilateral organizations. The reclassification of Botswana as a Middle Income Country (MIC) in 1992 made the country ineligible for concessional resources from MDBs and other developing agencies. Hence, diverse forms of development projects, including infrastructure projects, were mainly financed using public funds. Therefore, infrastructure projects which could not be funded using public funds would result in perhaps another option in funding from traditional bilateral partners. Botswana has overtime relied on financing from China, Japan and Kuwait. For instance the Kazungula Bridge Project was co-financed by both government of Botswana and Zambia as well the Japan International Co-operation Agency (JICA), and the African Development Bank (ADB) at a total cost of US$260 million.
Alternatively, the infrastructure financing gap could be addressed by China’s infrastructure initiative: the Belt and Road Initiative (BRI). BRI, is an ambitious global infrastructure development strategy adopted by the Chinese government in 2013 to invest in nearly seventy countries and international organizations. The programme is set to connect Asia with Africa and Europe via land and maritime networks along six corridors with the purpose of improving regional integration, increasing inter-regional connectivity and stimulating economic growth. The BRI addresses an “infrastructure gap” and thus has potential to accelerate economic growth across the said regions.
Botswana has made significant infrastructure progress in recent years, including the transport, water and sanitation, and telecommunication sectors. However, the country still faces other imperative infrastructure challenges such as power sector. Where the country is economically and financially exposed to a lack of generation capacity and insufficient power supply, leaving the economy vulnerable to power price shocks and load shedding. Botswana’s overall resource envelope of US$800 million per year surpasses its US$785 million needs estimate. Nevertheless, it loses US$68 million a year to inefficiencies and faces a funding gap of US$305 million per year, entirely in the power sector, traceable to the quality of spending decisions. As a solution, China has already been heavily engaged in the African power sector through BRI projects. In line with the unfolding BRI, power investment could reach up to US$1.5 trillion in Belt and Road countries in the next five years. A possible collaboration with China in its BRI projects would give them the much needed boost.
Reducing Non-Tariff Barrier’s
Improving trade facilitation is another priority area for reform. This means addressing time-consuming customs procedures and boosting efficiency, essentially reducing costs and facilitate trade. Botswana could take numerous steps to attain this, by assuring that all borders have information technology systems that support core processes and are adequately used by traders and officials. According to the IMF discussion note, other ways to improve facilitation include (1) adopting and enforcing effective governance policies for customs and other border agencies; (2) enhancing customs control of preferential origin rules to prevent revenue losses and build trust among trading countries; (3) introducing modern risk-analysis techniques and appropriate equipment for nonintrusive inspections and faster turnaround in laboratory sample testing; and (4) deepening modernization efforts, with a focus on reducing costs and delays faced by international traders are other reforms that could be looked into to improve trade facilitation. Other discrepancies in customs procedures and operations could be addressed by increasing the professionalization of customs agencies.
Finally, Botswana should focus on building a solid/reliable private sector. AfCFTA offers enhanced opportunities for joint ventures with foreign companies looking for reliable partners in Africa. The collaboration of private sector and foreign companies will enable a much needed transfer of wealth from the government to the people. The unyielding implementation of the provisions of the AfCFTA promises to improve the business environment in Africa. This can only be done if it reduces uncertainty over trading rules and market access. Making the AfCFTA a framework that reduces trade uncertainty within and among African countries is an essential ingredient to unlocking private sector decisions to expand existing and start new businesses to take advantage of the agreement.
About the Author
Chazha Ludo Macheng is a recent graduate of Master’s in International Business degree from Wuhan University, China. She’s passionate about international trade and sustainable development in Africa. She has several published works with China-Africa Project (China), Daily Maverick (South Africa) and Development Reimagined just to mention a few. She worked as Research and Policy Analyst at Development Reimagined, Beijing, China and has served as an intern at the Parliament of Botswana. She is particularly interested in China-Africa relations in the context of the synergies between AFCFTA and the BRI
