Trade ministry wants 32 new manufacturing companies by 2022
Mbongeni Mguni | Friday February 12, 2021 14:58
This will be part of a broader goal to have 2,400 new businesses established within the same period, Mmegi has learnt.
The targets are contained in the 2021-2022 estimates released this week, which provide a Pula-by-Pula breakdown of how different ministries will spend their allocations from the recently unveiled budget. The targets cover the financial years 2020-2021 to 2021-2022, but were only made public in this week’s estimates.
The targets are designed to push towards a diversified, competitive and productive economy.
The targets also come after a year in which the need for greater import substitution and industrialisation have become urgent priorities for the ministry and government, as the coronavirus (COVID-19) exposed regional supply chain weaknesses with countries focussing on their own economies and in some cases, restricting exports.
According to the estimates, the ministry wants its parastatals to support the establishment of 2,400 new businesses by March 2022, with 32 new manufacturing companies. In addition, the ministry is aiming at an 85% survival rate for Small, Medium and Micro Enterprises (SMME), and a 92% survival rate for large scale enterprises.
While the current survival rates for local start-ups is not publicly known, previous figures by local researchers indicated that up to 70% of SMME start-ups in the country fail within the first 18 months.
The estimates also reveal that the ministry, through its parastatals, which include the Citizen Entrepreneurial Development Agency (CEDA), the Local Enterprise Authority (LEA), the Botswana Development Corporation (BDC) and the Botswana Investment and Trade Centre (BITC), is targeting the creation of 9,495 jobs by March 2022.
The latest targets are in line with comments made by Investment, Trade and Industry minister, Peggy Serame on government’s push to support local manufacturing in order to drive import substitution, job creation and economic diversification.
“We must have something that’s our own and have our own manufacturing that is thriving,” Serame told Mmegi in a recent, wide-ranging interview.
“We cannot do everything, yes, but we must have a few sub-sectors or product lines that we can produce. Produce for your domestic market and then for export.”
She added: “We want to be an export-led economy under the Fourth Industrial Revolution and for you to export, you must first produce something. So we go to the question of how to support these industries to be able to stand on their own.”
Serame’s target to lift the manufacturing sector is expected to be particularly challenging, as the sector has struggled to meaningfully contribute to the broader economy in recent years.
According to the final Mid-term Review of NDP11, the manufacturing sector grew by an average of 4.1 percent between 2008 and 2018, ranking amongst the smaller contributors to the overall Gross Domestic Product (GDP), an estimate of economic size, value created and activity.
Although sectors such as meat production performed better during those years, manufacturing’s growth was just 2.8 percent in 2019, and the latest finance ministry figures expect that the sector will be seen to have contracted by 8.1 percent in the 2020 financial year, squeezed hard by COVID-19.
“The manufacturing sector has not grown as much as intended for a variety of reasons,” reads the mid-term review document.
“These include a lack of competitiveness and hence difficulties in accessing markets, inadequate capacity to meet demand in major markets, protectionist measures in neighbouring markets, difficulties in accessing value chains, particularly in vertically integrated industries and insufficient inflow of FDI. ”Manufacturing, however, is a key contributor to exports, particularly the non-mineral kind such as meat, electrical cables, plastic pipes, textiles, vaccines, and vehicle parts.
The sector is also labour intensive, accounting for 48,947 jobs as at December 2020, or about seven percent of total formal employment.
The lead agencies expected to deliver the ministry’s targets, however, will have to do more with less, according to the budget estimates. Subventions for the 11 parastatals or state-owned entities under the Investment, Trade and Industry ministry have been cut to P749.2 million in 2021-2022 from P795 million in the 2020-2021 financial year. The reduction is part of government-wide spending cuts on subventions and support for local authorities, as fiscal authorities attempt to limit the forecast 2021-2022 budget deficit.
Agencies expected to take the lead in delivering the ministry’s targets, such as CEDA, LEA, BDC, BITC and the Special Economic Zones Authority, will all have less support to deliver, while the beneficiaries they work with will be faced with the continuing harsh conditions brought on by COVID-19.
Serame has, however, said the ministry will persist with using levies, reservation policies and incentives to support local industry and consequently job creation and poverty reduction. One manifestation of this will be more ‘ringfencing’ or protection of certain products from cheaper and more aggressive imports.
“You must be mindful of the fact that every country supports their own,” she told Mmegi.
“This thing of opening up everything is a theory; on the ground, countries look at their own.
“One of the issues at the World Trade Organisation is countries subsidising their own. It’s a worldwide thing and we are not bad people.”