Stronger Pula stifles SA bound exports
Isaac Pinielo | Friday May 13, 2016 14:58
This emerged during a debate on the Pula to Rand parity at a special annual general meeting of the Botswana Exporters and Manufacturers Association (BEMA) in Gaborone this week.
Subhash Kapur of Reliance Foundries said the foreign exchange rate policy was the single biggest factor that made Botswana manufacturers uncompetitive, resulting in loss of revenue for the exporters as well as loss of jobs.
“A strong currency which makes exports too expensive will also likely boost what become cheaper imports, putting the country’s balance of payments and then the wider economy under strain,” he said.
According to Kapur, from 2012 to 2016 the Pula had strengthened by more than 36 percent against the Rand. He noted that this is detrimental for exporters and manufacturers.
“In 2012, one Pula was equivalent to R1.04 and that now a Pula is equivalent to about R1.40,” said Kapur. Similarly, he said, for exports of R1 million, an exporter would get P960,000 in 2012, whereas today, for the exports of a million Rands, an exporter would get approximately P714,000.
“You will note that for the same sale in Rands, one million for the same quantity, the manufacturer returns have reduced by over P246,000,” he said.
Kapur also said the country’s intentions to create jobs and focus on diversified export-led economy has been ignored. He added that productivity, competition and cauterisation are incomplete without a thorough study of monetary policy. Gaotlhobogwe Motlaleng, an economics professor at the University of Botswana said in order for Botswana’s manufacturers and exporters to be competitive, issues of market access and technological readiness must be of priority.
“Innovation and business sophistication factors need attention to enhance Botswana’s manufacturers and exporters competitiveness,” he said.
Motlaleng said Botswana’s competitiveness was lower than that of South Africa as ranked by the Global Competitive Index. South Africa is still ahead of the regional economies. He said efficiency enhancers ranked Botswana second while South Africa led.
In innovation and business sophistication, South Africa ranked 36th while Botswana was at position 111 out of 140 countries. He said poor work ethic, restrictive labour regulations and inadequate educated workforce in Botswana were threats to Botswana’s competitiveness. “Inadequate educated workforce in Botswana can be addressed by tertiary training skills that are relevant to the current labour market demands,” he said.
Motlaleng stated that skill acquisition and training from tertiary institutions must satisfy the industry’s requirements. On the exchange rate, Motlaleng said all tests done in various countries showed only one aspect: that past Pula-Rand exchange rate cannot be used to predict future rates.
“It is difficult for speculators to use previous Rand-Pula exchange rate movement to inform and enhance competitiveness of Botswana’s manufacturers and exporters,” he said. Motlaleng said it was necessary to consider alternative competitiveness indicators beyond the use of the exchange rate policy. Such indicators must arm to enhance and sustain Botswana’s manufacturers and exporter’s competitiveness.
For prominent economic commentator, Howard Sigwele, Botswana should address key drivers of global manufacturing to achieve higher competitive edge.
Sigwele said global manufacturing competitiveness index identified about 12 key drivers that were critical for global competitiveness in manufacturing.
These include talent, cost competitiveness, workforce productivity, supplier network, legal and regulatory system, educational infrastructure, physical infrastructure, economic, trade, financial and tax systems, innovation policy and infrastructure, energy policy, local market attractiveness and healthcare system.