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Botswana Institute for Development Policy AnalysisGaboroneBotswana
ISBN: 99912-911-7-2
The World BankPoverty Reduction and Economic Management 1Southern AfricaAfrica Region
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Prospects for Export Diversification inBotswana
Botswana Institute for Development Policy Analysis
Gaborone, Botswana
The World Bank
Poverty Reduction and Economic Management 1
Southern Africa
Africa Region
PROSPECTS FOR EXPORT DIVERSIFICATION INBOTSWANA
© BIDPA and The World Bank 2006
All rights reserved. No part of this publication may be reproduced, stored ina retrieval system or transmitted in any form or by any means, electronic,mechanical, photocopying, recording or otherwise, without the writtenpermission of the copyright owners.
Design and layout: Impression House, Gaborone, BotswanaPrinted by: Impression House, Gaborone, Botswana, 2006
ISBN: 99912-911-7-2
The views expressed in this book do not necessarily represent the opinion ofBIDPA or The World Bank but that of the authors.
Contact details:
Botswana Institute for Development Policy AnalysisPrivate Bag BR-29GABORONE, BotswanaTel: +267 397 1750Fax: +267 397 1748Homepage: http://www.bidpa.bw
ii
CURRENCY EQUIVALENTS
Currency Unit = Pula (P.)
US$1 = P4.54
(Effective April 27, 2005)
FISCAL YEAR
July 1 - June 30
Acronyms and abbreviations
ACBF African Capacity Building Foundation
ACP African, Caribbean and Pacific
AGOA African Growth and Opportunities Act
ARCS Administrative and Regulatory Cost Survey
ASYCUDA Automated System of Customs Data Management
ATC Agreement on Textiles and Clothing
BDC Botswana Development Corporation
BDVC Botswana Diamond Valuing Company
BECI Botswana Export Credit Insurance and Guarantee Company Limited
BEDIA Botswana Export Development and Investment Authority
BIDPA Botswana Institute for Development Policy Analysis
BLNS Botswana, Lesotho, Namibia and Swaziland
BMC Botswana Meat Commission
BNCS Botswana National Conservation Strategy
BoB Bank of Botswana
BoBCs Bank of Botswana Certificates
BOBS Botswana Bureau of Standards
BOC Botswana Ostrich Company
BOCCIM Botswana Confederation of Commerce, Industry and Manpower
BOTA Botswana Training Authority
BOTASH Botswana Ash
BPC Botswana Power Corporation
BPO Business Process Outsourcing
BSE Bovine Spongiform Encephalopathy
BTA Botswana Telecommunications Authority
BTC Botswana Telecommunications Corporation
BURS Botswana Unified Revenue Service
BWP Botswana Pula
CAP Common Agricultural Policy
CET Common External Tariff
CEDA Citizen Entrepreneurial Development Agency
CET Common External Tariff
CIF Cost Insurance and Freight
CITES Convention on International Trade in Endangered Species
iii
COMESA Common Market of Eastern and Southern Africa
COR Certificate of Rights
CSO Central Statistics Office
CYTAX “current year tax”
DAHP Department of Animal Health and Production
DCC Duty Credit Certificate
DFID Department for International Development
DoT Department of Tourism
DTI Direct Trade Input
DWNP Department of Wildlife and National Parks
EAOB Exporters Association of Botswana
EPA Economic Partnership Agreements
EPZ Export Processing Zones
ERP Effective Rate of Protection
ESAMLG Eastern and Southern Africa Anti-Money Laundering Group
EU European Union
FAP Financial Assistance Policy
FDI Foreign Direct Investment
FIAS Foreign Investment Advisory Service
FMD Food and Mouth Disease
FOB Free on Board
FPSG Fixed Period State Grant
FSC Financial Sector Commission
FTA Free Trade Area
GATS General Agreement of Trade in Services
GATT General Agreement on Trade and Tariffs
GCC Gaborone City Council
GDFI General Directorate for Foreign Investment
GDP Gross Domestic Product
GNI Gross National Income
GoB Government of Botswana
GRCO Gaborone Regional Customs Office
HATAB Hotel and Tourism Association of Botswana
HHI Hirschmann-Herfindahl Index
HIES Household Income and Expenditure Survey
HLCC High Level Consultative Council
IBCs International Business Corporations
ICC International Chamber of Commerce
ICD Inland Clearance Depot
IDA Industrial Development Act
IDZs Industrial Development Zones
IFSC International Financial Services Centre
IMF International Monetary Fund
ISC International Services Centre
JITAP Joint Integrated Technical Assistance Programme
LDC Less Developed Countries
LITS Livestock Identification and Trace Back System
LLA Local Licensing Authority
iv
MCI Monetary Conditions Index
METRs Marginal Effective Tax Rates
MFA Multi-Fibre Agreement
MFDP Ministry of Finance and Development Planning
MFN Most Favoured Nation
MIDP Motor Industry Development Programme
MLHA Ministry of Labour and Home Affairs
MoA Ministry of Agriculture
MoE Ministry of Education
MoH Ministry of Health
MTI Ministry of Trade and Industry
MTR Mid Term Review
NCSA National Conservation Strategy Agency
NDP National Development Plan
NEER Nominal Effective Exchange Rate
NEMIC National Employment, Manpower and Incomes Council
NILA National Industrial Licensing Authority
NISB National Immigrants Selection Board
NLA National Licensing Authority
NTBs Non Tariff Barriers
OECD Organization for Economic Co-operation and Development
OIE Office International des Epizooties
OMPP Ostrich Management Plan Policy
PAYE Pay As You Earn
PEEPA Public Enterprise Evaluation and Privatization Agency
PPI Producer Price Index
PPP Public Private Partnership
PSM Per Square Meter
RC Registrar of Companies
RCA Revealed Comparative Advantage
REER Real Effective Exchange Rate
RIR Real Interest Rate
RISB Regional Immigrants Selection Board
RLA Regional Licensing Authority
ROE Return on Equity
ROW Rest of World
RPMD Registrar of Patents, Marks and Designs
SACU Southern African Customs Union
SACUA Southern African Customs Union Agreement
SAD Single Administrative Document
SADC Southern African Development Community
SARS South African Revenue Service
SAT Self Assessment Tax
SLAAC State Land Allocation Advisory Committee
SMEs Small and Medium Enterprises
SPS Sanitary and Phytosanitary Standards
SPVs Special Purpose Vehicles
TCDA Trade Cooperation and Development Agreement
v
TCPB Town and Country Planning Board
TEC Tertiary Education Council
TILB Tourist Industry Licensing Board
TIN Taxpayer Identification Number
TRIPS Trade-Related Aspects of Intellectual Property Rights
TPRM Trade Policy Review Mechanism
TRQ Tariff Quota
TSA Tourism Satellite Accounting
TSG The Services Group
UNCTAD United Nations Conference on Trade and Development
UNICITRAL United Nations Commission for International Trade Law
USA United States of America
USAID United States Agency for International Development
VAT Value Added Tax
VET Vocational Education and Training
VCF Venture Capital Fund
VOIP Voice-Over Internet Protocol
WIPO World Intellectual Property Organization
WTO World Tourism Organization
WTO World Trade Organization
WUC Water Utilities Corporation
vi
TABLE OF CONTENTS
EXECUTIVE SUMMARY AND ACTION MATRIX................................................................................... I
1. DIVERSIFICATION AND EXPORT GROWTH................................................................................1
ECONOMIC AND EXPORT CONCENTRATION – SOME INDICATORS ........................................... 1COSTS AND BENEFITS TO CONCENTRATION .......................................................................... 2EXPORT PERFORMANCE OVERVIEW ..................................................................................... 6
2. THE ENABLING ENVIRONMENT I: THE NATIONAL POLICY FRAMEWORK................................13
NATIONAL POLICY DEVELOPMENT – AN OVERVIEW............................................................ 13BUSINESS REGULATION AND FOREIGN DIRECT INVESTMENT POLICY.................................... 16THE INCENTIVES REGIME .................................................................................................. 20THE EXCHANGE RATE AND EXPORTS.................................................................................. 29THE LABOR MARKET......................................................................................................... 36
3. THE ENABLING ENVIRONMENT II: EXPORT AND SECTOR-SPECIFIC POLICIES.........................40
SECTOR POLICIES - CASE STUDIES...................................................................................... 40IMPORT TARIFF AND EXEMPTION SCHEMES FOR EXPORTERS ............................................... 60EXPORT PROMOTION AND PRIVATE SECTOR SUPPORT INSTITUTIONS.................................... 62TRADE FINANCE AND EXPORT CREDIT INSURANCE ............................................................. 64LICENSING RULES AND STANDARDS................................................................................... 65
4. TRADE POLICY FOR EXPORT GROWTH...................................................................................69
MAIN TRADE AGREEMENTS ............................................................................................... 69MARKET ACCESS ISSUES ................................................................................................... 73DOMESTIC PROTECTION AND THE TERMS OF TRADE............................................................ 82
5. TRADE FACILITATION AND INFRASTRUCTURE.......................................................................96
CUSTOMS PROCEDURES, MANAGEMENT AND VISA RULES................................................... 96SHIPPING AND PORTS ...................................................................................................... 102LAND TRANSPORTATION ................................................................................................. 105AIR TRANSPORT.............................................................................................................. 109THE BUSINESS COSTS OF UTILITIES .................................................................................. 111
vii
TABLES
TABLE 1-1: ACTION PLAN...........................................................................................................................................................................iTable 1-1: Composition of Exports (US$'000) ...............................................................................................................................................7Table 1-2: Direction of Exports (as a percentage of total exports) ................................................................................................................8Table 1-3: Botswana’s Trade with the Region .............................................................................................................................................11Table 1-4: Botswana’s Revealed Comparative Advantage ..........................................................................................................................11
Table 1-5: Share of Foreign Companies in Manufacturing – 2000..............................................................................................................12Table 2-1: Summary of Major Incentive Programmes .................................................................................................................................22Table 2-2: Type of investment incentives in selected countries...................................................................................................................27Table 2-3: Regional Interest Rates (nominal) ...............................................................................................................................................30Table 2-4: Unemployment rates by level of training attainment, 2001 .......................................................................................................36Table 3-1: Tourism in Botswana and South Africa ......................................................................................................................................46Table 3-2: Motor Vehicle Exports by Type of Vehicle (in pula) .................................................................................................................57Table 3-3: Firm Survey: Characteristics........................................................................................................................................................58Table 3-4: Phase down in the rate of customs duty on imported light motor vehicles ...............................................................................59
Table 3-5: Prohibitions/Restrictions on Exportable Products ......................................................................................................................65Table 3-6: Botswana: Prohibitions/Restrictions on Imported Products.......................................................................................................67Table 4-1: Principal Trade Agreements Affecting Apparel and Textiles ....................................................................................................73Table 4-2: NTBs in the SADC Region..........................................................................................................................................................77Table 4-3: Rules of Origin for Textiles and Apparel ....................................................................................................................................78Table 4-4: Structure of MFN tariffs of SACU, 1997-02 ..............................................................................................................................84Table 4-5: SADC Non-Tariff Barriers...........................................................................................................................................................86Table 4-6: Botswana Effective Rates of Protection (percent) ......................................................................................................................90
Table 5-1: Documentation Requirements......................................................................................................................................................98Table 5-2: Land & Sea Transport Costs August, 2002...............................................................................................................................102Table 5-3: Shipping Costs- Mauritius to Botswana March, 2002..............................................................................................................102Table 5-4: Shipping services currently offered by Walvis Bay to Europe and the US .............................................................................104Table 5-5: Transport cost to ports for landlocked SADC countries – US$ for a 20-foot container .........................................................106Table 5-6: Botswana Road User Charges....................................................................................................................................................107Table 5-7: Comparative Cost of Infrastructure Services (US Dollars) ......................................................................................................111Table 5-8: Regional comparison of Fixed line call charges as on 2004 (US$/minute).............................................................................113
Table 5-9: Comparison of average tariffs (FY2002) ..................................................................................................................................114Table 5-10: Internal Water Usage and Cost (Botswana Pula, Unit cost)...................................................................................................115Table 5-11: Comparison of average tariffs (FY2002) ................................................................................................................................115Table 5-12: Regional Water Cost Comparison ...........................................................................................................................................115
BOXES
Box 1-1: Has Botswana caught ‘late-onset’ Dutch Disease? .........................................................................................................................5Box 2-1: The Land Problem and Exports......................................................................................................................................................19Box 2-2: Does Botswana’s reliance on diamonds suggest a more ‘activist’ role for government?............................................................21Box 3-1: Infrastructure at Top Tourist Attractions .......................................................................................................................................49Box 3-2: Does Botswana Benefit from Vehicles Protection and the MIDP? ..............................................................................................59
Box 3-3: Does Botswana need an Export Processing Zone (EPZ)?.............................................................................................................61Box 4-1: SACU – Towards a Single Market?....................................................................................................................................71
Box 4-2: Should Government Remove the Export Monopoly of the BMC?...............................................................................................88Box 4-3: Do Anti-Dumping Duties raise the price of inputs and raise the anti-export bias? .....................................................................88
Box 4-4: Evaluating trade diversion: the realities “on the ground” ..................................................................................................92Box 5-1: FIAS (2004) Recommendations on Customs Changes .................................................................................................................99
Box 5-2: Textiles and Walvis Bay....................................................................................................................................................105Box 5-3: Tourism and Air Transport ...........................................................................................................................................................110
FIGURES
Figure 1-1: Measures of Export Diversification, 1990-2003..........................................................................................................................1Figure 1-2: Annual Change in Government Mineral Revenues, 1993/4 to 2002/3.......................................................................................3Figure 1-3: Selected Merchandise Trade Indices, 1993=100 .........................................................................................................................8Figure 1-4: Real Non-Traditional Exports, 1990-2003...................................................................................................................................9
Figure 1-5: Services Exports, 1990/91 – 2002/3...........................................................................................................................................10Figure 2-1: Monetary Conditions Index ........................................................................................................................................................30Figure 2-2: Real Effective Exchange Rate Measures, 1990-2004 ...............................................................................................................33Figure 2-3: Bilateral Real Exchange Rates of the Pula 1990-2004..............................................................................................................34Figure 2-4: Private and Government Salaries by grade October 2003.........................................................................................................38Figure 3-1: Botswana – Overseas Tourist Arrivals, 2000 - 2003.................................................................................................................47Figure 3-2: Textiles Exports including 2004 Year to Date Data..................................................................................................................55
viii
PREFACE
Economic diversification is a major policy objective of the Government of Botswana and has beena key determinant of macro and microeconomic policy. The Ninth National Development Plan,covering the period April 2003 to March 2009, adopted the theme “internationally competitivesustainable economic diversification”. However, despite this policy focus, diamonds remain thedominant export and source of foreign exchange.
Against this background the Government requested that the World Bank undertake a collaborativestudy with the Botswana Institute for Development Policy Analysis (BIDPA) on the constraints andopportunities for export diversification. This partnership has combined the World Bank’s cross-country knowledge with BIDPA’s deep understanding of Botswana’s institutions and politicaleconomy. The study represents the views of both organizations and, it is hoped, will be a majorstep in continued collaboration. The study was also conducted in partnership with COMMARKTrust, a DFID-funded grant making organization focused on making markets work for the poor,which co-financed and implemented the ostrich, and garments and textiles sub-sector studies.
The study was undertaken between May 2004 and May 2005. Elwyn Grainger-Jones (consultant)was team leader and lead author of the report under the supervision of Happy Fidzani (ExecutiveDirector, BIDPA) and Fahrettin Yagci (Lead Economist, World Bank). Kennedy Mbekeani(Senior Research Fellow BIDPA) assisted in coordinating BIDPA’s trade inputs for the study, withJay Salkin (Senior Macroeconomic Policy adviser, BIDPA) as overall BIDPA internal reviewer.Peer reviewers were Dr Joel Sentsho (University of Botswana), Philip English (Senior Economist,WBI Trade, World Bank), and Jeffrey Lewis (Manager, DEC, World Bank).
A number of background studies were prepared as an input for the report, and are available asdiscussion drafts on BIDPA’s website (www.bidpa.bw). The case studies for this report werechosen to reflect a mix of traditional, non-traditional sectors, successful and challenged sectors.Sub-sector studies were undertaken on beef, ostrich, textiles, automobiles and parts, tourism andfinancial services exports. Background studies were also conducted on the impact of the exchangerate on exports and on the labour market’s impact on exports.
This study has benefited from a recently-completed Investment Policy Review prepared byUNCTAD, a FIAS study on the regulatory and procedural framework for private investment,studies on diversification in manufacturing, services and agriculture produced by BIDPA for theWorld Bank, a WTO Trade Policy Review of the Southern African Customs Union (SACU),USAID-funded trade work undertaken for the SADC Mid-Term Review, and various other existinggovernment and non-government reports.
A well-attended consultation workshop was held in Gaborone on March 11, 2005. As can be seenfrom the Action Plan, this study requires follow-up and further research on a number of fronts. Assuch it should not be seen as the end-point for collaboration between the World Bank, BIDPA andthe Government of Botswana on this important issue.
Finally, the fact that this study contains many suggestions for policy change should not detractfrom Botswana’s reputation as one of the most successful economies in Africa. Other studies, suchas World Bank (2003) “Botswana: A Case Study in Successful Growth”, focus more on whatcountries can learn from Botswana. This study focuses on how Botswana can sustain this strongrecord.
ix
ACKNOWLEDGEMENTS
The Study benefited from excellent assistance and collaboration with Government. The study teamwould like to thank in particular the staff of the Ministries of Finance and Development Planning,the Ministry of Trade and Industry, the Bank of Botswana, BEDIA, and the IFSC for valuableguidance and assistance. The study team found government officials to be universally open andhelpful, with a common desire to share knowledge to contribute to development in Botswana.
Funding was generously provided by the Dutch Government under the Bank NetherlandsPartnership Program. Co-financing was generously provided by BIDPA and the COMMARKTrust. COMMARK Trust financed and managed background case studies on the textiles andgarments industry and on the ostrich industry. Lolette Kritzinger-van Niekerk (World Bank SeniorEconomist, Botswana Country Economist) provided valuable advice and guidance. RissernéCarole Gabdibé (Team Assistant, World Bank) provided excellent administrative support.Excellent country support was provided to an intensive schedule of visiting missions by the team inBIDPA.
BIDPA wishes to acknowledge the support it received from the African Capacity Building
for proof reading the manuscript.this
bookFoundation (ACBF) for both its participation in the research activities that led to the production of
Dr
Imogen
Mogotsias well as part funding the publication costs of the book. We are also grateful to
x
EXECUTIVE SUMMARY AND ACTION MATRIX
Introduction
Botswana stands out as a successful mineral exporting country in Sub-Saharan Africa
1 Real GDP per capita has increased ten-fold since Independence – the fastest growth rate inGDP per capita in the world. When Botswana achieved Independence in 1966 it had 12kilometres of paved road, 22 Batswana who had graduated from University and 100 fromsecondary school. Botswana is now classified as an upper middle-income country, and hasapproximately 7000 kilometres of tarred roads, a GDP per capita in 2003 of approximatelyUS$4000, almost universal free education, three doctors per thousand population, and infantmortality of approximately 58 per 1000 live births. The proportion of the population that hascompleted primary education has grown from 1.5 percent in 1964 to 33 percent. Botswanawas awarded the highest sovereign credit rating in Africa by both Moody’s and Standard andPoor’s in 2002, 2003 and 2004.
2 Botswana has transformed itself from a largely agrarian and beef exporting country to aneconomy based on mining exports, the service sector and the government sector. This wasachieved because a combination of effective institutions, political stability and soundeconomic policies allowed it to successfully harvest a natural resource abundance indiamonds – Botswana has become the second largest diamond producer by volume in theworld after Australia, and the largest producer in terms of output value (EIU, 2004a).
However, Botswana still faces a number of development challenges
3 First, Botswana has one of the highest HIV infection rates in the world, estimated in 2002 tobe 25 percent for those aged 15-49 years. Second, although poverty has declinedconsiderably, about one-third of the population still lives below the poverty datum line andinequality levels are comparable to Colombia and Brazil. Third, diversifying the economybeyond Botswana’s principal export – diamonds – is a major policy goal for Government, butis proving difficult to achieve. This is the focus of this study.
This concentration of export activity in diamonds features in most indicators of economic
diversity
4 Rough gem diamonds dominate exports, accounting for 83 percent of total merchandisegoods exports in 2003. Since the mid-1980s to the late 1990s, the share of diamonds in totalmerchandise exports averaged 75 percent a year. In recent years, the share has increased to84 percent as non-diamond exports failed to keep pace with diamond growth. Mineral taxesand royalties are projected to account for approximately 46 percent of total governmentrevenues in budget year 2003/04 and 48 percent in the 2005/06 budget. Seventy-five percentof the stock of FDI in 1999 was concentrated in the mining sector (UNCTAD, 2003).Mining accounted for 35 percent of total GDP in 2002/03, although GDP figures mayunderstate the contribution of mining to economic activity – mining revenues sustaingovernment finances, and public sector consumption equals 37 percent of GDP. Generalgovernment accounts for 16 percent of GDP, the second largest component of economicactivity after mining. Similarly, although diamond-mining represents a relatively small shareof employment (3.4 percent), high diamond revenues have allowed a rapid expansion indirect and indirect government employment since Independence.
ii
5 One positive aspect of export diversification relates to trade in services. Services exportshave been rising steadily, with an average annual growth rate of around 10 percent in realterms between 1990 and 2003 compared to 3 percent a year for goods exports. This wasdriven in part by a growth in tourism revenues and business services. Export diversification,therefore, appears to be taking place in the form of a growth in services exports rather than ashift from diamonds to manufactured exports.
Diamond production has conferred enormous benefits to Botswana, although the old
adage that “there is no rose without thorns” applies…
6 First and foremost, diamond production creates few direct jobs, skills or technology transfer,accounting for about 3 percent of formal employment in 2001. Unemployment remains high,estimated at around 20 percent of the labour force in the 2001 census and almost 24 percentin the 2002/03 HIES. Second, there are high price and demand uncertainties in the diamondmarket. Third, there are questions over whether Botswana’s diamond output growth can besustained - open cast mining is projected to last about another 25 years at current extractionrates although new sources may well appear. Fourth, the government budget relies heavilyon unstable diamond revenues denominated in US dollars, and has finally moved into a long-awaited (small) deficit. After facing large budget surpluses for most of the 1980s and 90s,Botswana has had budget deficits in three of the last five years. Mineral taxes and royalties(mainly diamonds) accounted for approximately 46 percent of total government revenues andgrants in 2002/03.
Key Findings
What should be the policy response in the face of a hugely profitable dominant export
sector and the above challenges?
7 This study does not treat export diversification as an enclave issue that is somehowdisconnected from the rest of the economy. For example, reform of Government monopoliesin telecommunications and air travel is not a new issue. However, we present new evidenceon its impact on export diversification, particularly on tourism and financial services. Hence,instead of one ‘magic bullet’ or hidden growth sector, the study argues that there are a widenumber of policy-related constraints to export growth. The removal of these will inaggregate have a significant impact on exports.
8 Key recommendations that require action at the national, regional and international level areas follows:
At the national level there are many areas where government leadership is necessaryto improve the competitiveness of Botswana’s exports and to help mobilize a supplyresponse. This includes further improvements to the business environment throughfull implementation of the FIAS (2004) recommendations. In addition, Governmentshould introduce better and more systematic monitoring of its various incentivesprograms. Government should adopt best-practice principles for citizenempowerment policies so that this policy thrust does not contradict exportdiversification objectives. The Government review of taxation policies planned for2005 should include consideration of adopting a flat-rate company tax. There shouldbe a comprehensive reform of Vocational and Educational Training, and urgentresolution of the work permits issue.
Reform of utilities would reduce business costs and improve the competitiveness of
iii
goods and services exports. Government should revitalise its privatization andutilities reform program – particularly in the area of telecoms and air transport.Progress made with the phased agreement towards open skies should be closelymonitored to ensure that it gets implemented within the agreed time frames, if notsooner. To reduce international telecommunications prices, Government shouldconsider instructing Botswana Telecom Authority (BTA) to issue an unlimitednumber of licences for international voice services and lift the ban on providingvoice over internet protocol. The monopoly of Botswana TelecommunicationsCorporation should not be allowed to continue indefinitely to allow BTC torestructure - Government should set a target date for the privatization of BTC.
Some aspects of trade policy are also under the sole authority of nationalpolicymakers. The Botswana authorities should refrain from using import bans as atool to sustain local enterprises against foreign competition. Further, they shouldundertake a detailed review of all import permits, with a view to removing thisrequirement for all but a limited number of commodities for security, public healthand public morality reasons.
In the face of market failures and policy distortions at the sector/industry level,greater Government leadership is also needed to ensure that the right incentives,market structure and capacity-development for growth are in place. In the beefsector, the upcoming Government livestock study should fully consider options forBMC privatisation, the removal of export monopoly (in particular to South Africa)and the potential for trade liberalisation to increase exports. The ostrich sector is stillin a fledgling state, and Government should eliminate the current ostrich export levy.Greater government support to the tourism sector is needed, including bettermarketing, a move away from the current low volume/high cost approach, greatercollaboration with private sector organisations including consideration of a formalpartnership agreement between the public and private sector, and greatercoordination between the Botswana Tourism Board and the Department of Wildlifeand National Parks (DWNP). In the financial sector Government should considerbroadening the incentives available to IFSC companies to all cross-border services,and making further efforts to streamline the incentives approval process. The textilesector requires an active role for BEDIA to encourage much-needed productivityimprovements.
At the regional level the report advocates further regional integration (see paragraph40) and market opening. This includes Botswana using its potential new influence inthe new SACU Secretariat to reenergize the liberalization efforts of SACU. Thiseffort should comprise: a phased program of tariff reforms that would continue theprogress made during the early liberalization period in the 1990s, continuedreductions in the number of anti-dumping initiations, and developing a regionalapproach to easing visa restrictions over the longer run. In addition, Governmentshould develop a ‘Standards Strategy’, to include an assessment of the scope forgreater harmonisation of standards within SACU – in particular whether it would befeasible to introduce a single set of standards across the region, with inspections to bedone by single authority with clear guidelines of why inspections are being done.Botswana should lobby for simplified and liberalised SADC rules of origin in theSADC MTR follow-up discussions.
Many of the recommendations aimed at improved trade facilitation require a
iv
coordinated SACU solution (with some exceptions, such as opening the Tlokwengborder gate on a 24 hour basis). Government should develop a program for VATharmonisation by SACU members. Further, Government should explore the conceptof a ‘one-stop border post’ with South Africa to reduce border crossing time, with alonger-run objective of establishing a regional SACU customs authority Customs andExcise. Government should explore the scope for the introduction of a single touristvisa for multi-country visits to the region, and undertake a review of restrictivecabotage laws that raise freight costs across the region. A new transport desk couldbe established in the SACU Secretariat that could, for example, tackle intra-SACUtransport issues such as accusations of monopoly pricing by South African railwaysaffecting Botswana’s exports.
At the international level, continued progress in WTO negotiations and access toEU and US markets are essential. This includes improving EU preferences for beefproducts to allow customs duty, quota and special duty free export of a wider rangeof beef and meat products, without excessive administrative and sanitary restrictions.Further, making the AGOA LDC provision permanent would provide predictabilityfor potential investors in a particularly unstable market. Botswana should lobby forimproved rules of origin in all preferential trading agreements – in particular, forEconomic Partnership Agreement with the EU to allow for single transformation ofgoods such as found in the AGOA agreement with the United States. Potential newWTO rules on the Doha Development Agenda could assist in reducing the number ofanti-dumping actions launched by and against SACU, and an effective agreement ontrade facilitation could help to reduce restrictions across the region.
9 Detailed recommendations are presented below. For ease of reference, these are summarizedin the Action Matrix presented at the end of this Executive Summary.
The National Policy Framework
Despite a broadly private-sector friendly overall policy environment there are some
remaining constraints to business and foreign investment…
10 FIAS (2003) identified delays and inefficiencies in the registration of companies. UNCTAD(2003) expressed concerns over a draft Investment Code which suggested a possibletightening up on conditions for FDI. UNCTAD (2003) and FIAS (2004) highlight the impactof restrictive work permits for expatriates, and also identified difficulties for foreign investorsin acquiring commercial land in Gaborone. It is recommended that Government convene aseminar with key stakeholders to monitor implementation of the recommendations of FIAS2004 report, finalise revisions to the Industrial Development Act with the intention ofsimplifying the industrial licensing system, expedite approval of a revised investment codethat drops restrictions on smaller-scale FDI, and expedite reforms to the land allocationsystem.
Adopting best-practice principles on Citizen Economic Empowerment could ensure its
coherence with export diversification
11 ‘Citizen Empowerment’ is a term used to describe the valid objective of empowering citizensby enhancing their skills, resources and opportunities to participate in productive enterprises.The Government’s citizen economic empowerment strategy includes financial intervention toassist local business activities; enterprise development for citizens; job creation; and training
v
and education. However, there are also a number of concerns about current and potentialrestrictions arising under the remit of citizen empowerment. Citizen economic empowermenthas driven a wide number of Government schemes, including the local procurement programand the reservation policy, concerns over which are discussed below. Further, there are risksto Citizen Economic Empowerment becoming a form of hidden protectionism in its influenceon economic policy. Considerations over citizen empowerment may explain some of thedelays in dealing with the most pressing economic reform issues identified in this and otherrecent reports on Botswana, such as land allocation, work permits and privatisation. Forexample, the initial acquisition of serviced industrial land on state land is restricted tocitizens, resulting in major delays for overseas investors in obtaining land. It is importantthat government policies learn from international best-practice in empowering citizens – theapproach taken to citizen empowerment in other countries such as South Africa may not bethe most appropriate for Botswana because of the latter’s unique historical circumstances
12 This is clearly a sensitive issue that will have a major impact on export diversification. Onepossible first step towards resolving such conflicts would be for Government to adopt somebest-practice principles for actions taken under the citizen empowerment remit – Chapter 2suggests some possible principles, including principles such as “over-protection andexcessive handholding do not lead to empowerment”, “citizenship does not convey the rightto be shielded from the consequences of making economic decisions”, “creating new jobsleads to more citizen economic empowerment than providing preferential treatment forcitizens in filling existing jobs”, and that “education is a fundamental empowerment tool”.
Also at the national level, a unified flat-rate company tax could remove distortions against
some export sectors and simplify the regulation of IFSC companies…
13 Botswana is a low-tax jurisdiction, with low general rates of tax and investment tax credits invarious forms, including the ability to grant a tax holiday, favourable tax rates or exemptionand special deductions for employment or training. Preferential tax rates apply to themanufacturing sector and to offshore financial services companies approved by the IFSC –the company income tax for manufacturing businesses and IFSC companies is reduced fromthe standard 25 percent to 15 percent. Government can provide company-specific taxconcessions, but rarely makes use of this facility. It is recommended that Governmentconsiders adopting a uniform 15 percent tax rate for all business activities. This wouldremove the implicit discrimination against the tourism sector, and would eliminate theonshore and offshore distinction in financial services for tax purposes. This would of courserequire an assessment of fiscal impacts – non-mineral income tax, which includes personalincome taxes as well, accounts for about fifteen percent of total government revenue. As aninterim measure, consideration should be given to reducing the transaction cost of applyingfor the reduced manufacturing tax rate by awarding it automatically, subject to ex post
oversight. Since tax rates should be assessed in the broad context of macroeconomicmanagement and the overall taxation structure, this should be considered in the context of theoverall assessment of taxation policy planned for 2005.
There should be better monitoring of incentive programs, some of which may have an anti-
export bias…
14 The Central Statistical Office or another suitable agency or think-tank should conduct areview of ongoing impact assessment and monitoring of existing government supportprograms, tax incentives and reservation policies, in particular those supporting non-tradeableactivities. The reservation policy, through which certain economic activities are reserved
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exclusively for citizens and companies which are wholly owned by citizens, should bereviewed to assess whether it has had an impact on building human capital, and whether thisoffsets its negative impact on consumers by restricting trade and investment. Further, CEDAshould prepare more thorough evaluations of project proposals with a view to their netbenefit to Botswana, using shadow prices that place a premium on tradeable goods.Government should commission a cost-benefit review of the industrial rebate for rawmaterials imported for production for sales into domestic market.
15 Recent programs such as the local procurement program and the reservation policy, whichtypically include small-scale business activities and non-tradeable activities (e.g., housingand personal services), constitute an anti-export bias. The procurement program enablescompanies to seek protected government contracts instead of local entrepreneurship beingdirected towards export contracts. However, it is difficult to calculate the extent of the anti-export bias of these schemes. More broadly, it has not been possible to undertake evensimple financial cost-benefit analyses of the impact of Government incentives, in partbecause there is little data collected with which to undertake such analyses.
Import tariff exemption schemes for exporters are well-functioning although they are a
second-best option and require some reforms...
16 Botswana exempts certain customs and excise duties and VAT on raw materials imported byregistered manufacturers. Various exemption schemes function effectively with fewunnecessary delays imposed on importers. They are covered by SACU rules, hence untilrecently they were determined by South Africa with little consultation or predictability withrespect to rules changes. However, although most machinery inputs have zero tariffs andhave VAT payments reimbursed, there are still a number of tariffs that fall outside of thedefinition of ‘raw materials’ or ‘machinery’ that raise the price of operating a goods orservice exporting company. Vehicles are one important example. Hence even efficiently-managed exemption schemes are still a blunt instrument to redress the anti-export bias oftariffs. Critically, exporters are not exempted from anti-dumping tariffs on their inputs.Rebates and exemptions are only allowed on ‘schedule 1’ tariffs, whereas anti-dumpingduties are ‘schedule 2’ tariffs (see paragraph 46 below). Botswana should propose withinSACU that anti-dumping tariffs be eligible for duty exemptions and rebate schemes. With aview to assessing whether there is any practical value to establishing an EPZ, there should bea follow-up review on whether broadening the definition of inputs that are exempt fromcustoms and VAT would make a significant cost difference to exporters.
Export Promotion and Private Sector Support Institutions are well-resourced but are still
developing
17 Botswana has a broad range of export promotion activities. BEDIA is refocusing itsactivities on export development in contrast to export promotion, based on a perception thatweak internal capacity for product development is the major constraint to export. In thiscontext, BEDIA is preparing an export development programme as part of the WTO-UNCTAD-ITC Joint Integrated Technical Assistance Programme (JITAP) II. BEDIA andthe Botswana Development Corporation (BDC) are both involved in the provision of factoryshells. Given the emergence of private sector providers, this should be reappraised. Therehave been a number of complaints about the effectiveness of the Ministry of Trade andIndustry (MTI) in providing political risk insurance – Government should conduct aperformance audit of the provision of political risk insurance, including an assessment ofneed. There are mixed views concerning whether there is sufficient provision of trade
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finance and export credit insurance. Smaller export enterprises have reported difficulties inaccessing trade credit in a timely fashion. FIAS (2004) made suggestions on minoradjustments to the system that would facilitate a more rapid payment of exporters – theseshould be implemented.
There are relatively few self-imposed licensing restrictions on exports from Botswana,
although there is a need to develop a clearer standards strategy…
18 With the exception of diamonds and beef, Botswana allows exports to go largely unhindered.All commercial exports require an Export Declaration Form, although these arestraightforward to obtain. There has been a rapid increase in the number of approvedstandards – from 30 to 167 between 1998-2002. The Botswana Bureau of Standards(BOBS) is facing a number of challenges. It has limited testing facilities, is not able toimplement border controls to monitor the quality of trans-border goods because of theabsence of a holding facility, and legislation of departments linked with BOBS is not yetharmonized in terms of the development of product specifications. Government shoulddevelop a ‘Standards Strategy’. This should include an assessment for the scope for greaterharmonisation of standards within SACU – in particular, whether it would be feasible tointroduce a single set of standards across the region, with inspections to be done by a singleauthority with clear guidelines of why inspections are being undertaken. Under Article 28 ofthe new SACU agreement Botswana and other members have agreed that “Member Statesshall strive to harmonize product standards and technical regulations within the CommonCustoms Area”. A priority for the new SACU Secretariat will be to give some clarity and aroadmap on how Members could achieve this goal. BOBS is already collaborating withSADC countries to develop a regional body for accreditation of conformity assessmentfacilities (SADCA), which would allow mutual recognition among all members. Suchmeasures to avoid duplication should be encouraged. As Botswana’s major market for non-traditional exports and a major source for international exports, continued cooperation withthe South African Bureau of Standards is essential.
Human capital needs to be increased to boost productivity, in particular through a reform
of the vocational and educational training system and a resolution of the work permits
issue…
19 This study conducted a survey of 11 exporting firms to discuss a wide range of labour-relatedissues. Botswana now has a well-resourced education system, although there are twoparticular areas of concern. First, in the absence of any systematic human resource planning,Botswana’s vocational training system has been supply-driven with relatively limitedinvolvement of employers in the development of course content and training standards. Itfocuses mainly on pre-employment, time-bound technician and craft-level skills training forpredominantly male primary and secondary school leavers at government-funded vocationaltraining centres. There is a skill mis-match between this training and the skill needs ofmanufacturing and other key sectors, which rely almost totally on on-the-job training for bothproduction workers and other staff. Training policy and practice is still toocompartmentalised between the Botswana Training Authority (BOTA), the TertiaryEducation Council (TEC), and the Ministry of Education. It is recommended thatGovernment develop a detailed and comprehensive national human resources developmentstrategy, which focuses in particular on the occupational requirements of the key growthsectors in the economy. This should include a comprehensive reform of the vocationaleducation and training (VET) sector. In particular, little use is made of the company tax
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rebate for training, with companies complaining that it is too bureaucratic. This requiresreviewing and replacing it with a more effective incentive for human resource development.
20 Second, obtaining work and residence permits has been consistently identified as among themost difficult investment procedures in Botswana. The total backlog of work permitapplications was 7474 in late 2004. Temporary work permit waivers enable most foreigninvestors to circumvent unwieldy and bureaucratic work permit procedures, although thesehave to be renewed every three months. A resolution of the work permits issue is required,possibly with permits based on a points system and/or a minimum number of permitsawarded automatically for companies. Of particular concern is between 600-1000 percentincrease in work permit fees over the last four years and the twenty-fold increase in visaapplication fees instituted in 2004. Government should review these cost increases.Producers have complained that this has unreasonably raised the costs of obtaining labour.Advanced economies such as the United States still require the importation of large numbersof expatriate experts – Botswana’s stage of development and limited labour pool suggeststhat it should be encouraging rather than discouraging the arrival of skilled immigrants.
The Role of Government at the Sector and Industry Level – the Case Studies
21 Government leadership is needed at the sector level to ensure that the right incentives, marketstructure and capacity-development for growth are in place.
The beef sector faces growing competition and a need for reform…
22 This study commissioned a background study on the beef sector. The Botswana beef exportindustry is in crisis. The recent financial difficulties of the Botswana Meat Commission(BMC) – the Government’s export monopoly for beef – have been exacerbated by temporaryfactors – notably the recent drought and the outbreak of foot and mouth disease (FMD). Butwhile there may well be a cyclical upturn, these cycles are nevertheless occurring around adeteriorating trend. Further, in the past frequent exchange rate depreciations againstEuropean currencies in most years allowed BMC to post regular profits – this has recentlybeen reversed as the exchange rate appreciates.
23 This trend will not be reversed without fundamental change that would increase the numberof cattle sold to BMC for export. There appears to be a consensus that the fundamentalproblem facing the sector is that the cattle off-take rate is too low. This results in poorthroughput (and low weights) for BMC, either because prices on the domestic market arepushed up, making it more attractive than exporting, or simply because there are too fewcattle raised with the intention of bringing them to the market. Various studies suggest thatthere is significant scope for an increase in supply. However, over the period since 1992prices paid to producers have generally gone up by less than the price paid by EU importers.This has occurred for a number of reasons – high costs arising from EU SPS measures andrising demand in the local market, resulting in fewer cattle being sold to BMC and hencehigher unit processing costs.
24 The beef sector has long been a recipient of government support in the form of artificiallyhigh producer prices, heavy direct subsidies into the sector, a very lenient tax system, heavyprovision of livestock-specific infrastructure and trade protection. Industry restructuringwould allow time for either a substantial shake-up to the supply side or an orderly decline ofthe beef export sector. The study cautions against precipitate moves to privatise BMC – atleast until the supply side has been improved. The supply baseline is a throughput sufficient
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for only one abattoir, and standards might be compromised. Another option that should beconsidered is continuing BMC’s monopoly in terms of exports to Europe and other distantmarkets, but its removal for sales to South Africa. At the present time it seems improbablethat any organisation other than BMC would sustain substantial exports outside the region. IfGovernment decides that maintaining the export market is preferable to a domestic-only beefmarket, there should be further consideration of the scope for liberalization of beef imports.This would reduce domestic prices, making selling to BMC for export more attractive forfarmers. In the industrial sector and advanced countries it is commonplace to have intra-industry trade – there is no reason in principle why the same should not occur in Botswana,with the region importing larger quantities of forequarter meat partly in order to releasehindquarter meat for export. The planned livestock study should provide a clear estimate ofthe number of cattle in the country. Better information is essential for policymakers – itwould help to clarify issues such as off-take potential, linkages and the importance of cattleto the Botswana economy.
The ostrich sector is still at a nascent stage, during which time the removal of the export
levy should be considered…
25 The Botswana ostrich industry is at an infant stage. There are currently about 29 activefarmers in the country, holding a total of about 500 breeding hens. About half of theseostriches are held by two large scale producers. In terms of production efficiency, theBotswana industry produces a heavier bird in a relatively shorter space of time than SouthAfrica, although the overall quality of the skin is poor. There is only one abattoir, managedby the Botswana Ostrich Company (BOC). This received certification for exporting directlyto the EU in August 2004. Since then, the BOC has been able to supply around 3 tons permonth to the wholesale trade in Belgium. There is optimism that exports can be increased tothe EU, the target market. There is no tannery for ostrich leather as yet.
26 The government has supported Botswana’s ostrich industry through the provision of a newstate-funded ostrich abattoir and veterinary services, and through its willingness to extendBDC loan facilities despite a failure to repay the initial loan on schedule. The success of theostrich industry depends upon the viability of the BOC as the sole marketing channel forostrich products in Botswana. BOC is currently running at a loss, but is hopeful for apositive supply response from both existing and new producers following the approval toexport to the EU market. The key issue for Government is for how long to subsidise thisindustry – there should not be an assumption that just because the country has the largestpopulation of wild ostriches in the world it is automatically suitable for effective farming.There is significant growth potential, but there should be a clear end-point for the currentpublic subsidy. However, it is premature for the imposition of the current export levy of P32on average per bird, which reduces BOC’s earning by about ten percent per bird.Government should eliminate this levy until the industry reaches a critical mass to attainBOC profitability. According to industry participants, CEDA has so far not been sufficientlyforthcoming in funding ostrich farming projects. Only 10 ostrich projects have so far beenapproved for funding, with none since the EU granted export approval. CEDA’s reticencemay well be based on valid financial reasons, hence this issue should be addressed andnegotiated at an industry level.
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The tourism sector has major potential but requires greater investment and a clearer voice
in policymaking…
27 Apart from its diamonds and beef, Botswana’s natural comparative advantage is in its diverseand abundant wildlife and natural resources, which are a major draw for tourism. Touristnumbers rose rapidly but peaked in 2000. The gradual decline seen in 2004 – set against anet increase in South African tourist numbers – is of serious concern. Nevertheless, thesector has significant growth potential.
2 8 Botswana’s Tourism Policy has generally been based on sound principles that haveacknowledged the environmental value and vulnerability of the resource base. However,there is a need to give greater recognition to the sector in policymaking, and to align thesector support institutions more clearly around a demand-led approach. Further, despite theGovernment’s policy objective of “modified high volume/mixed price” tourism, Botswana isstill largely a low volume/high cost destination. Botswana can sustain its national wildernessareas while increasing visitor numbers. Government should consider greater ‘zoning’ ofwildlife areas to allow higher volumes in certain areas while maintaining greater restrictionsin others. The independent, self drive component of the international tourism market isgrowing continuously – the sector should develop the required infrastructure and marketingpackages to capitalize on this segment of the market.
29 While the various tourism policy frameworks provide some excellent proposals, these are notpart of a clearly defined and prioritized implementation plan, with the result that it is difficultto gauge and monitor implementation. The Department of Tourism (DoT) suffers from alack of adequate funding and a clear competitive marketing strategy, and has to play the roleof “referee and player” by having to regulate the industry while promoting it. Governmentshould allocate and manage the budget allocation and investment for the DoT and theDepartment of Wildlife and National Parks (DWNP) as a whole package within a commonlyagreed tourism development strategy. Due to limited resources and capacity, the promotionof “Brand Botswana” as a global destination of choice has suffered during the past few yearsand marketing has been largely left to the private sector. The recent appointment of the firstBotswana Tourism Board bodes well for destination marketing. There is need for a well-researched, clear marketing strategy that will direct the future marketing focus of the Boardand will inform Botswana’s overall tourism policy and development thrust.
30 An adherence to low volume/high value tourism and limited budgetary allocations have ledto under-investment in essential facilities and infrastructure development for tourism, andmounting pressure is being placed on the existing and limited infrastructure of wildernessparks (in particular Chobe). A formal partnership agreement between the government andthe private sector should be considered, possibly based around a dedicated Tourism andConservation Management Fund. The establishment of local tourism associations in themain tourism centres, affiliated to Hotel and Tourism Association of Botswana (HATAB),should also be considered. Such partnerships should aim to strengthen linkages to the localeconomy. Further research is needed on the costs and benefits of allowing a longerconcession term for tourism leases in wildlife management areas.
The International Financial Services Sector must be underpinned by sound regulation
while incentives should be broadened to all services exports…
31 The Botswana International Financial Services Centre (IFSC) became operational in 2000.IFSC has managed to attract twenty-one companies in a relatively short time. IFSC
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companies are estimated to grow to 244 total employees, of whom 168 are local, in 2005.Unfortunately there are no available data to isolate the impact of the IFSC upon the servicestrade balance.
32 Botswana offers a generous incentives package in its endeavour to set up an internationalfinancial services centre, including a reduced corporation tax regime stabilized to 2020,exemption from VAT on services or imports, and a credit for withholding taxes levied inother jurisdictions. All services must be for clients based outside of Botswana and transactedin foreign currency.
3 3 There are two main sector-specific challenges. First, a necessary condition for aninternational financial centre is to have a modern and well respected regulatory framework.A background study on the financial sector prepared for this report concluded that theregulatory system has so far been in a rather reactionary posture to new developments andhas tried to accommodate new needs within an existing structure. Government should makefurther efforts to streamline the process of obtaining IFSC tax and regulatory approval andreducing the number of bodies involved (currently the IFSC, the MFDP and the Bank ofBotswana) through introducing a one-step approval process. A potential problem arises fromhaving a dual tax regime, marketing an offshore jurisdiction based on a two-tiered tax regime(i.e., one for domestic economy and another for offshore) is becoming increasingly difficult.An overhaul of regulation of the non-bank financial system, including the offshorejurisdiction, is necessary. Further, a key enabling factor for financial services exports is thenumber of double-taxation agreements – Botswana has only ten such agreements, comparedto 40 in Mauritius. Government should increase efforts to negotiate double taxationagreements.
34 Second, Government should reappraise the existing scope of companies eligible for IFSCincentives – its current focus is too narrow and excludes a number of potential cross-borderservice activities (e.g., regional transport companies). Government should considerbroadening IFSC incentives by making all cross-border service exporters eligible forincentives and renaming the ‘IFSC’ (International Financial Services Centre) the ‘ISC’(International Services Centre).
The textile and apparel sector faces a challenging environment, and there is a clear role
for BEDIA to initiate industry reform to improve productivity
35 Botswana’s textile and apparel industry faces a number of challenges – notably the phase-outof the multi-fibre agreement, the possible ending of special access to the US market, and theending of the Financial Assistance Policy (FAP) subsidies. Despite this, its relatively diverseapparel exports have been growing rapidly to the United States (the ‘AGOA effect’),although exports to South Africa and Europe, while on a growth trend, both dipped in 2004according to preliminary government trade statistics.
36 Government has made extensive use of subsidies and other tax incentives to develop thetextiles and apparel industry. The main subsidy – the Financial Assistance Policy (the FAP)– has ceased and subsidy payments will end in 2005. While the industry may be able tosurvive without cash incentives, it will flourish only if sector efficiency is increased and onlyin an environment where the economy-wide barriers to conducting business discussed in thisreport are removed. The primary threat to the industry is its lack of competitiveness in termsof factory efficiency – productivity levels are very low, with the best examples estimated to
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be 50 percent of established international standards. This is because of inadequately trainedoperators and a lack of control by supervisory management.
37 There is a clear role for the Botswana Export Development and Investment Authority(BEDIA) in developing a comprehensive response to this lack of productivity. They shouldcommission productivity audits and training needs analyses, identify suitable serviceproviders to address the needs of the industry both nationally and regionally, identify meansof financing productivity enhancement and training, and develop the market for trainingservice providers to the industry. BEDIA should facilitate the establishment of an associationof Botswana Textile and Apparel manufacturers as an independent and officially registeredbody. There is also a need to identify niche markets. BEDIA should focus its promotioneffort on suppliers to specific market segments that can create competitive Botswana-basedsupply chains. The most likely market segments are Formal Modern Niche markets inEurope, the USA and South Africa, the replenishment segment of Traditional and ModernMass markets in Europe, USA and South Africa, and South African based apparelmanufacturers supplying the potential future Zimbabwe market.
The Automotive products sector is fairly dependent on the continuation of the South
African Motor Industry Development Programme (the MIDP) and tariff protection…
38 Exports surged between 1996 and 2000 because of the establishment of a large Hyundaiassembly plant in Botswana. This plant closed in 2000 ostensibly because of market accessbarriers and poor management. Rules of origin played a role in its demise. After the plantstarted operations South Africa challenged that there was insufficient value-addition takingplace and ruled that the products failed the rules of origin requirements as originating fromBotswana. South Africa used SACU Article 11(5) to oblige Botswana to cooperate in the
fulfilment of ‘economic objectives’ of its import control legislation for the auto sector.
39 A fledgling automotive products sector remains. This sector evolved through generous FAPincentives, the MIDP program and high tariff protection in the SACU market. Of the fivefirms surveyed for this report, two (the majority by output) benefit from MIDP, while theremaining firms sell to the tariff-protected SACU market (accounting for about one-quarterof employment of the firms surveyed). Further, three firms benefit from (soon to be phasedout) FAP subsidies. Tariffs in SACU are currently 38 percent for cars, and are scheduled tofall to 28 percent by 2009. Automotive products companies, therefore, face a challengingfuture. The MIDP provides a large reduction in import duties on completely built up unitsfor exporting companies, and has been a facilitating factor in choosing South Africa as anassembling centre by western and Japanese automobile giants. This scheme is potentiallyopen to WTO challenge as an export subsidy. This would reduce the attractiveness as alocation for assembling and manufacturing components for export in future. Beyondmaintaining protection at the expense of consumers and business users of transport – whichthis study does not recommend – there were no export constraints specific to this sectoridentified in the background study.
A Case for Greater Regional Integration
A major cross-cutting theme of the report is the need for greater regional integration…
40 Government should develop a clear long-term vision based on a transformation of SACUfrom a customs union to a single market. The new SACU Agreement, renegotiated in 2002,falls well short of a bold new vision for further regional integration. It maintains the basic
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customs union with very limited aspirations towards a single market. The Agreementexcludes cooperation on investment protection and incentives, but does include an agreement“in principle to develop common policies and strategies”. Similarly there is no commitmentto develop a common competition policy, although there is a commitment for Member Statesto cooperate on the enforcement of competition laws and regulations. There is no provisionto allow for the freer movement of people. Services remain outside of the agreement.However, the report identified a wide number of issues that need to be resolved at theregional level (see paragraph 8).
41 A Customs Union, such as SACU, requires a common external tariff, a customs pool and acommon trade policy. However, fiscal borders have remained in place and border controlsare maintained for differences in standards (e.g., safety standards). In contrast, a singlemarket means that goods circulate freely, with a common trade policy, the harmonisation ofstandards, common policies in competition, and harmonization of regulations where there issubstantial intervention in the market.
42 South Africa is the regional superpower, accounting for 90 percent of SACU’s GDP. As thedominant regional economy it has a past record of setting trade and economic cooperationpolicy according to its own interests with little consultation with its smaller neighbours. Thishas led to fears over the pooling of sovereignty associated with closer economic integration.However, this report advocates deeper economic integration in SACU, based on the conceptof “open regionalism” (GEP 2005) where barriers are also reduced between the region andthe outside world. Recommendations for closer integration feature in most sections of thisreport, as summarized in paragraph 8. This is for the following reasons:
First, Botswana cannot ‘go it alone’ given its small population. South Africa islikely to remain the major market for its non-diamond exports because of hightransport costs and the trading benefits of proximity. Apart from Egypt, South Africais the only major market in the region. The use of import substitution in the region topromote demand for more advanced products is not good, and small countries havehad particular difficulties in using such techniques because of their small market size.A small domestic market size is also a major constraint to investment since it limitsthe scope for economies of scale and expansion. A survey of French companiesfound small market size to be the main factor limiting investment in Africa(Charalambides, 2004). Trade ties with South Africa have played a central role inthe development of Botswana. South Africa is the primary market for Botswana’snon-traditional exports, constituting 75 percent of non-traditional exports. The casestudies for this report suggest a mixed reliance on the South African market. Fifteenpercent of beef exports are destined for South Africa, although this may represent amore important market as preferences to the EU are eroded. All ostrich exports aredestined for the EU. Data is not available on financial services direction of exports.Over half of holiday visitors come from South Africa. South Africa has traditionallybeen the dominant market for textiles and apparel exports.
Second, although Botswana has a higher GDP per capita than South Africa, it can
still benefit from South Africa’s more developed private sector, market know-how,
expertise and investment. South Africa is the source of almost half of the stock ofFDI in Botswana. Investors from outside the African continent are so far mainlyinterested in minerals. Attracting high quality investors who actually understand theinternational market is a challenge given that the economy of the entire SACU regionis still approximately the size of Belgium’s economy. Recent surveys of South
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African investment in Africa indicate that familiarity and the need to use SouthAfrica as the “anchor” economy are important determinants of investment(Charalambides, 2004). In some sectors, for example the textile or automotiveproducts sectors, South Africa offers the potential to link into regional supply chains,although progress in developing such linkages has been limited to date.
Third, the harmonization of regulations required to move towards a single market
could act as a major spur to increased investment and trade within the SACU
region and beyond. It would ultimately remove the need for the customs control ofgoods at the border, would encourage inwards investment to the region (sinceinvestors would have a common rules platform), and would encourage greater cross-border competition in services. As argued throughout the report, without suchcooperation the impact of having a customs union with a common external tariff islimited. The European Union did not have free circulation of goods before the singlemarket: “Despite the absence of customs duties in trade between Member States, infact there was little difference in administrative burden or appearances between intra– Community trade and trade with non – member countries… Customs clearance atthe Community’s internal frontiers was elaborate and time consuming” (EuropeanCommission, 1999). Of course, this is not a rapid process – it took the EU thirtyyears to harmonize its non-tariff barriers. Further, the liberalization of movement inpeople would also be beneficial to labour markets within the region, and could takeplace at a pace acceptable to SACU members, given concerns over its impacts. Inthe EU, regulations liberalizing the movement of people were introduced after theliberalization of goods.
Fourth, there is not a choice between aligning Botswana with Europe, North
America or South Africa. Closer integration with South Africa would not be at theexpense of closer trade and investment ties with other regional partners and beyond.“Trade diversion” costs should not be exaggerated – tariffs can be a small part of theimporting decision in relation to other costs (see Box 4-4). Nevertheless, closerregional integration should be accompanied by continued reductions in high externaltariff walls (Hinkle, 2004).
Trade Policy – Actions at the National and Regional Level
Import tariffs are moderate, although there is still a need to reduce protection and simplify
the tariff structure
43 A key feature of the SACU common external tariff (CET) is high tariff dispersion, from 0 to325 percent with a simple average tariff of 8 percent and an import weighted average of 6percent, a cascading tariff and a high tariff variance. This increases effective rates ofprotection and inefficiencies. A combination of high and low tariff rates reflects a SouthAfrican policy of keeping input tariffs low and maintaining high tariffs on some finalproducts. Botswana should initiate a renewed program of trade reforms through the newSACU Secretariat. This should include a phased program of tariff reforms that wouldcontinue the progress made during the early liberalization period in the 1990s, and wouldinclude SACU accelerating its tariff rationalization program to reduce the number of tariffcategories from 41 to six, in line with WTO commitments. SACU tariffs largely protectSouth African industries at the expense of Batswana consumers and businesses (includingexporters – see below). A reduction from over 100 to 41 ad-volorum tariff bands has so far
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taken place. Less complexity would increase transparency, reduce the scope for protectionistlobbying, and therefore facilitate trade.
44 SACU tariffs provide relatively high effective protection to some industries. Using standardtariff analysis, tariffs raised the incentives for Botswana companies to serve the domesticSACU market above the world market by raising the profitability of doing so by on average88 percent for a sample of 33 firms surveyed in Botswana by The Services Group (TSG,2003). The most protected sectors according to the TSG analysis are food processing,textiles, clothing, wood products and furniture production.
4 5 Botswana should use its influence in the new SACU Secretariat to reenergize theliberalization efforts of SACU. This effort should include tariff and non-tariff measures thatfeature throughout this study. On tariffs, this should include a phased program of tariffreforms that would continue the progress made during the early liberalization period in the1990s. This would focus on reducing SACU’s average applied rates (which would bestrongly in Botswana’s interest), urging SACU to accelerate its tariff rationalization programto reduce the number of tariff categories, lobbying within SACU for the number of anti-dumping initiations to be further reduced, and reviewing the impact of liberalizing beefimports with a view to discussing this with SACU neighbours.
Anti-dumping is one of the main ‘trade-policy imposed’ non-tariff barriers. This could
have a significant impact on input costs for some exporters and requires further
investigation…
46 On a trade-weighted basis anti-dumping measures add little to overall protection, althoughthey do make a significant difference at the individual product level. Critically for SACUexporters, most of the challenged products are intermediate products in the productionprocess (Holden, 2002). Hence, while intermediate products typically face a lower MFNtariff level, antidumping duties increased this protection considerably in the 1990s. Theseduties ranged between 15 and 202 percent and averaged 52 percent. Chemicals form thelargest single sector for initiated cases (37 percent), and make up approximately 10 percent ofBotswana’s imports. Similarly, machinery, mechanical and electrical appliances make up afurther 9 percent of anti-dumping cases and constitute 19 percent of Botswana’s imports.Critically, duty exemptions do not apply to anti-dumping duties. Government shouldcommission a short follow-up research piece to isolate how anti-dumping duties haveincreased the anti-export bias by raising the input costs for producers. At the same time,Botswana should act within SACU to further reduce the number of anti-dumping initiationsand to change SACU duty-exemption rules (see paragraph 16 above). Further, Governmentcould advocate the development of tighter rules on anti-dumping for all WTO membersthrough the WTO Doha Development Agenda.
…while Botswana imposes very restrictive non-tariff barriers on some sensitive products it
should refrain from using import bans as a tool to sustain local enterprises against foreign
competition.
47 Import bans are an arbitrary measure that is borne by the consumer and contributes to theanti-export bias. Botswana makes use of import licensing and import bans on the imports ofsome agricultural products (bread, beef, fish produce, eggs, chicken and – when in season –oranges, cabbages, tomatoes, and milk). The limits amount to an import ban for beef, eggs,poultry and bread. Botswana imposed a ban on the importation of bread in October 2003 tosupport local bakeries. Consumers had hitherto chosen higher-quality imported long-life
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bread, but were denied this choice by the ban. More critically for exporters, a further importlimitation is being considered at the time of writing which would ban the importation of allsecond-hand vehicles that are more than five years old. This would be enacted ostensibly onsafety grounds, but would more likely be initiated to protect largely South African producersfrom imports of reconditioned Japanese vehicles.
48 Government should undertake a detailed review of all import permits with a view toremoving this requirement for all but a limited number of commodities for security, publichealth and public morality reasons. In particular, Botswana should avoid any newrestrictions on the import of second-hand vehicles. More broadly, the Botswana authoritiesshould ask the new SACU Secretariat to set up a monitoring program of NTBs in similarfashion to a COMESA exercise.
So is there an ‘anti-export bias’?
49 Yes, but the economics of being in a customs union complicate the analysis. Import tariffs,and restrictions and regulations do impose a moderate anti-export bias on the economy.However, because high protection has supported industries largely in South Africa ratherthan Botswana, SACU tariff barriers have had a less distortionary impact on Botswana thanmight be expected. Botswana is therefore in an unusual position: because of the existence ofthe SACU customs union, a bias towards domestic production within SACU does not fullytranslate into a domestic investment bias towards import-competing production forBotswana.
50 Nevertheless, tariff and non-tariff barriers do have some impact on incentives to export fromBotswana. First, they reduce consumer welfare and thus national income and investment,although the extent to which tariffs are the principal cause of trade diversion in the region canbe disputed (Charalambides, 2004). Second, they have switched demand and thereforeinvestment towards some protected industries in Botswana – textiles and clothing tariffs haveraised the price of clothing on the domestic market throughout SACU, making it moreprofitable to sell into the domestic market and in South Africa. An import ban and a 40percent external tariff may have had a similar impact in the beef sector, where supplies toBMC for export are too low (see paragraph 24). Flour milling, furniture production, eggproduction, and dairy production also depend on non-tariff protection. Third, SACU tariffsand national non-tariff barriers raise the cost of inputs used by export companies. Thetransport sector is a good example. Trucks are not considered as machinery, hence they facetariffs and VAT. Motor vehicles face particularly high tariffs (see Box 3-2). Tariffs oncomputer equipment were reduced to zero only in 2004 after successive requests by theBotswana authorities. Further, some industrial materials still face tariffs, such as steel whichfaces a tariff of 5 percent, furniture of approximately 20 percent, transport equipment(approximately 12 percent), and printing and publishing (approximately 7 percent). Inaddition, anti-dumping duties are passed on to exporters as described above.
Protection of services from foreign and domestic competition also raises business input
costs for exporters, and represents a potential negotiating chip…
51 The state retains a monopoly in key utilities and elements of the transport sector: fixed-linetelecommunications, water supply and sewerage services, electric power supply, the airlineand the railway. The airline and telecommunications represent a major potentialimprovement to exporter efficiency – tourism operators surveyed for this study consistentlyidentified air transport costs as a major restriction (see recommendations on air transport
xvii
reform, paragraph 71). More generally, service companies identify internationaltelecommunications costs as a particular constraint. To reduce internationaltelecommunications prices, Government should consider instructing the BotswanaTelecommunications Authority (BTA) to issue an unlimited number of licences forinternational voice services and to lift the ban on providing voice over internet protocol. Themonopoly of BTC should not be allowed to continue indefinitely to allow BTC to restructure– Government should set a target date for the privatisation of BTC.
52 Such reforms could be used as a ‘negotiating chip’ in regional or WTO trade negotiations.Botswana has committed to under 5 percent of all possible WTO GATS servicescommitments, which is less than the average developing country index of 6.9 percent (WTOTPR, 2003). There are no GATS commitments on supply of services by temporarymovement of people nor (generally) on cross-border trade. This means in some cases thatservice has to be supplied through commercial presence by a supplier who meets all thenormal residency requirements.
Because of various preferential agreements, the levels of external tariffs imposed by
trading partners are not a major barrier to export growth.
53 Diamonds are allowed duty-free access to the EU market regardless of the trade regime inplace. The vast majority of Botswana’s other main products take place under preferentialtrading arrangements or the SACU customs union, hence face few tariff restrictions.
54 Exports to South Africa and other SACU members enter duty and quota-free. Most exportsto the US take place under AGOA. Exports to the EU take place under the Cotonouarrangements, where ACP countries are entitled to a 100 percent reduction in ad valorem
customs duties. The export weighted MFN tariff facing Botswana’s food products to the EUis 55 percent, while the average applied tariff is only a 5 percent (CEPII, 2004). CEPII(2004) find that, given a high level of protection on beef carcasses, there is no evidence oftariff escalation for food products. There are currently no import tariffs or export duties onostrich meat exports to the EU market. Botswana has preferential access to several importantmarkets for garment and textile products. As an ACP country, it has duty and quota-freeaccess for textiles and apparel to the EU. Under AGOA, Botswana qualifies as a ‘least-developed country’. This means that until September 2007 it can produce apparel fromfabric purchased anywhere in the world and ship it to the United States duty-free. As aSADC country, its products are given preferential duty treatment when exported to SADCcountries outside SACU. Zimbabwe and Botswana have a free trade agreement that datesback to 1956.
The erosion of these trade preferences is a concern in a number of sectors
55 Botswana faces the inevitable erosion of its existing preferential market access through thereduction of tariffs and trade barriers under WTO, regional and bilateral trading agreements,.
56 The textile industry has faced the phase-out of multi-fibre agreement (MFA), and faces thepotential removal of AGOA special preferences after September 2007. With MFA phase-out,major low-cost apparel producing countries, most notably China, are likely to take a greatershare of the apparel export market, although it is too early to fully assess the impacts. Thereis no doubt that some buyers will switch from African suppliers to Asian ones, particularlythose in price sensitive markets segments. On the other hand, price is not the only point ofcompetition in apparel: African apparel meeting the rules-of-origin can still be imported
xviii
duty-free into the USA and Europe; many buyers do not want to source all their productsfrom a single country or region; and China and other low-cost Asian producers do not havean infinite capacity to expand production.
57 AGOA has been the dominant driving force behind recent growth of the apparel sub-sector ina number of Sub-Saharan African countries, including Botswana. Botswana’s AGOA ‘LDCstatus’ means that manufacturers are able to source highly competitive Asian manufacturedcloth as their raw material input. Currently, this special LDC advantage will expire midwaythrough 2007 and it is unlikely to be extended. This would have the greatest impact on thewoven apparel segment of the sub-sector, employing 25 percent of the workforce. Thesurvival of these factories is at risk if they cannot source Sub-Saharan qualifying fabric.Botswana needs to start preparing now for this eventuality. Coping strategies could includeshifting market focus away from the USA to other markets, shifting the sourcing of rawmaterial to AGOA eligible countries, reducing manufacturing costs through improved labourand material efficiency and by investing in more automated equipment, and shiftingproduction to apparel made from fabric and yarn that is considered in short-supply in theUSA and, therefore, still duty-free to the USA under AGOA.
58 Botswana is protected from full-scale competition with the most efficient producers of beefin the world in a small number of markets only, of which the EU and South Africa (plusNorway) are probably the most important. ACP countries are covered by Protocol 4 on beefand veal of the ACP–EU Partnership Agreement of 2000 which gives beef a 92 percentreduction in customs duties. The prospect of price competition pushing EU prices belowtheir current level would be increased greatly if Botswana were to face direct competitionwith Latin American or Australasian suppliers. At present, Botswana has a preferential tariffquota (TRQ) under Cotonou. Because both the Cotonou and WTO TRQs are small relativeto the size of the European market, these imports do not significantly push down prices. TheDoha Round or an EU–Mercosur Free Trade Agreement could result in a significant increasein the size of the TRQ for Botswana’s competitors, while a merging of EPA and WTO quotascould have the same impact. While the main policy response is an improvement incompetitiveness in the beef sector, Botswana should nevertheless push for the EU to widenexisting trade preferences for beef products by allowing customs duty, quota and special dutyfree export of a wider range of beef and meat products.
Non-Tariff Barriers represent a more serious market entry restriction than tariffs, and
rules of origin are particularly damaging...
59 For trade with regional neighbours, the more obvious non-tariff barriers (NTBs) – foreigncurrency controls, import licensing, price controls and state marketing – have been removed,but a number of more non-transparent and arbitrary NTBs remain. For exports outside ofSACU, complex rules of origin act as a substantial barrier to exports. The power of rules oforigin is apparent from their positive impact in AGOA, and in their negative impact indecreasing Botswana’s textiles export to Zimbabwe. Rules of origin have proven to be themost contentious part of implementing the SADC Trade Protocol. Current rules of originwill be very difficult to satisfy for regional producers and will therefore hinder regionalvertical integration (Brenton, 2004). Special rules of origin have been applied to certainsectors (e.g., motor vehicles and sugar), and negotiations for other sectors are stillongoing—most notably textiles and apparel, and wheat and flour. For textiles and apparel,imported raw materials will have to undergo a minimum of two stages of production (“doubletransformation”) before they can be considered to have originated in a SADC country.SADC rules of origin on vehicles and components will also make it difficult for Botswana’s
xix
small auto sector to sell to non-SACU SADC countries. SADC Member States plan todiscuss rules of origin as a follow-up discussion to the Trade Protocol Mid-Term Review.
60 Botswana should launch a concerted lobbying effort to improve rules of origin in allpreferential trading agreements, starting with a Government-initiated ‘rules of origin’strategy paper. In particular, this could advocate for the Economic Partnership Agreementwith the EU to allow for single transformation of goods such as found in the AGOAagreement with the United States. In addition, Botswana should lobby for simplified andliberalised SADC rules of origin in the SADC MTR follow-up discussions (quota restrictionsshould be removed and the derogation should become the general rule for all SADC MemberStates). Botswana should press within SACU for a concerted and more liberal approach torules of origin – SACU has been resistant to relaxing rules of origin within SADC, insistingon higher local content to qualify for preferential treatment than other SADC members wouldlike to accept. Botswana should combine efforts with other textile and garment exporters inthe region to lobby for the AGOA LDC provision to be made permanent.
…and the EU’s stringent SPS regulations on beef and ostrich exports are becoming ever
more troublesome and costly to implement.
61 Compliance with the EU’s SPS requirements is necessary not only to continue exporting toEurope, but also to many other high-priced markets for both beef and ostrich sales. Part ofthe reason for the Botswana Meat Commission’s (BMC’s) failure to operate at full capacityhas been the closures required from time to time to deal with animal disease outbreaks. Inthe ostrich sector, the BOC also cannot currently isolate and quantify such costs. One of theirconcerns is that the multi-species abattoir is required by government to meet stringent EUstandards for all its slaughter operations, including cattle service slaughters for domestic beefprocessors. This renders the abattoir less competitive in slaughter service provision relativeto its domestic rivals. Detailed estimates of the costs of compliance in both sectors should bea priority for further research so that policymakers may fully assess the costs and benefits ofthe current emphasis on sales to the European Union.
There are various other non-tariff barriers limiting regional and international exports
from Botswana.
62 Import permits are required for agricultural products in most SADC countries. South Africaimposes specific levies on some imported and domestically produced agricultural products,although these are not high. Local content requirements are used in all SACU countries.Visa restrictions increase the cost of travel and business, and have a particular impact on theservices sector. There is no provision in the new SACU agreement to allow for the freermovement of people. If SACU is to move towards a single market, this is an important steptowards its achievement. Botswana should work with other SACU members to develop aregional approach to easing visa restrictions, starting with a SACU-wide visa, possiblyincluding SADC members.
Trade Facilitation – Actions at the National, Regional and International Level
Botswana faces a number of ‘trade facilitation’ constraints
63 Key features of Botswana’s trade facilitation landscape include proximity to major SouthAfrican markets, distance from major developed country markets, and – as a landlockedcountry - reliance on transit through its neighbours, primarily South Africa. Botswana is onlyfour hours by road to the major South African conurbation of Johannesburg. Botswana’s
xx
exports to the US and EU largely pass through the Port of Durban, which is just 9 hoursjourney from Gaborone. The costs of transport links to other countries in the region areraised by poor and fragmented infrastructure in neighbouring countries. High transport costswere quoted as a major constraint for all of the background sector studies conducted for thisreport. Transportation costs for imports of intermediate and capital inputs and exports fromBotswana to South Africa and beyond are high in comparison to international competitorssuch as Mauritius and South Africa, or Argentina or Brazil for beef.
Shipping costs are expensive from Southern Africa – Government should use its own
procurement program to increase competition
64 Naude (2001) estimates that shipping costs from South Africa are significantly above worldprices – with the margins on imports almost 50 percent higher than the average fordeveloping countries. Despite a general reduction in shipping costs worldwide over the lastthree decades, costs from South Africa have risen. Private freight companies suggest thatGovernment, a major importer of goods, does not provide sufficient scrutiny to its transportcost on imports. Government should undertake a review of government-procured shippingcosts to assess whether greater price pressures could be introduced into the transport market.This could review whether government should import FOB1 and open transit to tender fromnational and international importers. As part of this review, CSO should build an index ofshipping costs on which to base analysis (‘FOB’ and ‘CIF’ costs).
Walvis Bay and the Trans-Kalahari Corridor offer an alternative route out, but has not yet
become popular.
65 By using Walvis Bay, Botswana manufacturers can reduce shipping time to Europe and theEast Coast of the United States by a week or more compared to Durban, although the cost issimilar. This is particularly important in the apparel sector where a short response time toorders is crucial. This route uses the Trans-Kalahari highway linking Pretoria to Walvis Bayvia Botswana. An important component of maritime transport costs is seaport efficiency.South Africa's port turnaround times tend to be up to 5 times as long as that of competitors(Naude, 2001). Port clearance in South Africa on average takes two to three days, and thereare many complaints about congestion, especially at the Port of Durban. Container handlingat Walvis Bay is more efficient than the port of Durban; and, according to some officials,there is less pilferage of goods. Unfortunately, direct call to the USA has not yet beenestablished, in part because Walvis Bay is not yet certified for export directly to the US. TheWalvis Bay route has so far not proved attractive to exporters, partly because traders areaccustomed to the Durban route. Hence, traffic to and from the port to Botswana is low,raising transport costs and limiting the frequency of sailings from Walvis Bay. Governmentshould work with the Walvis Bay Corridor Group and other authorities to encourage greateruse of Walvis Bay route.
Botswana has a relatively well-developed and well-managed land transport infrastructure,
although costs could be reduced through removing cabotage cartage laws and reviewing
road charging
66 For exports requiring sea ports, Botswana faces high inland transportation costs to Durbanand Walvis Bay. The average cost to send a 40 foot container to Durban from Gaborone isapproximately Pula 12,000 (US$2460) to 14,000 (US$2870). This is less than the equivalentcost for Zambia, but equal to Zimbabwe and well above Swaziland (Tagg, 2002). Auto-
1 Bearing in mind that CIF costs often exclude hidden transport costs, such as demurrage charges.
xxi
component exporting firms interviewed for this study reported that the Durban to Gaboroneand back route for raw and finished products constitute nearly 60 percent of total transportcosts. There are four areas of concern on land transport.
67 First, reviews of the domestic road transport market suggest that there are no major policyrestrictions to new entry among the commercially established operators, with the exception ofpassenger transport, which is restricted to citizens-owned enterprises. However, restrictivecabotage laws (common to all SADC countries) contribute to the high costs of transport inthe region – cargo carriers are not allowed to pick up loads at the delivery destination exceptthose destined for their originating country. Government should undertake a review of theimpacts of restrictive cabotage laws with a view to initiating a coordinated effort to liberalisethese restrictions. Regulatory reform has had a significant impact on prices in other countries– for example, liberalization of the transport market in France reduced transport costs bybetween 20-40 percent.
68 Second, road charging is a particularly contentious regional issue. Botswana recently revisedits road user charges for foreign-owned freight vehicles, with an increase of 797 percent infees for the Tlokweng-Gaborone Section. Typical of transport policy changes in the region,the increase was made without consultation with SACU partners. Government should reviewthese new road charges with a view to revoking them, and should encourage greaterconsultation among SACU Transport Ministries, possibly by establishing a transport deskwithin SACU.
69 Third, soda-ash relies on the South African rail parastatal to transport its product withinSouth Africa. The Botswana authorities should investigate the pricing of rail transport bySpoornet, possibly taking up any concerns about monopoly pricing with South Africanofficials through SACU.
70 Fourth, access to many of the main tourism attractions is limited to gravel roads which aremostly only navigable by means of 4-wheel drive vehicles. The undeveloped road systemhas been applied as a control mechanism to limit tourism. Given the need to spreadBotswana’s tourism appeal across a wider spectrum of market segments (in particular theself-drive market), the possibility of upgrading some of the gravel access roads to and withinthe parks should be investigated.
High air transport costs are a major constraint to the development of services exports, re-
enforcing the importance of air liberalisation
71 Passenger travel costs are high. Market access to the air transport sector is quite restrictive incomparison with road transport. Air Botswana is Botswana’s only designated scheduledairline, with the Botswana Government as sole shareholder. A new bilateral agreement withSouth Africa will phase-in an open-skies, multi-designated aviation regime over three yearsfrom 2004. This should have a major impact on prices. As part of an export diversificationstrategy, progress in phasing in the agreement should be closely monitored to ensure that itgets implemented within the agreed time frames, if not sooner. Government should alsoconsider setting a new target date for the privatisation of Air Botswana.
xxii
Botswana Customs is efficient, although the difference between South Africa’s Value
Added Tax (VAT) and Botswana’s VAT creates a second economic border which should be
removed…
72 Customs clearance procedures were recently reviewed and simplified prior to implementationof an UNCTAD project to install the ASYCUDA++ computer system in all the main customsclearance points in the country. Imported inputs for export production get customs clearancelargely without unnecessary restrictions. However, the difference between South Africa’svalue added tax (VAT) and Botswana’s VAT creates a second economic border. Despitebeing major trading partners, Botswana’s VAT rate is 10 percent, while South Africa’s is 14percent. To mitigate the risk of hijacking or pilferage of goods, South Africa recently made ita requirement that all Botswana freight companies forwarding goods to Durban for exportmust pay VAT collected before the goods are allowed through South Africa, then have itreimbursed. There have been a number of complaints about the reimbursement proceduresand delays.
73 Government should propose a SACU-wide strategy for VAT harmonisation. This shouldinclude costings comparing the revenue gains/losses with estimates of the economic lossesassociated with the increased transaction costs of the VAT differentials. A further resultingrestriction is the time allowed for the groupage of products within South Africa – exporters orfreight forwarders must prove that goods leave South Africa within 30 days or face a penalty.This rule makes it difficult to containerise goods in South Africa. Botswana should lobby theSouth African authorities (possibly through SACU) to extend the time allowed for groupage(containerization) of products in South Africa before they are liable for South African VAT.
…while customs-related constraints to regional trade require a push for greater
cooperation.
7 4 Weak and inefficient customs in neighbouring non-SACU countries create significantbarriers to regional integration. The textiles sector is a good example – border constraints inZambia and Zimbabwe will limit the ability of Botswana apparel manufacturers to use cottonfrom these countries in their production chain – this could be particularly important if theAGOA LDC special exemption is ended in 2007 (see paragraph 57). Further, there arediffering customs electronic platforms between South Africa and Botswana, which meansthat traders with South Africa still need to fill out forms manually to clear goods. In addition,although electronic documentation is now available in the larger customs offices, it must stillbe accompanied by a paper version as paper documentation is regarded as the only legaldeclaration.
75 Botswana should push for an effective agreement on trade facilitation in the WTO and shouldalso continue to use existing regional fora, such as SADC, to tackle these obstacles. In thelonger-term, Government should champion the creation of a regional SACU customsauthority. This would ensure common procedures, reducing transaction costs for shippers.The Department of Customs and Excise is exploring the concept of a ‘one-stop border post’with South Africa to reduce border crossing time. As an interim measure, this should bestrongly encouraged.
xxiii
Border constraints are onerous for tourists entering by car, and there is a need to remove
multiple tourism taxes and introduce a regional tourist visa.
76 Botswana’s central location in Southern Africa and the fact that it borders four countriesplaces it at the centre of the Southern Africa tourism circuit. The absence of a coordinatedand tourist-friendly immigration and customs system at the various entry points results inmajor frustrations and lengthy delays, and could impact negatively on the visitor experience.Botswana, Zimbabwe, South Africa and Zambia all have different immigration and customsrequirements and tax regimes, with the result that visitors have to go through a variety ofdiffering procedures in order to move between them. This makes a quick round trip a majorexercise with the visitor having to pass through six border control points, often having to waitin long queues, paying a variety of steep entry taxes and wasting valuable time. Governmentshould explore the scope for the introduction of a single, special tourist visa which includesentry tax costs. This could be approved and purchased in advance of the visit at a foreignoffice of any of the four tourism circuit countries.
Data Limitations
One final point – this study came across a range of data constraints. Resolving these –
particularly the lack of recent trade data – will be necessary in developing an export
strategy
7 7 First and foremost, there has been a two-year delay in accessing reliable trade data.Government should review procedures and capacity for collecting trade data at the CSO. TheMinistry of Finance and Development Planning must find a way to integrate the software ofits two departments that collect (Customs) and analyse (Trade Statistics in CSO). Datashould be made available in a usable format on a quarterly basis. One solution could be tocontract out this role. Second, there are major weaknesses in the quality of services exportand import data (paragraph 1.22). There should be a concerted effort involving the CSO,Bank of Botswana and other relevant departments to reconcile and improve the quality ofservices exports information. Third, good quality data on productivity would help to identifypossible sources of inflationary pressures and the underlying reasons for lack ofcompetitiveness. Fourth, the calculation of a producer price index (PPI) for Botswana wouldfacilitate the calculation of an REER index that is consistent with good international practice.Botswana’s REER calculations should, as far as possible, use PPIs for trading partnerinflation rather than consumer prices indices.
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arag
rap
h 3
.51
).
Th
is w
ou
ld o
f co
urs
e re
qu
ire
an e
stim
atio
n o
f th
e b
ud
get
im
pac
ts a
nd
an
ass
essm
ent
of
ho
w t
his
wo
uld
fit
into
ov
eral
l ta
x p
oli
cy.
No
n-m
iner
al i
nco
me
tax
, w
hic
h i
ncl
ud
es p
erso
nal
in
com
e ta
xes
as
wel
l,
acco
un
ts f
or
ab
ou
t fi
fteen
perc
en
t o
f to
tal
go
vern
men
t re
ven
ue,
alt
ho
ug
h i
t is
beco
min
g m
ore
imp
ort
ant
as m
iner
al r
even
ues
sta
gn
ate
and
SA
CU
rev
enu
es d
ecli
ne
(par
agra
ph
2.2
3).
MF
DP
Nex
t 3
yea
rs
MODERATE
9.
Co
nsi
der
atio
n s
ho
uld
be
giv
en t
o r
emo
vin
g t
he
nee
d f
or
a m
anu
fact
ure
r to
ap
ply
to
th
e M
inis
try
of
Fin
an
ce a
nd
Dev
elo
pm
en
t P
lan
nin
g i
n o
rder
to b
e e
lig
ible
fo
r th
e r
ed
uced
tax
rate
.
Th
e c
urr
en
t
syst
em
, w
here
by
an
ap
pli
cati
on
is
lod
ged
wh
ich
is
then
care
full
y s
cru
tin
ized
, se
em
s to
ad
d a
n
un
necess
ary
lay
er
of
bu
reau
cra
cy
.
Co
mp
an
ies
co
uld
be p
erm
itte
d t
o t
ak
e a
po
siti
on
as
to t
heir
elig
ibil
ity
(in
lin
e w
ith
sel
f-as
sess
men
t p
rin
cip
les)
, w
ith
th
e D
epar
tmen
t o
f T
axes
th
en a
ble
to
rev
iew
any
cla
im (
par
agra
ph
2.2
6).
MF
DP
2006
MODERATE
Th
e
Ince
nti
ves
Reg
ime
10.
Th
e re
serv
atio
n p
oli
cy s
ho
uld
be
refo
rmed
. A
s it
sta
nd
s, i
t is
a r
estr
icti
on
on
tra
de
in c
erta
in a
reas
of
com
mer
cial
act
ivit
y (
Tab
le 2
-1:
Su
mm
ary
of
Maj
or
Ince
nti
ve
Pro
gra
mm
es a
nd
par
agra
ph
2.1
2).
MT
I
Nex
t 3
yea
rs
MODERATE
iii
11.
Go
ver
nm
ent,
in
co
op
erat
ion
wit
h S
AC
U a
nd
SA
DC
, sh
ou
ld e
stab
lish
a c
lear
er r
ole
fo
r co
op
erat
ion
to
avo
id t
ax c
om
pet
itio
n i
n t
he
reg
ion
(p
arag
rap
h 2
.32
).
MF
DP
, B
UR
S
Longer
-run
MO
DE
RA
TE
12.
Go
ver
nm
ent
to c
om
mis
sio
n c
ost
-ben
efit
rev
iew
of
ind
ust
rial
reb
ate
for
raw
mat
eria
ls i
mp
ort
ed f
or
pro
du
ctio
n f
or
sale
s in
to t
he
do
mes
tic
mar
ket
(p
arag
rap
h 3
.75
).
MF
DP
2006
MO
DE
RA
TE
13.
As
par
t o
f a
bro
ad e
xp
ort
div
ersi
fica
tio
n s
trat
egy
, B
ots
wan
a sh
ou
ld r
eco
nsi
der
an
d a
pp
rais
e an
y b
road
or
specif
ic s
ub
sid
ies
(esp
ecia
lly
in
tere
st r
ate
su
bsi
die
s) f
or
no
n-t
rad
eab
le g
oo
ds
acti
vit
ies.
F
or
exam
ple
, C
ED
A s
ho
uld
ev
alu
ate
pro
ject
pro
po
sals
wit
h a
vie
w t
o t
hei
r n
et b
enef
it t
o B
ots
wan
a, u
sin
g
shad
ow
pri
ces
that
pla
ce a
pre
miu
m o
n t
rad
eab
le g
oo
ds
(par
agra
ph
2.1
9).
MF
DP
Nex
t 3
yea
rs
MO
DE
RA
TE
14.
Cen
tral
Sta
tist
ical
Off
ice
or
ano
ther
su
itab
le a
gen
cy o
r th
ink
-tan
k t
o c
on
du
ct a
rev
iew
of
on
go
ing
imp
act
mo
nit
ori
ng
of
exis
tin
g g
ov
ern
men
t su
pp
ort
pro
gra
ms,
tax
in
cen
tiv
es a
nd
res
erv
atio
n p
oli
cies
set
ou
t in
Tab
le 2
-1:
Su
mm
ary
of
Maj
or
Ince
nti
ve
Pro
gra
mm
es.
MF
DP
, C
SO
Nex
t 2
yea
rs
HIG
H
15.
Go
vern
men
t co
uld
dev
elo
p a
deta
iled
an
d c
om
pre
hen
siv
e n
ati
on
al
hu
man
reso
urc
es
dev
elo
pm
en
t
stra
teg
y,
wh
ich
fo
cuse
s in
par
ticu
lar
on
th
e o
ccu
pat
ion
al r
equ
irem
ents
of
the
key
gro
wth
sec
tors
in
th
e
eco
no
my
. T
he
dev
elo
pm
ent
of
a la
bo
ur
mar
ket
in
form
atio
n s
yst
em i
s es
sen
tial
. M
ost
im
po
rtan
tly
,
this
sh
ou
ld i
ncl
ud
e a
com
pre
hen
siv
e re
form
pla
n f
or
the
vo
cati
on
al e
du
cati
on
an
d t
rain
ing
sec
tor
(par
agra
ph 2
.70).
ML
HA
, M
OE
,
MF
DP
, B
OT
A,
TE
C
Nex
t 2
yea
rs
HIG
H
16.
Th
e c
om
pan
y t
ax
in
cen
tiv
e f
or
train
ing
req
uir
es
rev
iew
ing
an
d r
ep
lacin
g w
ith
a m
ore
eff
ecti
ve
ince
nti
ve
for
hu
man
res
ou
rce
dev
elo
pm
ent
(par
agra
ph
2.2
8).
MF
DP
2006
MO
DE
RA
TE
Th
e L
abo
r
Mar
ket
17.
A r
eso
luti
on
of
the
wo
rk p
erm
its
issu
e is
als
o r
equ
ired
, p
oss
ibly
wit
h p
erm
its
bas
ed o
n a
po
ints
sy
stem
and
/or
a m
inim
um
nu
mb
er o
f p
erm
its
awar
ded
au
tom
atic
ally
fo
r co
mp
anie
s (p
arag
rap
h 2
.65
).
In
par
ticu
lar,
Go
ver
nm
ent
sho
uld
rea
sses
s th
e co
st o
f o
bta
inin
g a
wo
rk p
erm
it a
nd
vis
a.
DW
P
2005-6
VE
RY
HIG
H
iv
CH
AP
TE
R 3
: T
HE
EN
AB
LIN
G E
NV
IRO
NM
EN
T I
I: E
XP
OR
T A
ND
SE
CT
OR
-SP
EC
IFIC
PO
LIC
IES
Sec
tor
Po
lici
es -
Cas
e S
tud
ies
Beef
18.
Up
com
ing
Go
ver
nm
ent
liv
esto
ck s
tud
y t
o f
ull
y c
on
sid
er o
pti
on
s fo
r B
MC
pri
vat
isat
ion
, th
e re
mo
val
of
exp
ort
mo
no
po
ly (
in p
arti
cula
r to
So
uth
Afr
ica)
an
d t
he
po
ten
tial
fo
r tr
ade
lib
eral
isat
ion
to
in
crea
se
export
s (p
arag
raph 3
.12
).
MoA
2005-6
VE
RY
HIG
H
Ostriches
19.
Go
ver
nm
ent
to e
lim
inat
e th
e cu
rren
t o
stri
ch e
xp
ort
lev
y (
par
agra
ph
3.2
4).
MoA
2005-6
HIG
H
Tourism
20.
Th
e es
tab
lish
men
t o
f lo
cal
tou
rism
ass
oci
atio
ns,
wh
ich
are
aff
ilia
ted
to
HA
TA
B,
in t
he
mai
n t
ou
rism
cen
tres
is
reco
mm
end
ed.
L
oca
l b
usi
nes
ses
of
such
ass
oci
atio
ns
cou
ld c
oll
abo
rate
wit
h t
he
pu
bli
c
sect
or
on
iss
ues
, su
ch a
s th
e cl
ean
ing
up
an
d b
eau
tifi
cati
on
of
tou
rism
to
wn
s, s
afet
y,
infr
astr
uct
ura
l
issu
es, co
mm
unit
y a
war
enes
s an
d t
ouri
sm i
nfo
rmat
ion p
rovis
ion a
nd r
eser
vat
ions
(par
agra
ph 3
.37).
21.
It i
s cr
uci
al t
hat
th
e D
WN
P b
e an
act
ive
and
key
par
tner
in
th
e fo
rmu
lati
on
an
d i
mp
lem
enta
tio
n o
f th
e
nat
ion
al t
ou
rism
str
ateg
y,
be
clo
sely
ali
gn
ed t
o t
he
Bo
tsw
ana
To
uri
sm B
oar
d,
and
th
at t
he
Go
ver
nm
ent
allo
cate
an
d m
anag
e it
s b
ud
get
all
oca
tio
n a
nd
in
ves
tmen
t in
th
e D
OT
an
d t
he
DW
NP
as
a h
oli
stic
pac
kag
e, w
ith
in a
co
mm
on
ly a
gre
ed t
ou
rism
dev
elo
pm
ent
stra
teg
y (
par
agra
ph
3.3
7).
22.
Sin
ce t
he
tou
rism
su
cces
s o
f em
erg
ing
des
tin
atio
ns
is r
elia
nt
up
on
th
e ac
tiv
e p
arti
cip
atio
n a
nd
jo
int
vis
ion
ing
of
the g
ov
ern
men
t an
d t
he p
riv
ate
secto
r, a
fo
rmal
part
ners
hip
ag
reem
en
t sh
ou
ld b
e
con
sid
ered
, w
ith
bo
th p
arti
es c
om
mit
tin
g t
hem
selv
es t
o t
he
imp
lem
enta
tio
n o
f a
join
tly
ag
reed
nat
ion
al
tou
rism
str
ateg
y t
hat
wil
l g
uid
e to
uri
sm d
evel
op
men
t o
ver
th
e n
ext
dec
ade
(par
agra
ph
3.3
9).
23.
A f
orm
al p
artn
ersh
ip a
gre
emen
t b
etw
een
th
e g
ov
ern
men
t an
d t
he
pri
vat
e se
cto
r sh
ou
ld b
e co
nsi
der
ed.
HA
TA
B
Nex
t 3
yea
rs
MO
DE
RA
TE
MF
DP
, D
WN
P
Nex
t 2
yea
rs
MO
DE
RA
TE
DW
NP
,
HA
TA
B
Nex
t 2
yea
rs
MO
DE
RA
TE
DW
NP
v
Th
is c
ou
ld i
ncl
ud
e fu
nd
ing
co
op
erat
ion
an
d i
n t
his
reg
ard
th
e es
tab
lish
men
t o
f a
ded
icat
ed T
ou
rism
and
Co
nse
rvat
ion
Man
agem
ent
Fu
nd
, to
be
fun
ded
th
rou
gh
rea
list
ic l
evie
s an
d c
har
ges
at
all
tou
rism
po
ints
su
ch a
s p
ark
s, m
ob
ile
tou
r o
per
ato
rs,
ho
spit
alit
y e
stab
lish
men
ts,
etc.
(A
to
uri
sm b
ed l
evy
is
curr
entl
y b
ein
g c
har
ged
, b
ut
it i
s sm
all
and
on
ly a
pp
lica
ble
to
acc
om
mo
dat
ion
en
terp
rise
s) (
par
agra
ph
3.3
9).
24.
Fu
rth
er r
esea
rch
is
nee
ded
on
th
e co
sts
and
ben
efit
s o
f al
low
ing
a l
on
ger
co
nce
ssio
n t
erm
fo
r to
uri
sm
leas
es i
n w
ild
life
man
agem
ent
area
s (p
arag
rap
h 3
.41
).
Nex
t 2
yea
rs
MODERATE
DW
NP
2006
MODERATE
Fin
an
cial
Ser
vice
s E
xport
s
25.
Go
vern
men
t to
co
nsi
der
bro
ad
en
ing
IF
SC
in
cen
tiv
es
by
mak
ing
all
serv
ice e
xp
ort
ers
eli
gib
le f
or
ince
nti
ves
an
d r
enam
ing
th
e IF
SC
(In
tern
atio
nal
Fin
anci
al S
erv
ices
Cen
tre)
th
e IS
C (
Inte
rnat
ion
al
Ser
vic
es C
entr
e) (
par
agra
ph 3
.48).
26.
Go
ver
nm
ent
to i
ncr
ease
eff
ort
s to
neg
oti
ate
do
ub
le t
axat
ion
ag
reem
ents
27.
Go
vern
men
t to
ex
ped
ite a
co
mp
lete
ov
erh
au
l o
f th
e r
eg
ula
tio
n o
f th
e n
on
-ban
k f
inan
cia
l sy
stem
,
incl
ud
ing
off
sho
re j
uri
sdic
tio
n.
In
th
is r
egar
d,
a u
nif
ied
no
n-b
ank
fin
anci
al s
yst
em r
egu
lato
r ap
pro
ach
,
sim
ilar
to M
auri
tius
and S
outh
Afr
ica,
could
be
one
poss
ible
cours
e to
foll
ow
(par
agra
ph 3
.53).
28.
Go
ver
nm
ent
to m
ake
furt
her
eff
ort
s to
str
eam
lin
e th
e p
roce
ss o
f o
bta
inin
g I
FS
C t
ax a
nd
reg
ula
tory
app
rov
al a
nd
red
uci
ng
th
e n
um
ber
of
bo
die
s in
vo
lved
(cu
rren
tly
th
e IF
SC
, th
e M
FD
P a
nd
th
e B
ank
of
Bots
wan
a), poss
ibly
thro
ugh i
ntr
oduci
ng a
one-
step
appro
val
pro
cess
(par
agra
ph 3
.46
).
MF
DP
2005-6
HIGH
MF
DP
Ongoin
g
MF
DP
, B
OB
Nex
t 2
yea
rs
HIGH
MF
DP
, B
OB
2005-6
HIGH
Th
e A
pp
are
l S
ecto
r
29.
BE
DIA
co
uld
ho
ld a
co
nsu
ltati
on
meeti
ng
wit
h t
he m
an
ufa
ctu
rers
wh
o a
re c
urr
en
tly
receiv
ing
sub
sid
ies
un
der
FA
P t
o f
ind
ou
t w
hat
bar
rier
s to
co
mp
etit
iven
ess
each
fac
es.
BE
DIA
nee
ds
to m
ake
sure
th
at t
hes
e b
arri
ers,
so
me
of
wh
ich
are
dis
cuss
ed i
n t
his
rep
ort
, ar
e o
ver
com
e as
far
as
po
ssib
le
(par
agra
ph 3
.62).
30.
In-c
om
pan
y i
nte
rven
tio
ns
to b
e d
evel
op
ed a
s p
art
of
the
nat
ion
al H
IV/A
IDS
str
ateg
y (
par
agra
ph
3.6
6).
31.
BE
DIA
co
uld
dev
elo
p a
co
mp
reh
ensi
ve
resp
on
se t
o t
he
low
lev
els
of
pro
du
ctiv
ity
in
th
e te
xti
le a
nd
BE
DIA
2005
MODERATE
MoH
,
Ongoin
g
vi
ap
pare
l in
du
stry
.
It s
ho
uld
co
mm
issi
on
pro
du
cti
vit
y a
ud
its
an
d t
rain
ing
need
s an
aly
sis,
id
en
tify
suit
able
ser
vic
e p
rov
ider
s to
ad
dre
ss t
he
nee
ds
of
the
ind
ust
ry b
oth
nat
ion
ally
an
d r
egio
nal
ly,
iden
tify
mea
ns
of
fin
anci
ng
pro
du
ctiv
ity
en
han
cem
ent
and
tra
inin
g a
nd
dev
elo
p t
he
mar
ket
fo
r tr
ain
ing
ser
vic
e
pro
vid
ers
to t
he
indust
ry (
par
agra
ph 3
.65
).
32.
Ind
ust
rial
ists
in
th
is s
ecto
r sh
ou
ld b
e en
cou
rag
ed a
nd
ass
iste
d t
o f
orm
an
in
du
stri
al a
sso
ciat
ion
to
lob
by
an
d
neg
oti
ate
fo
r th
eir
sp
ecif
ic
need
s.
BE
DIA
co
uld
u
se
its
off
ices
to
facil
itate
th
e
esta
bli
shm
ent
of
an a
sso
ciat
ion
of
Bo
tsw
ana
Tex
tile
an
d A
pp
arel
Man
ufa
ctu
rers
th
at i
s co
nst
itu
ted
as
an i
nd
epen
den
t, o
ffic
iall
y r
egis
tere
d b
od
y1.
Th
is a
sso
ciat
ion
wo
uld
th
en b
eco
me
the
key
po
int
of
con
tact
wit
h t
he
ind
ust
ry a
nd
wo
uld
rep
rese
nt
its
inte
rest
s in
dis
cuss
ion
s w
ith
Go
ver
nm
ent
and
Lab
ou
r
Un
ion
s, a
nd
co
uld
par
tici
pat
e in
th
e p
rep
arat
ion
s fo
r tr
ade
neg
oti
atio
ns
(par
agra
ph
3.6
7).
BE
DIA
2006
VE
RY
HIG
H
BE
DIA
2006
MO
DE
RA
TE
33.
Bo
tsw
ana
sho
uld
pro
po
se,
wit
h S
AC
U,
a ch
ang
e in
th
e tr
ade
reg
ime
to a
llo
w a
nti
-du
mp
ing
tar
iffs
to
be
elig
ible
fo
r d
uty
ex
emp
tio
ns
and
reb
ate
sch
emes
(B
ox
4-3
).
MT
I
2006
MO
DE
RA
TE
Imp
ort
Tar
iff
and
Ex
emp
tio
n
Sch
emes
for
Ex
po
rter
s34.
Go
ver
nm
ent
to t
ake
foll
ow
-up
rev
iew
on
wh
eth
er b
road
enin
g t
he
def
init
ion
of
inp
uts
th
at a
re e
xem
pt
fro
m c
ust
om
s an
d V
AT
wo
uld
mak
e a
sig
nif
ican
t co
st d
iffe
ren
ce t
o e
xp
ort
ers
( Erro
r!
Refe
ren
ce
sou
rce n
ot
fou
nd
.).
MT
I
2005
MO
DE
RA
TE
Tra
de
Fin
ance
an
d
Export
Cre
dit
Insu
rance
35.
Co
nd
uct
a p
erf
orm
an
ce a
ud
it o
f th
e p
rov
isio
n o
f p
oli
tical
risk
in
sura
nce b
y M
TI,
in
clu
din
g a
n
asse
ssm
ent
of
nee
d (
par
agra
ph 3
.85
).
MF
DP
2006
MO
DE
RA
TE
36.
BE
DIA
an
d B
DC
to
ap
pra
ise w
heth
er
they
sh
ou
ld c
on
tin
ue i
n t
he p
rov
isio
n o
f fa
cto
ry s
hell
s
(par
agra
ph 3
.82).
BE
DIA
-BD
C
2005
MO
DE
RA
TE
Export
Pro
mo
tio
n
and
Pri
vat
e
Sec
tor
Support
Inst
itu
tio
ns
37.
BE
DIA
to
co
ord
inat
e JI
TA
P i
mp
lem
enta
tio
n t
o b
uil
d o
n w
ork
un
der
tak
en i
n t
his
stu
dy
(p
arag
rap
h
3.8
1).
BE
DIA
2005
MO
DE
RA
TE
vii
38.
Un
der
tak
e a
det
aile
d r
evie
w o
f al
l im
po
rt p
erm
its,
wit
h a
vie
w t
o r
emo
vin
g t
his
req
uir
emen
t fo
r al
l b
ut
a li
mit
ed n
um
ber
of
com
mo
dit
ies
for
secu
rity
, p
ub
lic
hea
lth
an
d p
ub
lic
mo
rali
ty r
easo
ns.
G
ov
ern
men
t
cou
ld r
evie
w t
he
Co
ntr
ol
of
Go
od
s, S
erv
ices
an
d O
ther
Ch
arg
es A
ct,
po
ssib
ly a
pp
lyin
g a
co
sts
and
ben
efit
s ap
pro
ach
to
ass
ess
wh
eth
er a
red
uce
d s
cop
e fo
r th
e A
ct i
s b
enef
icia
l.
Th
is s
ho
uld
in
clu
de
an
asse
ssm
ent
of
the
scope
of
allo
win
g i
ssuin
g o
f im
port
per
mit
s outs
ide
of
Gab
oro
ne
(par
agra
ph 3
.94
).
MT
I
2006
HIG
H
39.
Go
ver
nm
ent
to d
evel
op
a ‘
Sta
nd
ard
s S
trat
egy
’, w
hic
h c
ou
ld i
ncl
ud
e an
ass
essm
ent
of
the
sco
pe
for
gre
ate
r h
arm
on
isati
on
of
stan
dard
s w
ith
in S
AC
U –
in
part
icu
lar
wh
eth
er
it w
ou
ld b
e f
easi
ble
to
intr
od
uce
a s
ing
le s
et o
f st
and
ard
s ac
ross
th
e re
gio
n,
wit
h i
nsp
ecti
on
s to
be
do
ne
by
sin
gle
au
tho
rity
wit
h c
lear
gu
idel
ines
of
wh
y i
nsp
ecti
on
s ar
e b
ein
g d
on
e (p
arag
rap
h 3
.89
).
MT
I- B
ots
wan
a
Bure
au o
f
Sta
ndar
ds
2006
MO
DE
RA
TE
Lic
ensi
ng
Ru
les
and
Sta
ndar
ds
40.
At
the
bo
rder
, th
e D
epar
tmen
t o
f C
ust
om
s an
d E
xci
se c
on
du
cts
ver
ific
atio
n o
f im
po
rt p
erm
its
and
ph
ysi
cal
exam
inat
ion
of
go
od
s o
n b
ehal
f th
e D
epar
tmen
t o
f C
rop
Pro
du
ctio
n a
nd
Fo
rest
ry.
Th
ese
dep
artm
ents
sh
ou
ld b
e li
nk
ed e
lect
ron
ical
ly t
o a
vo
id d
elay
s fo
r im
po
rter
s in
cle
arin
g g
oo
ds
in t
he
even
t o
f q
uer
ies
(par
agra
ph
3.9
4).
Cust
om
s,
MF
DP
2005
MO
DE
RA
TE
CH
AP
TE
R 4
– T
RA
DE
PO
LIC
Y F
OR
EX
PO
RT
GR
OW
TH
42.
Bo
tsw
ana
sho
uld
lau
nch
a c
on
cert
ed l
ob
by
ing
eff
ort
to
im
pro
ve
rule
s o
f o
rig
in i
n a
ll p
refe
ren
tial
trad
ing
ag
reem
ents
, st
arti
ng
wit
h a
Go
ver
nm
ent-
init
iate
d ‘
rule
s o
f o
rig
in’
stra
teg
y p
aper
. I
n p
arti
cula
r,
this
co
uld
ad
vo
cate
fo
r th
e E
co
no
mic
Part
ners
hip
Ag
reem
en
t w
ith
th
e E
U t
o a
llo
w f
or
sin
gle
tran
sfo
rmat
ion
of
go
od
s su
ch a
s fo
un
d i
n t
he
AG
OA
ag
reem
ent
wit
h t
he
Un
ited
Sta
tes.
In
ad
dit
ion
,
Bo
tsw
ana
sho
uld
lo
bb
y f
or
sim
pli
fied
an
d l
iber
alis
ed S
AD
C r
ule
s o
f o
rig
in i
n t
he
SA
DC
MT
R f
oll
ow
-
up
dis
cuss
ion
s (q
uo
ta r
estr
icti
on
s sh
ou
ld b
e re
mo
ved
an
d t
he
der
og
atio
n s
ho
uld
bec
om
e th
e g
ener
al
rule
fo
r al
l S
AD
C M
emb
er S
tate
s).
Bo
tsw
ana
sho
uld
pre
ss w
ith
in S
AC
U f
or
a co
nce
rted
an
d m
ore
lib
eral
ap
pro
ach
to
ru
les
of
ori
gin
– S
AC
U h
as b
een
res
ista
nt
to r
elax
ing
ru
les
of
ori
gin
wit
hin
SA
DC
,
insi
stin
g o
n h
igh
er l
oca
l co
nte
nt
to q
ual
ify
fo
r p
refe
ren
tial
tre
atm
ent
than
oth
er S
AD
C m
emb
ers
wo
uld
lik
e to
acc
ept
(par
agra
ph
4.3
0).
MT
I
Nex
t 2
yea
rs
VE
RY
HIG
H
Mar
ket
Acc
ess
Issu
es
43.
Lo
bb
y t
he
EU
to
im
pro
ve
exis
tin
g t
rad
e p
refe
ren
ces
for
bee
f p
rod
uct
s to
all
ow
cu
sto
ms
du
ty,
qu
ota
an
d sp
ecia
l d
uty
fr
ee ex
po
rt o
f a w
ider
ran
ge o
f b
eef
an
d m
eat
pro
du
cts
, w
ith
ou
t ex
cess
ive
adm
inis
trat
ive
and
san
itar
y r
estr
icti
on
s (p
arag
rap
h 4
.17
).
MT
I, M
OA
Nex
t 2
yea
rs
HIG
H
vii
i
44
.P
rep
are
det
aile
d e
stim
ates
of
the
cost
s o
f co
mp
lian
ce n
eed
to
be
pre
par
ed i
n o
rder
to
fu
lly
ass
ess
the
cost
s an
d b
enef
its
of
the
curr
ent
emphas
is o
n s
ales
to t
he
Euro
pea
n U
nio
n (
par
agra
ph 4
.37).
MoA
2006
HIG
H
45
.B
ots
wan
a sh
ou
ld c
on
tin
ue
to l
ob
by
fo
r th
e A
GO
A L
DC
pro
vis
ion
to
be
mad
e p
erm
anen
t in
ord
er t
o
pro
vid
e p
red
icta
bil
ity
fo
r p
ote
nti
al i
nv
esto
rs i
n a
par
ticu
larl
y u
nst
able
mar
ket
(p
arag
rap
h 4
.21
).
MT
I
Nex
t 2
yea
rs
HIG
H
Do
mes
tic
Pro
tect
ion
and
th
e
Ter
ms
of
Tra
de
46
.T
he
Bo
tsw
ana
auth
ori
ties
sh
ou
ld r
efra
in f
rom
usi
ng
im
po
rt b
ans
as a
to
ol
to s
ust
ain
lo
cal
ente
rpri
ses
ag
ain
st fo
reig
n co
mp
eti
tio
n.
T
his
is
an
arb
itra
ry m
easu
re th
at
is b
orn
e b
y th
e co
nsu
mer
an
d
con
trib
ute
s to
th
e an
ti-e
xp
ort
bia
s.
Go
ver
nm
ent
sho
uld
rec
on
sid
er t
he
effe
ctiv
e im
po
rt b
an o
n b
read
and n
ot
impose
new
res
tric
tions
on i
mport
s of
seco
nd-h
and v
ehic
les
(Par
agra
ph 4
.59
).
MT
I, M
FD
P
Ongoin
g
VE
RY
HIG
H
ix
47
.B
ots
wan
a sh
ou
ld u
se i
ts i
nfl
uen
ce i
n t
he
new
SA
CU
Sec
reta
riat
to
ree
ner
giz
e th
e li
ber
aliz
atio
n e
ffo
rts
of
SA
CU
. T
his
eff
ort
sh
ou
ld i
ncl
ud
e: a
ph
ased
pro
gra
m o
f ta
riff
ref
orm
s th
at w
ou
ld c
on
tin
ue
the
pro
gre
ss m
ade
du
rin
g t
he
earl
y l
iber
aliz
atio
n p
erio
d i
n t
he
19
90
s. T
his
sh
ou
ld f
ocu
s o
n:
reduci
ng S
AC
U’s
aver
age
appli
ed r
ates
(w
hic
h w
ould
be
stro
ngly
in B
ots
wan
a’s
inte
rest
).
urg
ing
SA
CU
to
acc
eler
ate
its
tari
ff r
atio
nal
izat
ion
pro
gra
m t
o r
edu
ce t
he
nu
mb
er o
f ta
riff
cate
go
ries
fro
m 4
1 t
o s
ix,
in l
ine
wit
h W
TO
co
mm
itm
ents
(p
arag
rap
h 4
.52
).
lob
by
ing
wit
hin
SA
CU
fo
r th
e n
um
ber
of
anti
-du
mp
ing
in
itia
tio
ns
to b
e fu
rth
er r
edu
ced
(Bo
x 4
-3).
G
ov
ern
men
t sh
ou
ld i
nit
iate
a s
ho
rt f
oll
ow
-up
rev
iew
of
the i
mp
act
of
an
ti-
du
mp
ing
du
ties
on
th
e c
ost
of
Bo
tsw
an
a’s
bu
sin
ess
in
pu
ts.
Go
vern
men
t to
ad
vo
cate
th
e
dev
elo
pm
ent
of
tig
hte
r ru
les
on
an
ti-d
um
pin
g f
or
all
WT
O m
emb
ers
thro
ug
h t
he
WT
O D
oh
a
Dev
elo
pm
ent
Ag
end
a.
urg
ing
SA
CU
to
set
up
mo
nit
ori
ng
pro
gra
m o
f N
TB
s in
sim
ilar
fash
ion
to
a C
OM
ES
A
exer
cise
.
rev
iew
ing
th
e im
pac
t o
f li
ber
aliz
ing
bee
f im
po
rts
wit
h a
vie
w t
o d
iscu
ssin
g t
his
wit
h S
AC
U
nei
ghbours
(par
agra
ph 4
.63
).
dev
elo
pin
g a
reg
ion
al a
pp
roac
h t
o e
asin
g v
isa
rest
rict
ion
s o
ver
th
e lo
ng
er r
un
, st
arti
ng
wit
h a
SA
CU
vis
a, p
oss
ibly
incl
udin
g S
AD
C m
ember
s (p
arag
raph 4
.45
).
Pro
po
sin
g,
wit
hin
th
e S
AC
U f
ram
ewo
rk,
a ti
gh
ten
ing
of
SA
CU
mem
ber
s’ a
bil
ity
to
mak
e
use
of
Art
icle
17
(p
arag
rap
h 4
.46
).
pro
po
sin
g S
AC
U-w
ide
lim
itat
ion
s o
n t
he
use
of
loca
l co
nte
nt
req
uir
emen
ts t
hat
res
tric
t th
e
abil
ity o
f oth
er S
AC
U m
ember
s to
tra
de
wit
h t
hei
r S
AC
U n
eig
hbours
(par
agra
ph 4
.47).
MT
I
Nex
t 5
yea
rs
VE
RY
HIG
H
x
CH
AP
TE
R 5
– T
RA
DE
FA
CIL
ITA
TIO
N
48
.D
evel
op
a p
rog
ram
fo
r V
AT
har
mo
nis
atio
n b
y S
AC
U m
emb
ers,
in
clu
din
g a
n a
sses
smen
t o
f co
stin
gs,
co
mp
ari
ng
th
e r
ev
en
ue g
ain
s/lo
sses
wit
h e
stim
ate
s o
f th
e e
co
no
mic
lo
sses
ass
ocia
ted
wit
h t
he
incr
ease
d t
ran
sact
ion
co
sts
of
the
VA
T d
iffe
ren
tial
s (p
arag
rap
h 5
.7).
F
urt
her
, G
ov
ern
men
t to
pro
po
se
dev
elo
pm
ent
of
a tr
ansi
t sy
stem
th
at c
ov
ers
mo
vem
ent
thro
ug
h a
ll S
AC
U M
emb
er S
tate
s.
MF
DP
2005-6
HIG
H
49
.L
ob
by
So
uth
Afr
ican
au
tho
riti
es t
o e
xte
nd
tim
e al
low
ed f
or
gro
up
age
(co
nta
iner
izat
ion
) o
f p
rod
uct
s
in S
ou
th A
fric
a b
efo
re t
hey
are
lia
ble
fo
r S
ou
th A
fric
an V
AT
(p
arag
rap
h 5
.7).
DoT
, M
TI
2006
MO
DE
RA
TE
50
.E
xp
lore
th
e co
nce
pt
of
a ‘o
ne-
sto
p b
ord
er p
ost
’ w
ith
So
uth
Afr
ica
to t
he
red
uce
bo
rder
cro
ssin
g t
ime
(par
agra
ph 5
.11).
Cu
sto
ms
2006
MO
DE
RA
TE
51.
Explo
re d
esir
abil
ity o
f m
ovin
g t
ow
ards
a re
gio
nal
SA
CU
cust
om
s au
thori
ty (
par
agra
ph 5
.11
).M
TI,
MF
DP
2005-6
MO
DE
RA
TE
52.
Imple
men
tati
on o
f F
IAS
(2004)
Cust
om
s R
ecom
men
dat
ions
(Box 5
-1).
MT
I, C
ust
om
s
MO
DE
RA
TE
53
.G
ov
ern
men
t co
uld
set
up
a ‘
com
pla
ints
/ su
gg
esti
on
s’ p
ost
at
the
mai
n b
ord
er p
ost
s, f
oll
ow
ing
a
sim
ilar
in
itia
tiv
e b
y C
OM
ES
A s
tate
s (p
arag
rap
h 5
.13
)
Cu
sto
ms
2006
MO
DE
RA
TE
Cu
sto
ms
Pro
cedure
s,
Man
agem
ent
and V
isa
Ru
les
54
.C
ust
om
s an
d E
xci
se t
o o
pen
Tlo
kw
eng
bo
rder
gat
e o
n a
24
ho
ur
bas
is (
at p
rese
nt
it i
s 0
60
0 t
o 2
20
0)
to r
edu
ce c
on
ges
tio
n (
par
agra
ph
5.1
3).
Cu
sto
ms
2005
MO
DE
RA
TE
xi
55.
Go
ver
nm
ent
to e
xp
lore
th
e sc
op
e fo
r th
e in
tro
du
ctio
n o
f a
sin
gle
, sp
ecia
l to
uri
st v
isa
that
co
uld
be
app
rov
ed a
nd
pu
rch
ased
in
ad
van
ce o
f th
e v
isit
at
a fo
reig
n o
ffic
e o
f an
y o
f th
e fo
ur
tou
rism
cir
cuit
co
un
trie
s (B
ots
wan
a,
Nam
ibia
, Z
am
bia
an
d Z
imb
ab
we),
wh
ich
wil
l p
rov
ide a
ccess
to
all
fo
ur
countr
ies
(par
agra
ph 5
.17
).
Imm
igra
tio
n
Nex
t 2
yea
rs
HIGH
56.
Go
ver
nm
ent
to e
xp
lore
sco
pe
for
red
uci
ng
or
com
bin
ing
mu
ltip
le t
axes
th
at a
pp
ly w
hen
co
mb
inin
g
Zim
bab
we
and
Bo
tsw
ana
in a
reg
ion
al t
rav
el p
ack
age
(par
agra
ph
5.1
8).
MF
DP
,
Cu
sto
ms
2005-6
HIGH
57.
Bo
tsw
ana
sho
uld
pu
sh f
or
an e
ffec
tiv
e ag
reem
ent
on
tra
de
faci
lita
tio
n i
n t
he
WT
O t
hat
ref
lect
s th
e
var
yin
g i
mp
lem
enta
tio
n c
apac
itie
s o
f d
evel
op
ing
co
un
trie
s an
d r
edu
ces
con
stra
ints
to
tra
de.
It
sh
ou
ld
also
co
nti
nu
e to
use
ex
isti
ng
reg
ion
al f
ora
, su
ch a
s S
AD
C,
to t
ack
le t
hes
e o
bst
acle
s (p
arag
rap
h 5
.14
).
MT
I, F
ore
ign
Aff
airs
2005-6
MODERATE
58.
Go
ver
nm
ent
sho
uld
pro
po
se S
AC
U-w
ide
lim
itat
ion
s o
n t
he
use
of
loca
l co
nte
nt
req
uir
emen
ts t
hat
rest
rict
the
abil
ity o
f oth
er S
AC
U m
ember
s to
tra
de
wit
h t
hei
r S
AC
U n
eighbours
(par
agra
ph 4
.47).
MT
I
2006
MODERATE
59
.G
ov
ern
men
t to
wo
rk w
ith
Wal
vis
Bay
Co
rrid
or
Gro
up
an
d o
ther
au
tho
riti
es t
o e
nco
ura
ge
gre
ater
use
of
Wal
vis
Bay
ro
ute
. T
his
co
uld
be
ach
iev
ed b
y a
gg
ress
ive
and
co
nti
nu
ou
s m
ark
etin
g n
eed
s to
be
dir
ecte
d a
t b
oth
su
pp
lier
s an
d s
hip
pin
g a
gen
ts;
com
pre
hen
siv
e m
easu
rem
ent
of
vo
lum
e an
d t
yp
e o
f
frei
gh
t tr
affi
c in
th
e co
nte
xt
of
a st
ud
y t
o i
nv
esti
gat
e th
e p
oss
ibil
ity
of
a co
ord
inat
ed e
ffo
rt b
y p
riv
ate
secto
r g
rou
ps
to u
se W
alv
is B
ay
.
Fu
rth
er,
BE
DIA
co
uld
req
uest
th
e S
ou
thern
Afr
ican
Glo
bal
Co
mp
eti
tiv
en
ess
Hu
b t
o f
acil
itate
eff
icie
nt
tran
spo
rtati
on
ov
er
the Z
am
bia
-Zim
bab
we-B
ots
wan
a
tran
spo
rtat
ion
co
rrid
or
in t
he
sam
e w
ay t
hat
it
has
fo
r th
e T
ran
s-K
alah
ari
and
Dar
-Lu
sak
a co
rrid
ors
.
MT
I-
Dep
artm
ent
of
Tra
nsp
ort
2005-6
MODERATE
60
.G
ov
ern
men
t to
un
der
tak
e a
rev
iew
of
go
ver
nm
ent-
pro
cure
d s
hip
pin
g c
ost
s to
ass
ess
wh
eth
er g
reat
er
pri
ce p
ress
ure
s co
uld
be
intr
od
uce
d i
nto
th
e m
ark
et.
Th
is c
ou
ld r
evie
w w
het
her
go
ver
nm
ent
sho
uld
imp
ort
FO
B a
nd
op
en t
ran
sit
to t
end
er f
rom
nat
ion
al a
nd
in
tern
atio
nal
im
po
rter
s (p
arag
rap
h 5
.25
).
MF
DP
2006
MODERATE
xii
61
.U
nd
erta
ke
a re
vie
w o
f th
e im
pac
ts o
f re
stri
ctiv
e ca
bo
tag
e la
ws
(co
mm
on
to
all
SA
DC
co
un
trie
s) w
ith
a v
iew
to
in
itia
tin
g a
co
ord
inat
ed e
ffo
rt t
o l
iber
alis
e th
ese
rest
rict
ion
s (p
arag
rap
h 5
.35
).
Dep
artm
ent
of
Tra
nsp
ort
2005-6
HIGH
62.
Go
ver
nm
ent
to r
evie
w t
he
road
ch
arg
es t
hat
sta
rted
in
Mar
ch,
20
04
, w
ith
a v
iew
to
rev
ok
ing
th
em,
an
d f
ull
y c
on
sult
ing
wit
h o
ther
Mem
ber
Sta
tes
befo
re i
nv
ok
ing
an
y s
uch
ch
arg
es
in t
he f
utu
re
(par
agra
ph 5
.36
).
Dep
artm
ent
of
Tra
nsp
ort
2005
MODERATE
63.
Go
vern
men
t to
en
co
ura
ge
gre
ate
r co
nsu
ltati
on
am
on
g
SA
CU
T
ran
spo
rt
Min
istr
ies,
p
oss
ibly
esta
bli
shin
g a
tra
nsp
ort
des
k w
ith
in S
AC
U,
and
en
cou
rag
e in
tra-
SA
CU
dia
log
ue
bet
wee
n t
ran
spo
rt
auth
ori
ties
(p
arag
rap
h 5
.36
).
MT
I,
Dep
artm
ent
of
Tra
nsp
ort
Nex
t 3
yea
rs
MODERATE
64.
Bo
tsw
ana
to t
ake
up
Sp
oo
r-n
et p
rici
ng
iss
ue
wit
hin
SA
CU
, an
d t
o e
xp
lore
wh
eth
er S
ou
th A
fric
an
com
pet
itio
n l
aws
allo
w f
or
consi
der
atio
n o
f ra
il p
rici
ng c
om
pla
ints
by B
OT
AS
H (
par
agra
ph 5
.38).
MT
I,
Dep
artm
ent
of
Tra
nsp
ort
2006
MODERATE
Lan
d
Tra
ns-
po
rtat
ion
65
.G
ov
ern
men
t to
in
ves
tig
ate
the
po
ssib
ilit
y o
f u
pg
rad
ing
so
me
of
the
gra
vel
acc
ess
road
s to
an
d w
ith
in
the
par
ks
– f
or
exam
ple
, fr
om
Mau
n t
o M
ore
mi,
bet
wee
n C
ho
be
and
Mo
rem
i an
d w
ith
in p
arti
cula
r
zon
es o
f th
e p
ark
s.
Su
ch u
pg
rad
es s
ho
uld
be
acco
mp
anie
d b
y i
nfr
astr
uct
ure
im
pro
vem
ents
in
th
e
sele
cted
hig
h d
ensi
ty a
reas
of
the
par
ks
so a
s to
acc
om
mo
dat
e in
crea
sed
vis
ito
r fl
ow
s in
a s
ust
ain
able
man
ner
(p
arag
rap
h 5
.42
).
Dep
artm
ent
of
Tra
nsp
ort
,
DW
NP
Nex
t 3
yea
rs
MODERATE
66
.P
rog
ress
mad
e w
ith
th
e p
has
ed a
gre
emen
t to
war
ds
op
en s
kie
s sh
ou
ld b
e cl
ose
ly m
on
ito
red
, so
as
to
ensu
re t
hat
it
get
s im
ple
men
ted
wit
hin
th
e ag
reed
tim
e fr
ames
, if
no
t so
on
er (
par
agra
ph
5.4
5).
MF
DP
Nex
t 3
yea
rs
HIGH
Air
Tra
nsp
ort
67
.G
ov
ern
men
t to
set
a n
ew t
arg
et d
ate
for
the
pri
vat
isat
ion
of
Air
Bo
tsw
ana
(par
agra
ph
5.4
4).
MF
DP
HIGH
xii
i
68
.R
evit
alis
e th
e p
riv
atiz
atio
n p
rog
ram
– p
arti
cula
rly
in
th
e ar
ea o
f te
leco
ms
and
air
tra
nsp
ort
(p
arag
rap
h
5.5
0).
MF
DP
2005
HIG
H
69
.T
o r
edu
ce i
nte
rnat
ion
al t
elec
om
mu
nic
atio
ns
pri
ces,
Go
ver
nm
ent
sho
uld
co
nsi
der
in
stru
ctin
g B
TA
to
issu
e an
un
lim
ited
nu
mb
er o
f li
cen
ces
for
inte
rnat
ion
al v
oic
e se
rvic
es a
nd
lif
t th
e b
an o
n p
rov
idin
g
vo
ice
ov
er I
P.
Th
e m
on
op
oly
of
BT
C s
ho
uld
no
t b
e al
low
ed t
o c
on
tin
ue
ind
efin
itel
y t
o a
llo
w B
TC
to
rest
ruct
ure
- G
ov
ern
men
t sh
ou
ld s
et a
tar
get
dat
e fo
r th
e p
riv
atis
atio
n o
f B
TC
(p
arag
rap
h 5
.53
).
BT
A
Nex
t 2
yea
rs
VE
RY
HIG
H
Th
e B
usi
nes
s
Cost
s of
Uti
liti
es
70
.T
he
Go
ver
nm
ent
sho
uld
en
cou
rag
e th
e W
ater
Uti
liti
es C
orp
ora
tio
n (
WU
C)
to s
up
ply
raw
wat
er t
o t
he
ind
ust
rial
est
ates
wh
ere
tex
tile
an
d a
pp
arel
man
ufa
ctu
rers
are
lo
cate
d.
Th
is w
ou
ld b
e an
en
orm
ou
s
ince
nti
ve
to p
ote
nti
al i
nv
esto
rs i
n w
eav
ing
, k
nit
tin
g a
nd
dy
ein
g p
lan
ts (
par
agra
ph
5.6
0).
MF
DP
2005-6
MO
DE
RA
TE
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