Transcript An Assessment of The Diversification

An Assessment of The DiversificationGrowth Implications in Botswana
and Emerging Policy Dynamics
Grace Tabengwa
Johane Motsatsi
Conference 27-28th Aug 2014, Gaborone
STRUCTURE/OUTLINE
 OVERVIEW-CONTEXT, SCOPE, OBJECTIVES
 ANALYTICAL APPROACH
 ASSESSMENT KEY FINDINGS
 DIVERSIFICATION-GROWTH IMPLICATIONS
 (i)
(ii)
(iii)
(iv)
Performance and Progress on Trade Expansion and a
Diversified Export Base
Performance and Progress Towards a Diversified Growth
Base
Foreign Direct Investment Performance
Employment Generation vs Unemployment
 CHALLENGES AND EMERGING POLICY ISSUES
 SUCCESS COUNTRY CASES
 CONCLUSIONS AND RECOMMENDATIONS
2
OVERVIEW-CONTEXT, SCOPE, OBJECTIVES
Botswana's Growth Inter-Linkage with Mining Sector Performance make Diversification a Policy Priority
15
-5
-10
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
5
0
1000
900
800
700
600
500
400
300
200
100
0
10
10
•
20
SubSahara
n
Africa
Europe
an
Union
Botsw
ana
Diamond Production Volume and Real Profit
0
-10
-20
-30
Mining Sector Growth Forecats by
the IMF
40
35
30
25
20
15
10
5
0
Production vol. (right)
Production vol. ( ml. of ct.)
USA
Profit (ml. 2000/01 Pula perct.)
Mining Sector Growth Performance
and Forecasts (%)
Botswana GDP Growth vs Regional Performance
Real profit per carat (left)
Source: Generated from Statistics Botswana, MFDP and IMF/WB Statistic
 Main Policy Framework in the last 2-3 Decades, albeit subtle changes
Encapsulated in National Development Planning Process (2-3 Decades)-NDP 9 major theme on
diversification
Recognised Major Government Commitment through Budget Resource Allocations
Crystallized Botswana Excellence Strategy for Economic Diversification (2009)
 Economic Diversification Drive, Sector Strategies, Policy Initiative and Programmes: (FAP, CEDA, LEA,
ISPAAD, NAMPAAD, ARAP, ALDEP, Economic Empowerment, Trade Policy, Marketing and Branding
Botswana, Export/FDI Incentives, Competitiveness Reforms,-Doing Business and Global
Competiveness, HRDC)
National Vision 2016
Beneficiation, Diamond Trading Company Relocation
Supportive Micro-Macro Policy Initiatives across sectors Ministries, parastatals, privates sector
agencies, SMME Support, Reforms for Business and Regulatory Frameworks
Assessment Focus…
• Evaluate diversification policy focus versus performance against
the attainment of key national policy objectives as
conceptualized in the context of Botswana.
 Defining Diversification vs Overriding National Objectives for
Diversification:
A diversified export base, promoting non-mineral export.
expanding trade, expand revenue sources
A diversified growth base-boosting non-mining sector growth
and sustenance.
Attract FDI to other sectors of the non-mining economy to
support sustainable growth, enhance industry growth
Generate employment given its importance for inclusive growth
Setting Objectives
•
•
Utilise possible indicators for assessment based on the concept of diversification
as pursued in Botswana
Quantitative and Qualitative Assessment
 (i)
Performance and Progress on Trade Expansion and
a
Diversified Export Base
(ii)
Performance and Progress Towards a Diversified
Growth
Base
(iii)
Foreign Direct Investment Performance
(iv)
Employment Generation vs Unemployment
• Recognised developmental achievements: High growth, HDI, Reinvestment of mining revenues to create growth catapulting Botswana
to MIC status-sound and strong policies and institutions.
• Impetus-Catalysation of Diversification and its Delivery…Policy
Dialogue Today
?
But what is the progress towards Diversification…… How are we doing? What
can we do even better in fast tracking the diversification process towards
Sustainable growth…
ASSESSMENT KEY FINDINGS
(i) Performance and Progress on Trade Expansion and a Diversified
Export Base
 (ia) Trade Profile: Some export activities emerging (services, textiles, vehicles) ; mining
export dominance in total exports, volatility , direct impacts on growth performance via
trade and revenue channels
•
•
Still concerns with no major achievements towards as varied sustainable export profile
Growth implications: Trade Balance, Revenues, BOP, Foreign Exchange Reserves, Fiscal StrengthBudget Position and Growth
•
Figure 1: Botswana’s Export Growth Performance (%) and the Export/Import Profile (Current, Pula Millions)
Mining Exports in Total Exports
Total Export Growth (%)
14000.0
12000.0
Total Exports
80.0
12000.0
10000.0
60.0
10000.0
8000.0
40.0
8000.0
6000.0
-60.0
Export Growth (%)
2010 Q4
2010 Q2
2009 Q4
-40.0
Copper/Nicke
l Exports
2009 Q2
0.0
2008 Q4
-20.0
2008 Q2
2000.0
0.0
2007 Q4
0.0
Imports
2007 Q2
2000.0
4000.0
Total Exports
2005 Q4
2006 Q4
2007 Q4
2008 Q4
2009 Q4
2010 Q4
4000.0
20.0
Diamond
Exports
2006 Q4
6000.0
2005 Q4
14000.0
2006 Q2
Export and Import Profile
(ib) Non-Mining Exports – Positives emerging, sustenance concerns,
filtration in major way to broaden export profile…not much has changed in
terms of export diversity
 Growth implications: via Trade and Revenue Channels-Trade Balance,
Revenues, BOP, Foreign Exchange Reserves, Fiscal Strength-Budget Position
and Growth
 ,
2013 Export Composition Status
Indicators of Diversification- Non-Mining
Export in Total Exports
45000
40000
Total Exports
35000
30000
Principal
Mining
Exports
Principal
Non-Mining
Exports
25000
20000
15000
10000
5000
Other
manufactu
res
Meat
8%
2%
2012
2010
2008
2006
2004
2002
2000
1998
Copper/nic
kel
9%
Textiles
Soda 1%
ash/salt
1%
Gold
1%
Polished
Diamonds
14%
0
1996
Services
6%
Source: Generated from Bank of Botswana Annual Reports, Statistics Botswana
Rough
Diamonds
58%
(ic)
Export composition:
Botswana's non-diamond exports remain concentrated
around five major commodities: copper-nickel matte, soda ash, meat, hides and skins, and
textiles even two decades of policy initiatives seeking to boost export diversity.
• Slow and minimal filtration of export activities despite identified opportunities, enhanced
marketing to-No major “new export activities …data for performance.
•Positive achievements also noted with service exports
•Sustenance Concerns of Performance- Textile exports-benefited from AGOA, Government
support. Vehicle exports effected by closure of Botswana Motor Vehicle Company which
relocated to RSA-
Table 1; Performance of other Major Exports (P Millions )
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Copper
Nickel
757.5
2 301.0
3 822.8
5 521.7
5 923.6
3 620.0
4 152.8
3 398.2
3 393.5
4 615.7
Beef
284.0
309.9
363.2
592.3
530.3
480.1
868.8
462.4
522.9
996.0
Soda
Ash
250.8
332.1
462.7
473.5
505.2
526.0
506.4
522.3
644.6
723.4
Textiles
560.8
1 117.0
916.7
2 787.5
1 819.3
1 417.6
1 118.5
1 777.6
614.3
361.8
Vehicles
556.1
569.7
183.6
218.7
413.6
490.9
275.3
830.5
989.9
658.6
Source: Bank of Botswana Annual Report
Gold
…
182.9
206.3
239.4
382.4
269.6
460.5
524.7
618.4
451.1
 (id)Revenue diversity- constrained by limited export diversity and
trade profile. Positive Improvements, Challenges for Customs and
excise-tariff liberalisation
 Growth implications: Revenues key to pursue developmental objectives in
NDPs, limited fiscal flexibility eg impact on NDP 10 and future planning
process already , BOP, Foreign Exchange Reserves, Fiscal Strength-Budget
Position and Growth
2012/13 Share in Total
Revenues Status
Customs
& Excise
17.65
Mineral
49.60
NonMineral
Income
Tax
13.49
24.13
27.37
47.87
38.46
11.21
13.60
0.00
0.00
0.06
0.11
0.51
0.55
0.08
0.09
8.20
9.96
0.03
0.08
2008/09
25.45
33.43
15.13
0.01
0.08
0.63
0.09
14.37
2009/10
26.42
30.27
18.52
0.00
0.09
0.63
0.11
2010/11
19.45
37.79
20.10
0.01
0.11
0.72
2011/12
21.89
41.11
14.96
0.00
0.17
2012/13
34.13
28.99
16.14
0.01
0.12
2013/14
31.08
30.11
20.37
2014/15
31.8
30.4
31.2
Table: Revenue Sources and Shares in Total (Percent)
2005/06
2006/07
2007/08
Export
Duties
0.00
Property
Taxes
0.06
Vehicle
Taxes
0.55
License
Fees
0.09
VAT
8.89
Airpor
t Tax
0.08
Source: Statistics Botswana, MFDP
Airport Tax
0
VAT
12.68
License Fees
0.07
0.07
Vehicle Taxes
0.54
13.13
0.00
Property Taxes
0.12
Export Duties
0.10
14.53
0.00
0.01
0.54
0.10
12.90
0.00
Mineral
28.99
0.54
0.07
12.68
0.00!
Customs &…
34.13
Non-Mineral…
16.14
0 10 20 30 40
(ii)
Performance and Progress Towards a Diversified
Growth
Base
 (iia) Non Mining Growth –Positive though still concerns with sustenance across other
sectors . Overall lower national growth rates in the era of diversification:
Growth outcomes which remain determined by mining sector, lower growth at about 4.5-6%
range in 2011, 2012,2013, 2014 projections
Growth Implications-though positives emerging still questions sustainability , broad based
growth, targets attainment e.g 7.5%
Mining, Non-Mining and Total GDP Performance (Constant Prices, Pula Millions and %)
Source: Compiled from Statistics Botswana, MFDP .
iib) Sectoral Performance -non-mining sectors picking pace since
(
the 1990s. Gov’t and mining still significant though share declining. Emerging
Sectors albeit sustainability concerns for “Growth Drivers”
Implications for growth: Though positives emerging..sustenance for broad
based growth
Figure 3: GDP Shares by Sector (Percentage)
Mining
45.0
Agric
40.0
35.0
Manuf
30.0
Wat & Elec
25.0
Const
20.0
Trad Hot & Res
15.0
10.0
Trans & Comm
5.0
Bank Ins & Bus
1991/92
1992/93
1993/94
1994/95
1995/96
1996/97
1997/98
1998/99
1999/00
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0.0
Source: Statistics Botswana
Gen Gov
Soc & Per Ser
(iii)
Foreign Direct Investment Performance
Table 6: FDI inflows, by Region and economy, 1990-2012 Millions of dollars
Region/economy
2005
2006
2007
2008
2009
2010
2011
2012
30
917.6
36 575.2
51 273.6
58 894.2
52 964.3
43 581.6
47 598.1
50 041.1
6 701.4
1 334.4
8 117.4
13 921.3
10 128.7
2 047.5
8 722.1
5 399.8
Angola
-1
303.9
- 37.7
- 893.3
1 679.0
2 205.3
Botswana
278.6
486.4
494.6
520.9
128.8
- 6.1
413.6
292.5
Lesotho
70.3
59.9
106.5
111.9
99.9
113.7
132.1
172.3
Malawi
139.7
35.6
124.4
195.4
49.1
97.0
128.8
129.5
Mozambique
107.9
153.7
427.4
591.6
892.5
1 017.9
2 662.8
5 218.1
Namibia
386.6
733.0
720.3
522.1
793.0
816.0
357.5
South Africa
348.0
6
646.9
- 526.8
5 694.5
9 006.3
5 365.4
1 228.3
6 004.3
4 572.5
Swaziland
- 45.9
121.0
37.5
105.7
65.7
135.6
93.2
89.6
Zambia
356.9
615.8
1 323.9
938.6
694.8
1 729.3
1 108.0
1 066.0
Zimbabwe
102.8
40.0
68.9
51.6
105.0
165.9
387.0
399.5
Africa
Southern Africa
Source: UNTAD database
- 3 227.2 - 3 023.8 - 6 897.8
Sector Level FDI –
Some positives noted albeit still minimal among “”Potential Growth Driver
sectors-finance, retail,services..however, dominance of mining noticeable
Table: Share in Total FDI Levels by Sector
Sectors
2000
2001
Mining
78.8
80.6
Manufacturing
3.5
2.6
Finance
6.3
7.0
Retail and Wholesale 7.8
6.2
Electricity, Gas & Water 0.0
0.0
Real Esrtate and Business 1.6
Services 1.1
Transport, Storage & Communication
1.1
0.9
Construction
0.2
0.2
Hospitality
0.8
1.3
Public Administration 0.0
0.0
Other
0.0
0.0
Total FDI
100.0
100.0
2002
71.3
3.6
10.2
9.6
0.2
1.3
2.0
0.2
1.6
0.0
0.0
100.0
2003
68.3
3.9
11.4
10.8
0.4
1.2
2.0
0.1
2.0
0.0
0.0
100.2
2004
59.3
3.6
22.1
5.7
0.9
2.2
3.2
0.7
1.4
0.0
0.9
100.0
2005
59.6
3.3
29.0
2.9
0.0
2.1
2.2
0.0
0.5
0.0
0.0
99.6
2006
45.9
1.3
48.2
2.0
0.0
0.6
1.3
0.1
0.3
0.0
0.3
100.0
0.72
0.95
25000
20000
1.43
2007
56.7
1.5
35.2
2.5
0.0
2.0
0.7
0.1
0.5
0.0
0.7
100.0
0.00
0.00
2008
49.3
1.1
40.4
0.9
0.0
6.9
0.5
0.4
0.4
0.0
0.1
100.0
0.00
2010
57.3
1.6
27.5
9.3
0.0
1.7
0.1
1.0
0.3
0.0
1.2
100.0
2012
72.2
0.5
22.4
1.4
0.0
0.9
0.7
0.0
0.0
0.0
1.8
100.0
Mining
0.00
1.83
Manufacturing
22.40
15000
2009
39.3
1.0
40.5
7.6
0.0
6.2
0.1
0.0
0.1
0.0
5.0
100.0
Finance
Mining
Total FDI
10000
0.48
72.19
Retail and Wholesale
5000
Electricity, Gas &
Water
0
Real Esrtate and
Business Services
1997 1999 2001 2003 2005 2007 2009 2012
(iv)
Employment Generation vs Unemployment
Gov’t major employer, mining without employment generation capacity despite being
major sector. Limited pvt sector job market profile, Deceleration in absorptive capacity and
employment creation,
High unemployment…Implications for poverty, inequality , sustainable inclusivee
growth..ultimately impacts overall growth and development achievements
Table 6: Estimated Number of Paid Employees by Sector and Economic Activity,( Percentage Share in
1980
1985
1990
1995
2000
2005
2006
2007
2008
2009
yearly averages)
Agriculture
Mining & Quarrying
Manufacturing
Water & Electricity
Construction
Commerce
Wholesale & Retail Trade
Hotels & Restaurants
Transport
Finance & Business Services
Finance
Real Est.& Business Activities
Education
Health & Social/community Work
Private & Parastatal
Central Government
Local Government
Ipelegeng
Total Employment
2.8
4.7
3.7
1.0
8.8
6.8
5.2
1.7
2.2
2.8
2.3
0.6
0.9
1.6
35.5
15.9
3.6
0.0
100
1.9
3.4
4.6
0.9
5.4
8.6
6.5
2.1
2.7
3.2
1.7
1.5
0.9
1.8
33.4
17.3
4.1
0.0
100
1.6
2.0
6.0
0.5
7.6
9.4
7.1
2.3
2.1
3.5
0.9
2.6
0.5
2.0
35.4
13.2
3.0
0.0
100
1.0
1.9
5.4
0.6
5.0
10.2
7.8
2.5
2.0
4.0
0.9
3.1
0.8
2.3
33.2
15.8
3.6
0.0
100
1.2
1.6
6.1
0.6
5.7
9.5
7.4
2.2
2.0
3.7
1.0
2.7
1.3
0.9
32.6
17.3
4.2
0.0
100
1.0
1.7
6.0
0.4
4.5
10.3
7.6
2.7
2.3
4.0
1.0
3.0
1.4
0.9
32.6
15.9
4.5
0.0
100
1.0
2.0
6.1
0.5
4.2
10.2
7.6
2.7
2.3
4.1
1.1
3.0
1.5
1.0
32.9
15.5
4.5
0.0
100
1.0
2.0
6.1
0.5
3.8
10.3
7.7
2.6
2.2
4.4
1.2
3.1
1.6
0.9
32.7
15.5
4.5
0.0
100
1.0
2.0
6.2
0.5
3.7
10.3
7.7
2.6
2.1
4.3
1.3
3.0
1.6
1.0
32.5
15.8
4.6
0.0
100
0.8
1.4
4.8
0.4
3.0
8.5
6.3
2.2
1.7
3.6
1.1
2.5
1.3
0.9
26.5
13.2
12.8
9.0
100
Formal sector employment increased from 315 791 in 2008 to 323 803 in 2009
and to 335 156 in 2011 yielding an average annual growth rate of 2.2 percent
(Statistics Botswana). Unemployment rate decreased from 19.5 percent in 2008 to
17 percent in 2009 and then marginally increased to 17.8 percent i2009/10
-Absorptive capacity shrinking, average annual employment growth declining
and employment elasticities
Source: Siphambe (2007)
Summary Findings, Challenges and Policy Issues
•
Key Summary Findings
 (i)
Positives Emerging…Though still Limited Trade and Export Diversity: Positive turnaround for
diversification though export and growth diversity still remains limited
 (ii) Positives Emerging….Though Still Limited Growth Diversity for Sustainability Assurance: Overall rate of
growth decelerating, non-mining growth though picking up remains below that required for sustainable growth
 (iii) Emerging Positives…FDI Still Biased Towards Mining raising concerns for Non-Mining Industry Expansion
Prospects: Largely biased towards miming and extractive industry
 (iv) Decelerating Employment Generation and Absorptive Capacity Raising Concerns for Inclusive Growth and
attaining “Prosperity for All”: Capacity to generate employment by private sector remains low while
government capacity for labour absorption is decelerating
 (v) Unemployment Dynamics-Rising Youth Unemployment: Unemployment rates quite high and is a major
concern among the youth-future inter-generational success
 In general..Assessments limited by adequacy of data to track diversification broadly at a more disaggregated
level…at Sector /Industry level, More Importantly the Performance of Programmes, Strategies, Initiatives
versus realisation of objectives.
 Policy framework is to a large extent in place and the major challenge is turning diversification strategies into
realisable results…time for turnaround to implementation (SEZs, NHRDC, Entrepreneurship/SMME, Pvt Sector
Dev, Regulatory/Business Reforms
 Recognised State of Transition….Outlook positive for diversification in the medium –long term horizon…Process
takes effect since a lot is being done to set up and fill gaps/address challenges/ Some Strategies Unfolding,
Reforms just commenced in some areas

Challenges that still prevail: impacting diversification process and its pace:







Competitiveness….Sector Strategies, Doing Business Reforms, Global Competitiveness Reforms
Requisite Infrastructure
Requisite Human Capital …Sector Strategies, NHRDP
Capacity for Institutions
Monitoring and Evaluation-Sector, Industry…Coordinated
Diversification indicators, Alignment of Policies to M and E
Market opportunities, export and investment opportunities-their identification and exploitation
Success Country Lessons






Botswana’s diversification policy approach lately integrates lessons from success countries
Mauritius
 EPZ and trade policy approach to develop export sector
 Botswana recent policy focus towards SEZ Human capital development-Working on National Human Resource Development Plan-Sector Strategies to be
developed
 To great extent Botswana is setting its policy framework to diversify economic with lessons from success
South Africa-PPPs
 PPP policy for infrastructure development, Private Sector Role, thriving business environment….can Botswana
dra lessons
 South Africa IDZs, Botswana SEZ., lessons for policy approach for partnerships.
 some lessons for technological advancement
Chile Experience Success on transformation, employment creation, diversification, addressing inequality,
Rwanda
 Made notable strides in competitiveness lately-issues for regulatory and business environment
More emphasis should be directed at capacities to turn strategies into results.
 Strategies and Policies are there…..how do we shift to the next stage is often the constaining factor
 Market challenges, export opportunities, FDI opportunities, Infrastructure, Competitiveness
 Capacities to Turn Strategies into realisable results, pace of Implementation
 Capacities to Identify Opportunities and Effectively harness their Potential
 Sector Specific Challenges- Supportive Research and Dynamism to Strategies
Conclusions and Recommendations
 Despite efforts to promote and develop export development programme and export promotion
there is limited progress towards a diversified export base and thriving export sector, the paper
recommends
 More focus on unlocking the realisation of the diversification process through capacities to
identify export opportunities
 Sector Specific Strategies…more rigour in sector strategies and their delivery,
 More work on Micro Policy to leverage Macro Policy to support sectors
 Strengthening Capacity of Institutions Need for institutional support and the requisite
capacity to ensure strategies for export development across sectors are turned into
realisable diversification to deliver export industries.
•
•
•
Enhance capacity for identification and promotion of exports and building their diversity with
requite supportive national policies and regional opportunities in Southern Africa which remains a
major weakness
To expand exports, Botswana should take advantage of partnerships that can establish export
processing zones and public/private sector partnerships export sector strategies for growth.
This requires strong institutional frameworks supporting partnership dialogue on critical issues
and impediments to trade/export development (e.g., customs valuation procedures, bureaucratic
processing procedures, transport corridor inefficiencies, and lack of knowledge pertaining to
export markets).
• Capacity for identification of export and investment
opportunities and to shift strategies to realization of results of
diversification initiatives.
• Trade Expansion and broadening export base: export processing
zones to expand-potential export sectors such as
manufacturing, services, tourism, textile, agriculture to broaden
the export and industrial sector. –SEZs….
• Trade Facilitation and Capacity Development
• Regional Integration: Exploitation of trade agreements to
broaden the export base even more urgently. An example is the
case of AGOA to develop a sustainable textile sector. An
extended and revised AGOA Taking advantage of regional
integration to boost export and extra and intra-regional trade
and developing requisite infrastructure such as for the water,
energy and power generation
•
Continued Strategic Interventions to address Competitiveness, Productivity and Efficiency,
Doing Business, Regulatory Reforms and Supporting Private Sector Development
 High factor productivity remains important to achieve a conducive environment for the Private
sector , enhancing efficiency and productivity
 The textile industry: AGOA has been the dominant driving force behind recent growth of the
apparel sub-sector in a number of SSA countries, including Botswana. With prospects for AGOA
renewal, the export sector should have capacity to exploit the trade preferences which is an area
that requires focus since many developing countries lack capacity to fully exploit and take
advantage of trade preferences.
•
Critical to Hasten NHRDP and its effective Implementation: Human capital
development and hastening the implementation of the NHRDP to address skills
requisite to support the diversification and competitiveness reform process.
•
Strategic investment Partnerships: where major investments are required the
strategic partnerships should focus on infrastructure development, water, sustainable
energy generation and power supply, health, education, agricultural sector,
manufacturing beyond extractive sector, ICT to create an environment conducive for
export and investment development..
•
Strategic Inclusive Partnerships and Initiatives: to address existing social, economic
and institutional development and capacity gaps. Capacity building of private sector,
entrepreneurship, SMME development and key policy making and implementing
institutions to enhance delivery on diversification.
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