Botswana’s attractiveness to foreign investors is declining and the flow of Foreign Direct Investment (FDI) to the country and other African countries is facing a threat due to Brexit and policy changes under US president Donald Trump, a South African based capital markets research entity has warned.
In the Africa Attractiveness Index (AAI) released last week EY revealed that Botswana which was the 7th most attractive country to FDI in 2016 when compared to other African countries dropped to the 10th position after being overtaken by Cote d’Ivoire, Uganda and Tanzania.
The index shows that when compared to its competitors in Africa, Botswana’s attractiveness to foreign investors is declining and indicates that instead of investing in the country, investors are highly likely to invest in Morocco which is the most attractive destination for FDI followed by Kenya, South Africa, Ghana, Tanzania, Uganda and Cote d’Ivoire, Mauritius and Senegal.
It appears that Botswana is facing a stiff competition for FDI and can no longer depend on its competitive advantage of being a politically stable country. In their recent annual report, Botswana Investment Trade Center (BITC) indicated that although Botswana is showing growth and moving forward in certain quarters, she must be mindful that she is increasingly losing ground to some economies and this should be a source for significant concern.
Lack of skills and delays in developing both business facilitation law and “one stop shop” are among factors which negatively affect Botswana’s ability to compete for FDI, according to the institution. It has emerged that some BITC officers cannot effectively interact with the investment community and do not understand key drivers within some sectors of the economy. “Currently there exists a gap in terms of sector knowledge and overall business experience to engage in meaningful discussions with potential investors.” said parastatal. BITC Board Chairperson Victor Sennye has noted that there is an urgent need for formulation of business facilitation law which is critical if Botswana is to improve attractiveness to FDI in the competitive global landscape and government should also strengthen the “one stop shop” concept and provide supporting legislation to render it effective.
BITC has indicated that in order to improve its attractiveness and flow of FDI into the country, Botswana should focus on marketing particular attributes in which she has a competitive and comparative advantage. “Some countries approach investment promotion successfully by selling their market size and purchasing power, while others position themselves as regions with low cost but highly productive labor forces. Similarly, Botswana attributes in the areas of mining, beef and tourism presents real opportunity.”
Figures from the AAI index report show that out of P3.12 billion total capital investment recorded in Botswana during the 2015/2016 financial year, FDI companies contributed P1.49 billion and the financial sector represented the largest contribution to the investment at 58%. Other sectors that contributed to FDI include mining, manufacturing, agriculture, property, tourism, transport and logistics and the companies were from South Africa, India, Canada, Australia, Ethiopia, Zimbabwe and China.
EY analysts have warned that growth in FDI flows into Africa is likely to decelerate over the next few years. “From our point of view, this has far less to do with Africa’s fundamentals than it does with a world characterized by heightened geopolitical uncertainty and greater risk aversion. FDI in Africa is facing threats as two of the biggest traditional investors, the US and UK face domestic uncertainty on account of Brexit and policy changes under President Donald Trump,” said the analysts.
EY added that companies already doing business in the continent will continue to invest but will probably exercise a greater degree of caution and be more discerning.