FDI strategy questioned

Some members of the Public Accounts Committee last week raised doubts over Botswana’s efforts to attract Foreign Direct Investment (FDI). Kanye North Legislator; Kentse Rammidi asked the Permanent Secretary in the Ministry of Trade and Industry Banny Molosiwa if Botswana’s strategy to attract FDI was aggressive enough. Selibe Phikwe West Member of Parliament Gilson Saleshando also wondered why the country was failing to attract FDI despite the many trade missions that are undertaken every year. Molosiwa however told the committee that she was happy with the effort and strategy, “We have trade attaches in Geneva, Brussels, London, India and South Africa to try and attract FDI, but investors take time to make decisions on these matters”, she told the committee adding that countries like South Africa have better incentives that Botswana.

Botswana was recently ranked best investment destination globally though it has not really fulfilled its potential as shown by its failure to appear in Enerst and Young’s (E&Y) ‘Africa Attractiveness Survey 2013’ which showed countries that attract the most FDI.

The report shows that Southern Africa is the leading region in terms of absolute numbers of Foreign Direct Investment projects, while both East and West Africa have experienced strong growth rates.

South Africa remains the largest destination for FDI projects, with a widening lead. A number of other countries, including Ghana, Nigeria, Kenya, Mozambique, Tanzania and Uganda are becoming more prominent on investors’ radar.

Botswana Institute of Policy Development and Analysis (BIDPA) Research Fellow, Professor Roman Grynberg says though government was working to attract FDI, there were some reforms that needed to be made to make Botswana more competitive, and “First we need to establish the Export Processing Zones in Botswana. Second we need to get our tax system right. All of our neighbours are racing to lower taxes on foreign investors. We are no longer competitive. Third our costs are really high in comparison to some of the other SADC countries. What really holds Botswana back is the very high cost of management, skilled personnel and professionals and the government needs to develop policies that will increase competition and lower costs of this labour in the country,” responds Prof. Grynberg.

Grynberg further pointed out that substantial investment in infrastructure was also essential adding that until Botswana has a railway to the coast, investment will be limited.
He also emphasised the disadvantages of being neighbours with an economic giant like South Africa, “South Africa generally has adequate utilities, infrastructure and logistics needed in Gauteng which fundamentally disadvantages us. On top of that they provide billions in subsidies which we do not do.”

Botswana Investment and Trade Centre (BITC) 2012 report so far indicate that the organisation attracted P698.97 million in FDI, exceeding its target of P600 million by 16.4 percent. However, domestic investment expansions at P362.5 million failed to reach the P500 million target. BITC also failed to create 2,276 jobs as forecasted achieving only 1,206 employment opportunities.