B-FAR Calls SEZA and BIH Back to the Drawing Board and MITI to Act
The Honourable Minister Dr Thapelo Matsheka made a startling revelation at the Budget Speech 2020. He informed the nation that P4.9 billion is wasted every year through inefficiencies at the State-Owned Enterprises (SOEs) or ‘parastatals’. Whilst this calls for immediate and concerted corrective action we should also proactively guard against making it worse. The Botswana Forum for Action and Reform (B-FAR) believes that the recently formed Special Economic Zones Authority (SEZA), whilst well intended, is on a sure footing to make the current alarming rate of wastage look like child’s play. We also perceive the continuation of institutional stumbling blocks to the nation’s desired transformation journey within the SOEs existing under the Ministry of Investment, Trade & Industry (MITI).
SEZA is an institution that should be like no other with regard to transformation, but appears to be started on horribly shaky grounds. It should serve as an instrument of transformation, as it should not only instigate, facilitate and drive large scale development, but should also inherently have the means to influence development policy, interrogate relevant legislature and advocate for structural change and thus fuel and propel transformation, but it seems to have gone astray from its birth and destined for a gloomy and wasteful existence.
Some years ago there was a man called Nico Cypionka engaged by the government on advisory capacity under the then Botswana Economic Advisory Council (BEAC). In 2003 Mr Cypionka came up with a list of eight (8) recommendations or interventions for stimulating economic growth. He recommended that they be considered for implementation at Pandamatenga, Tuli Block, Francistown, Selibi Pikwe, Palapye, Fairgrounds, SSKI Airport and Lobatse. This was in 2003, and the recommendations were meant for that time. We should also note that at that time the Local Enterprise Authority (LEA) and the Botswana Innovation Hub (BIH) did not exist and SPEDU was more of a policy administrative structure than the economic free zone it is today. The recommendations were made under this background.
Eight (8) years later, in 2011, someone copy-pasted Mr Cypionka’s recommendations into a Special Economic Zones (SEZ) Policy. Consequently, the SEZ Policy stipulated the number of SEZs (zones), where they should be, and the economic areas they should cover, just as they were stated by Mr Cypionka. A normal SEZ Policy should only lay down the criteria for selecting a SEZ and should never stipulate their number, their locations and their economic areas as these are dependent on changing technologies, market conditions and economic factors. What Mr Cypionka intended as recommendations for 2003 had ill-advisedly become the SEZ Policy for Botswana 8 years later in 2011. It is very surprising that this grave mistake escaped the sharp eyes, checks and balances of the Ministry leadership. It gets worse.
During the period from 2003 to 2011, LEA had come into existence and was mandated, among others, to ‘facilitate market access’ and had policy focus on a number of fields including agriculture. This LEA mandate of facilitating agriculture is exactly what Mr Cypionka had intended for Pandamatenga and Tuli Block. The SEZ Policy overlooked the fact that these two areas were therefore covered by LEA. There was absolutely no need to take Mr Cypionka’s recommendation regarding these two places and put them in the SEZ Policy in 2011. They were fulfilled by LEA. It gets worse. The Botswana Innovation Hub (BIH) had also come into existence and had covered SSKI Airport.
We hasten to observe that BIH is not at MITI but it does affect the work of MITI. In fact, as a useful aside in this analysis BIH should ideally not exist in the form of a parastatal directly under any Ministry. It is not a Science & Technology (S&T) Park as it likes to make us believe and even if it was, it should ideally be attached to a bigger institution like a University or a Research Organization or even a Municipality (City Council). Fortunately it was never intended to be an S&T Park. But it gets worse there too. BIH is not even what it was intended to be – it is not an Innovation Hub. If government has not heard this in as clear terms as we are using here, it has now and B-FAR is available to elucidate. Going back to MITI, it can be said to be fortunate that BIH functions and behaves like a Special Economic Zone, a SEZ, thus fulfilling Mr Cypionka’s recommendation for SSKI Airport area. This is to be expected because Mr Cypionka had a hand in the way BIH was conceptualized in 2006 – intentionally moving it away from a S&T Park model. Yet, once again, whoever copy-pasted these recommendations into a SEZ Policy failed to realize that SSKI Airport was already covered by BIH. The 2011 Policy recommends that a SEZ be created at SSKI Airport. A SEZ is recommended to be developed where a SEZ already exists. It gets worse.
During the period between 2003 and 2011, the SPEDU also became a Free Zone, a form of a Special Economic Zone, yet the policy includes Selibi Pikwe as an area earmarked for a SEZ. This means another SEZ on top of an existing SEZ. It gets worse and even more perplexing when we move on to Gaborone Fairgrounds. In 2003 when Mr Cypionka recommended Fairgrounds for financial services imtervention, the Fairgrounds area had the most number of companies in financial services and had empty space to accommodate an intervention. Today there is no such space and the target fintech companies exist elsewhere, such as at Finance Park and CBD. Even Mr Cypionka will himself take Fairgrounds out of the list if he was here today. In pursuit of a mirage, SEZA has drawn a map over existing companies and entities at Fairgrounds such as Botswana Accountancy College, BancABC, BDC, LEA, BIHL and several private companies that did not exist in 2003, all the way up to and including Riverwalk Mall. Poor souls, they just have to have a map of an intended SEZ even if it goes over existing private and public entities just because their policy says so. At B-FAR, we can not visualize a SEZ at Pandamatenga or Tuli Block by any stretch of imagination, but Fairgrounds is utterly and shockingly strange. Imprudence within SOEs can cause immense harm to an economy, and failure to step in by accounting Ministries is worrisome. SEZA is busy consulting neighbourhoods on futile Impact Studies related to Fairgrounds SEZ and MITI is aware of these wind-chasing activities but remains silent and unperturbed. It gets worse.
Things proceeded in this extremely imprudent manner from the 2011 SEZ Policy into the 2015 SEZ Act. The Policy became law, almost word for word. Four years after the Policy and twelve (12) years after Mr Cypionka’s recommendations, the mistakes were solidified into law. It gets worse. SEZA was established in 2017 and typically one would expect that the experts were hired and would pick the mistakes and start SEZA off by first correcting the foundational instruments – the Policy and the Act. This did not happen and as we speak today, in 2020, 17 years since the recommendations were made by Mr Cypionka for interventions to be carried out at that time in 2003, this is how this nation stands to lose:
• Two SEZ zones (Pandamatenga and Tuli Block) are planned in areas where it is inconceivable to have a SEZ, to address economic areas unusual for SEZs and problems already mandated to LEA;
• Two SEZ zones (Selibi Phikwe and SSKI Airport) are planned on top of existing SEZs, money is being spent trying to design and create what is already in existence;
• One SEZ zone (Fairgrounds) is planned on top of existing businesses and entities, money is being spent trying to realise an impossible and impractical dream;
• A big SEZA headquarters is planned at SSKI Airport, where already exists a big headquarters of another SEZ. The existing SEZ does not even know it is a SEZ and duplication is underway;
The above analysis tells us that out of the eight SEZs specified in the SEZ Policy, five of them are irrelevant and unworkable. This is because Mr Cypionka’s recommendations have been fulfilled or things have changed considerably since 2003. Pandamatenga, Tuli Block, Selibi Pikwe and Fairgrounds should not have been included in the SEZ Policy and Act and SSKI Airport SEZ should only exist as an expansion of the already existing SEZ that is wrongly labeled BIH. Only Palapye, Francistown and Lobatse can be justified under today’s circumstances. There is obvious duplication and irrelevance – the very same problems that Hon Dr Matsheka lamented on when he delivered the 2020 Budget Speech.
B-FAR alerts the nation to the realization that SEZA has the capability to more than double the loss stated by Dr Matsheka if it is not checked. We also recall that it took 10 years to develop BIH at well over P2billion spent (building and staff) and SEZA proposes an 8-fold undertaking compared to BIH. A country the size of Botswana should only grapple with 2 or 3 SEZs. Dr Matsheka assured us that it can not be ‘business as usual’ at government, and that was before the debilitating COVID-19 came upon us. Belt-tightening is critical now more than ever before. Government has the responsibility to pull SEZA back to the drawing board before it goes out of hand. We understand that MITI has employed a new SEZA CEO during the lockdown period. We understand that the new CEO was a key player in the formulation of the erroneous SEZ Policy and SEZ Act. It is a challenge for anyone to correct himself, moreso if his mistakes were perceived by MITI as strengths and not weaknesses, but we look up to MITI to come up with solutions, sooner rather than later and we recommend that the following be done:
a. The amendment of the SEZ Policy and Act. We have to step out of 2003 and have foundational instruments that allow for changing times, technologies, markets and national needs. We should unlock the SEZ potential from that distant past and bring it to the current. The amendment is necessary and urgent.
b. Proceeding with Lobatse, Palapye and Francistown in the interim;
c. Termination of all current plans for Fairgrounds zone; it does not make sense now and it will never make sense.
d. Termination of Selibi Pikwe zone and handover of plans to SPEDU;
e. Transfer of Pandamatenga and Tuli Block zones to LEA for market access facilitation;
f. Taking appropriate measures to incorporate BIH into SEZA or alternatively into BITRI or BIUST where it will then serve as a proper S&T Park.
g. Proceeding with SSKI Airport as expansions, but removing plans for new SEZA Headquarters at SSKI Airport to avoid obvious future duplication.
There are several things we should expect from SEZA once it has been retooled as above suggested. It should begin to lead interrogation of useful structural reforms in Botswana. To elucidate on this expectation we would like to pick a number of issues of great concern for the nation. These are:
a) Unemployment: We need to know exactly how SEZA is going to contribute to the creation of jobs, how many are possible, over how long and how exactly they will be created;
b) Citizen Empowerment: We need to know specific measures that SEZA policies will take to empower Batswana and promote local and domestic enterprise;
c) Comparative Advantage: Large multi-national companies (MNCs) in the tyre industry like Dunlop, Firestone, etc are attracted to Thailand because of its comparative advantage in rubber and not because of low taxes and rebates. Thailand grew rubber trees and thereby created comparative advantage. This is how nowadays true Foreign Direct Investment (FDI) is attracted to a country. We need to know what SEZA intends to do for Botswana in this regard;
d) Structural Change: B-FAR believes that had the SEZ Policy and Law not unwittingly been cast in stone as they were, SEZA would have had the flexibility to investigate high yield economic areas and follow them instead. We need to be told how this will be addressed going forward;
e) Medicinal and High Value Plants: B-FAR believes that with the flexibility mentioned above, SEZA might have picked the need to investigate the economic benefits of medicinal marijuana and industrial hemp well before they became political, and would have led our economy the right way, especially that SEZA inherently can influence policy and law. We do not expect a SEZ in horticulture but one in high value medicinal crops instead, and we have many such crops. We need to understand why such areas are ignored and what SEZA intends to do about this;
f) Global Value Chains (GVCs): Planning flexibility allowed for by policy and law will enable SEZA to effectively respond to new areas of high economic value including participation in GVCs as recommended by World Bank and IMF. We need to know how SEZA intends to lead the country in this regard, including as it relates to the automotive industry, a known source of GVC opportunities. We can not accept that the ‘electric car’ remains an impossible political gimmick; we demand that SEZA awakens to take it up and informs us how the transformation will unfold.
B-FAR does not derive joy from fault-finding but advises in good faith and calls for action on matters in desperate need for change. No-one is going to come from another side of the world to point out our mistakes as a country. It is Batswana who will do that and Government agencies should reflect on such advice and act for the good of our country. We trust that MITI will respond and act accordingly.
It can not be business as usual. Let this be a decade of change. Remove obstacles to transformation.
FATSHE LENO, LA RONA!