Botswana exports to China decrease while imports increase
Huge untapped export potential exists
Botswana recorded an increasing trade deficit with China over the last five years, with a deficit of over US$ 149 million in 2020, despite longstanding bilateral relations between the two countries.
Executive Director of Business Intelligence at Botswana Investment and Trade Centre ( BITC) Botho Bayendi says imports have been increasing, while Botswana exports to China have been decreasing.
“Botswana has been on the receiving end and exporting very little to China,” Bayendi said in a Botswana- China Investment Promotion webinar that targeted Chinese investors in sectors including technological innovation, mining and minerals beneficiation. Exports to China have been decreasing over the last five years. In 2016, exports to China were recorded at about US$ 44 million while in 2020 exports were about US$ 2 million. Bayendi said while 2020 was characterised by disruptions due to the Covid- 19 pandemic, generally exports to China were still on a decline. Major exports to China include vegetable saps and extracts, articles of apparels and clothing and industrial goods. “Export orientated investors should come and set up in Botswana and participate in the export market,” Bayendi said. Imports from China on the other hand have been increasing for the past five years. In 2020, imports stood at over US$ 151 million being an increase from about US$ 121 recorded in 2019.
Major imports are industrial goods including machinery, medical instruments and apparatus, furniture and clothing and apparels. While the trade scale between the two countries has tilted in favour of China, Bayendi sees a huge untapped export potential to China. According to Trade Decision Support Model, Botswana has about P13.7 billion of untapped export potential to China, with most opportunities in meat and meat products, which are large and growing. There is also an opportunity in export of live cattle, which Bayendi believes is currently lucrative.
“The two opportunities are consistent with Botswana’s comparative advantage in cattle production and export,” she says. Other opportunities exist in the entire cattle production value chain including vaccines and in hides and skins. Other notable export potential exists in foodstuffs, plastic pipes and tubes, fabrics, iron and steel products. Guandong Provincial Government Direct African Affairs Division, Jiang Zhenquin said Botswana and China have over the last 46 years enjoyed mutual friendship that needs to be harnessed further for increased trade. Zhenguin said entrepreneurs from both countries need to fully utilise the relatively new African Continental Free Trade Area ( AfCFTA) to boost national trade and inter- country trade. According to Zhenguin, Botswana- China bilateral trade reached US$ 323million in 2020, a year on year increase of 1.4 percent. China’s imports from Botswana reached US$ 87 million.
Zhenguin explained that as at end of 2019, China’s direct investment in Botswana was around US$ 186 million. From January 2020 to October 2020, China direct investment in Botswana amounted to US$ 2.37 million.
“Influenced by the Covid pandemic, Guandong and Botswana saw limited economic and trade relations,” Zhenguin added. He said in the context of China- Africa Covid- 19 pandemic response, Guandong is willing to work with Botswana to strengthen the substantial cooperation and make use of online events and other corporative ways to introduce Guandong enterprises to Botswana. In addition, he believes that online investment promotions will encourage capable companies to embark on trade and business with Botswana and eventually invest in the country. Trade experts
opine that it is likely that the scale would tilt towards China because the two countries have fundamental differences.
For one, Botswana does not have many export products and the export market is largely made of diamonds, while China on the other hand is far advanced in industrialisation, manufacturing and produces ample products some of which Botswana consumes. The two countries also have very different economic structures and are at different levels of development.
The webinar, a collaboration of BITC, Guandong Provincial Government and Okavango Diamond Company is one of the initiatives to promote Botswana as an ideal investment destination for Chinese enterprises. Business Intelligence Executive Director, Bayendi allays fears of Chinese investors explaining that while Botswana’s population is small, there are market access instruments that they can take advantage of. Among them is the Southern African Development Community ( SADC), which provides preferential market access of more than 293 million consumers. The Southern African Customs Union ( SACU) on the other hand provides Duty Free and Quota Free market access to 61 million consumers. In addition, there is SACU- EFTA, the Free Trade Agreement between member states of the European Free Trade Association including Iceland, Norway and Switzerland. Further SACU has signed a Preferential Trade Agreement with South American Customs Union known as Mercosur, to form the SACU- MERCOSUR. Mercosur comprises of Argentina, Brazil, Paraguay and Uruguay. AGOA on the other hand is a Duty Free and Quota Free market access to the USA. The Botswana- Zimbabwe market access allows for goods originating from either of the
trading partners to be exempted from payment of customs duties on condition that the goods meet a minimum 25 percent local content. EAC- SADCCOMESA creates a single market comprising of Eastern and Southern African countries with the ultimate aim of moving towards a Continental African free trade Area.
The newest market access instrument on the other hand is the AfCFTA through which the region plans to expand intra- African trade through better harmonisation and coordination of trade liberalisation and facilitation regimes and instruments across Africa.
The EU- SADC EPA is a Duty Free Quota Free market access to the European Union. Among other benefits of investing in Botswana, Chinese companies were told to take advantage of the stable labour relations, the trainable workforce and a competitive tax framework. Botswana offers investors a competitive tax framework of 15 percent for manufacturing companies and those operating within the Innovation Hub, while 22 percent corporate tax is imposed for all other companies. In addition, companies under the International Financial Services Centre ( IFSC) benefit from a competitive corporate tax of 15 percent. They do not pay any withholding tax on royalties, dividends and management fees. Companies will also be exempted from VAT and will not suffer any capital gains tax when disposing off assets where shareholding of the IFSC Company exceeds 25 percent. Botswana offers even more incentives for the SPEDU region at five percent for the first five years and 10 percent thereafter. In addition, there are also seven Special Economic Zones that have been prioritised. Botswana has no exchange controls and therefore makes it easy for companies to repatriate their profits.