New German Act unsettles local exporters
Germany introduces new act that requires businesses to be mindful of Human Rights and Environmental issues
Germany adopted the Supply Chain Due Diligence Act on the 11th of June 2021. The law seeks to strengthen the protection of international human rights and the environment by setting binding standards for large companies and their value chains. Germany and Botswana delegates from different sectors held a webinar session which unpacked the new Germany act and how Botswana is preparing for the new changes so that companies that export products will not be negatively affected.
Giving the opening remarks, Ambassador of Botswana to the Federal Republic of Germany, Mmasekgoa Masire- Mwamba noted that Germany and Botswana share long historic ties that are rooted in good governance and mutual respect. Masire- Mwamba emphasised that issues of sustainability are not taken into account, and businesses will be stretched. She noted that it is important for government to produce a conducive environment for businesses to function in within the context of the law.
CEO of Botswana Export Manufacturing Association, Mantlha Sankoloba stated that the economic environment of Botswana encourages companies to grow; moreover, Botswana is the 3rd freest economy in Africa. Sankoloba explained that Botswana is preparing companies that are affected by this new act so that it does not negatively affect them when the act commences. The export development program which is an initiative by the BITC and the Trade for Southern Africa are some of the platforms through which they help companies in various ways including on issues of compliance with international standards.
Breaking down the new legal Act, Senior Business and Human Rights Consultant at Twentyfifthy in Berlin, Cora Fritz indicated that the law will be in effect from January 2023. The act will target companies that have over 3000 employees and in 2024, it will affect companies with over 1000 employees. The act will affect all companies which trade with German companies.
Fritz highlighted that all affected companies will be expected to exercise due regard for human rights and environmental obligations in their supply chains. Actions of a company will not be expected to lead to human rights violations. Fritz noted that the act will be monitored by the Federal Office for Economic Affairs and Export Control. Financial penalties and administrative fines of up to 8 million Euros or 2 percent of annual turnover or exclusion from being awarded public tenders for up to 3 years may be imposed on those who break this law.
Senior consultant at Twentyfifthy Zambia, Daisy Banda indicated that acceding to this requirement may be relevant in other markets as Switzerland, Holland and the EU have similar regulations in the pipeline. Banda noted that this law may repel some companies from doing business with Germany as they may be unable to show adequate risk management within their business parameters.
Banda advised companies to use this new law as a competitive advantage. Companies should be proactive in embedding due diligence in their plans so that they can secure business opportunities in Europe and the global market at large.
Masire- Mwamba closed the webinar by stressing the point that this will not be the last discussion that Germany and Botswana have on this issue. There will be further discussions between the two countries as local companies that export to Germany and the European market at large prepare themselves for the new changes.