How Botswana can improve its agri trade balance with SA

In this article, Thomas Harvey, Absa’s head of AgriBusiness in Botswana, provides an overview of the agriculture sector in that country and explores the linkages between the agriculture sectors of Botswana and South Africa.

South Africa and Botswana are dependent on each other to a greater or lesser extent in the supply and demand chains of their agriculture sectors. Botswana is a landlocked, semi-desert country that is not self-sufficient in food, and depends on imports, mainly from South Africa, to ensure its food security. South Africa, on the other hand, needs the Botswana market to ensure offtake for some of its exports.

Botswana’s commercial agriculture sector is still young and in a fast-developing phase, which means the country still has to develop its primary and secondary agriculture sectors. The Botswana government has identified agriculture as an area of strategic importance and as the sector with the best prospects for future development. The government is therefore seeking to attract private investment to grow the commercial farming sector and create employment opportunities for rural people.

To this end, it has established a number of special economic zones, including the 50 000ha Pandamatenga dryland crop production area; beef and dairy in the Lobatse area, with the Botswana Meat Commission (BMC) export abattoir based there; the Selebi Phikwe irrigation scheme, fed by the Letsibogo and Shashe dams and focusing on citrus and vegetable production; and the Zambezi Integrated Agro-Commercial Development Project in northern Botswana, which will be a huge, commercial-scale irrigation project on 20 000ha.

However, according to a report published by the US Department of Agriculture, the development of a modern cattle farming and slaughter industry in Botswana is limited by the government’s monopoly on meat processing plants, exports and livestock prices, as well as the occurrence of foot-and-mouth disease in the north-eastern part of the country.

BOTSWANA’S FARMING CHALLENGES

Agriculture contributes only 2% to Botswana’s GDP, but it is vital to the livelihood of many citizens who rely on subsistence farming. Botswana’s traditional agriculture is practised on communal land with livestock production, mainly beef. According to the annual agricultural survey report of 2019, the number of cattle enterprises has declined, with the traditional herd shrinking from 1,1 million head in 2018 to 935 000 in 2019. Small-stock production, on the other hand, has shown a marked improvement, which can be attributed to government programmes.

Arable production in the traditional sector has also shown a downward trend in all major crops. The challenges faced by these farmers include a lack of finance, poor crop production methods, a lack of technology mainly because of the cost involved, overgrazing, a low calving rate (about 56,5%), drought, and animal health and marketing problems.

VALUE OF TRADE

BOTSWANA MUST INVEST IN INFRASTRUCTURE AND DIVERSIFY COMMODITY PRODUCTION TO ALTER THE TRADE IMBALANCE

The value of all exports from Botswana to South Africa in 2020 totalled US$569 million (about R8,1 billion). At about 7% of all exports, live cattle comprised the third-largest export category, and frozen beef, at 1,22%, was in

10th place. The value of live cattle exports to South Africa during 2020 was US$39 million (R558 million). Between 1 October 2020 and 22 January 2021, a total of 47 135 live cattle were exported from Botswana, of which 99,2% went to South Africa and the rest to Namibia.

The export of meat and edible meat offal to South Africa declined 68%, which can be attributed to the challenges experienced by the BMC. This prompted farmers to export live animals to South Africa instead. In contrast, the total value of exports from South Africa to Botswana in 2020 amounted to US$6,5 billion (R93 billion), and

these included a number of agricultural products. Maize and wheat were amongst Botswana’s top 10 import commodities from South Africa. Fertiliser to the value of US$24,9 million (R356 million) was imported, up 30% from 2019, a steep increase that could be an indicator of the fast growth in commercial horticulture and crop production. The value of tractors imported was US$17,1 million (R245 million), a decrease of 11,8% from 2019. (This was probably due to closed borders between the countries during the COVID-19 lockdown.)

Dairy and dairy products, pork, fish and mutton were also imported, mostly from South Africa.

The balance of trade between these two countries underlines the dependence of Botswana on South Africa for food, energy, agricultural inputs, fuel and other commodities, while it emphasises the importance of Botswana to South Africa as a market. The export of value-added products and processed agricultural commodities from South Africa to other African states reflects the lack of processing facilities in these countries. Botswana, for its part, will have to invest in infrastructure, create a trade-enabling environment, and diversify commodity production to alter the trade imbalance now in favour of South Africa.

Rectifying the imbalance

The potential for regional integration to propel Africa and thus Botswana’s growth and enhance its ability to participate effectively in global trade should be recognised. Enhanced intra-Africa trade holds the potential to reduce reliance on developed economies as engines of growth and afford farmers in countries such as Botswana the opportunity to develop the required products, capacities, competitive competencies and economies of scale for effective integration and participation in African and global trade. This trade will earn valuable foreign exchange for the country. The Comprehensive African Agricultural Development Programme recognises trade as one of the primary pillars upon which agricultural development needs to be based.

Important contributors to limited intercountry trade between Botswana and

South Africa are supply-side constraints related to production capacity and product diversification. In the absence of Botswana’s capacity for local production, the increased demand for imports of high value and processed agricultural products will serve to perpetuate the current trade imbalance.

Several South African commercial farmers have made use of the partnerships supported by the Botswana government to diversify their farming operations into Botswana. However, commercial farmers in Botswana still face many challenges, such as the high cost of imported inputs, on which they rely, as well as the transport and storage of these inputs. The storage of agricultural commodities out of season is also a challenge, as are the great distances between production areas and Gaborone, where the main offtake is based. Many areas do not have excess to electricity, and solar energy has to be installed.

The agriculture sector in Botswana is also not represented by a central farmers’ organisation that can negotiate as a collective with government.