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PRESENTATION
Mr Phil Louw of Afrox - Africa Experience
Botswana is a country rich in diamonds. This government realized at
an early stage that this was not an infinite resource and they needed to develop
other industries for a sustainable future. Beef exports, the second biggest forex
earner, were not enough to guarantee a bright future either, and their vision
was to become the little Switzerland of Africa.
Government invited business to become equal partners in realizing this
dream. Together they developed a strategy that would become known as the National
Development Plan, and in 1996 they were concluding NDP 9 and had NDP 10 and 11
planned. The Botswana government's active pursuit of these plans gave them credibility.
Apart from maintaining their beef export markets in the EU, they targeted the
'A' and 'A-plus' tourists. They also recognized the need to embark on value adding
projects. Instead of exporting unfinished goods, they actively sought to entice
manufacturers and processors to establish themselves in Botswana albeit that they
might need to import their raw materials.
Liberal foreign exchange laws were introduced and steadily improved until all
controls were removed.
It seems therefore that Botswana's success can be ascribed to the 'Partnership
Approach' between Business and Government, Local Government and Entrepreneurs.
Development has thus been both qualitative and quantitative as is evident in the
infrastructure development over the past 10 years.
Malawi in contrast to Botswana is extremely poor, also landlocked and
over populated. There are approximately 11 million people in Malawi and 1,5 million
people in Botswana.
Malawi is essentially an agriculture-based economy, with tobacco, tea and
coffee being the main forex earners. Exports also include textiles in the form
of finished products. Worth noting is that southern Africa consumes approximately
650 000 tons of rice and that Malawi could meet this demand if they established
appropriate irrigation schemes.
Malawi tried to emulate Botswana in their approach but have yet to succeed
in attracting and retaining manufacturers. Production costs are exorbitant because
of very high input costs, i.e. electricity, transport, etc. This coupled with
low productivity levels make any prospects less than attractive.
Prior to the change of government and the establishment of the new democracy,
the entire economy was essentially state run. For example a single company represented
30% of the economy. (Admarc) Contract labour to SA mines, used to be a good source
of income, but as the neighbouring economies opened up and forex became available,
although in a controlled way, the advantages of certain alliances of the past
dissipated.
Like other SADC members, the Malawi government also invited business to form
a partnership and to participate in the growth agenda/programme. Hence the establishment
of the 'Vision 2020', which was aimed essentially at lifting the per capita income
from $180 to $1200 per annum. Unfortunately very little of the grand plan could
be realized within the time frame adopted. Regrettably the large-scale political
interference and corruption constantly threatens to derail initiatives.
Seen in context, one must acknowledge that Malawi has no raw materials or mineral
wealth of its own. The tourist trade collapsed along with its infrastructure and
the emergence of the global village concept and competitiveness has seriously
marginalized this economy. A high inflation rate and a volatile exchange rate
also does not inspire investor confidence.
Other contributing factors are the long routes to their markets that are essentially
through Zimbabwe and South Africa. Until the railway system is resurrected and
restored within Malawi and Mozambique, supply chain management and its associated
costs will always inhibit rapid expansion programmes.
Zimbabwe's influence on this economy and any other neighbouring country should
not be underestimated. The unilateral enforcement of border fees, toll fees, environmental
taxes and the procrastination of officials at the borders, stifles opportunities
and only add costs. (It is not uncommon to find that distribution costs far exceed
product costs on these routes).
Until Malawi becomes less dependent on donor funding which is approximately
60% of its re-occurring budget, improves its infrastructure - roads, telecommunications,
services - and is able to liberalize it foreign exchange sufficiently to attract
investment, the privatization of state owned businesses and ailing agriculture,
will not provide the economic growth required to improve its revenue base.
Zambia on the other hand largely removed exchange controls, embarked
on a planned privatization programme and actively propositioned multinationals
to return to their formerly nationalized businesses. Years of degradation resulting
from institutionalized management and political interference saw some of the most
effective businesses and mines reduced to inefficient and loss making operations.
Profits were redirected and very little, if any, re-capitalization took place.
Tax holidays and a variety of rather lucrative incentive schemes serve as the
carrot to attract would-be investors. But the Achilles heal is the peoples costs.
The existing structure is very socialistic in design and, apart from all the statutory
requirements, severance pay is 25% of basic salary for each year's service.
South Africa should avoid the pitfalls of business prospects in Central Africa
if we look at the entrants and withdrawals from the copper mines.
Zimbabwe is a disaster! According to the latest reports large-scale
bankruptcies are now unavoidable and the collapse of what was once the second
biggest economy in southern Africa, is imminent. Half the national herd has already
been slaughtered. Industries that rely on imports for the processing of their
products are forced to buy forex on the parallel market at Z$1,800 to the US$1.00
whilst the official rate given from the financial institutions for forex earned
is Z$55.00 to US$1.00.
There are no food reserves left and whatever is available is politically manipulated.
Bartering has become a way of life. This in itself stifles the economy.
The once thriving tourist industry has shrunk by 65%. In desperation for forex,
various taxes already referred to were imposed. Others include carbon tax, fly-over
taxes and departure taxes.
Zimbabwe is the gateway to a number of SADC countries, hence the strong influence
on those economies. But, because of the untenable situation, the affected countries
either have or are actively pursuing other options and routes. Ultimately this
is neither good for Zimbabwe or the affected countries.
Phil concluded that his intention was in no way to leave us with a negative
impression. The 13 years that he worked and lived in Botswana, Malawi and Zambia
were some of his most rewarding years. His involvement with the respective Chambers
of Commerce, although varied, offered him the opportunity to make a difference.
Although some people may think that the ruling majority rendered ex-patriots or
minority groups ineffective, he said his experience was different. Being present
offered him the opportunity of influencing decisions.
Emél thanked Phil for the very interesting presentation, and mentioned that
we should learn from the experiences of these countries. We should remain positive
and keep in mind that local, Provincial and National government is prepared to
assist emerging and existing business, as long as the required paperwork is in
place.
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