What is the current investment appetite in the region? Do you see that changing in 2022?
With the lifting of COVID-19 related travel restrictions and the end of lockdowns in most jurisdictions, there seems to be a slow but growing appetite to invest in the Southern Africa region. The Minister of Finance and Economic Development recently announced that Botswana now expects economic growth of 9.7% of GDP for 2021, up from 8.8% forecast in February 2021, helped by an increase in diamond sales and a recent rebasing of the GDP accounts. Botswana‘s growth rate is expected to be the highest in Africa for 2021. S&P has revised the country’s economic outlook from negative to stable. This positive news bodes well for increased investment in 2022, especially in the diamond mining sector. However, while experts talk about the prospect of a possible fourth wave of COVID-19 before the end of the year, it remains to be seen whether or not a possible increase in infections will put a damper on the investment outlook. Current immunization rates in Botswana are very encouraging in terms of vaccine availability and uptake by the eligible population. This gives hope that a fourth wave will either be avoided or greatly mitigated and will not have a significant negative impact on economic activity and investments.
In which sectors do you foresee an increase in investment and/or financial movements over the next 18 months?
In Botswana, diamonds, which are the mainstay of the economy, have seen their international sales improve considerably. In 2020, Botswana’s largest diamond mining company, Debswana Diamond Company (a 50/50 joint venture between the government and De Beers), saw a 30% drop in diamond sales. Sales of rough diamonds rebounded 41% in the first half of 2021, driven by the reopening of key markets in the United States and China. The more favorable business climate has prompted renewed interest as diamond cutting and polishing companies want to establish manufacturing facilities in Botswana. These are undoubtedly welcome foreign direct investments that bode well for increased economic activity.
The tourism sector will greatly benefit from the easing of travel restrictions and some of the new measures such as the introduction of digital passports for the COVID-19 vaccine. After being banned from travel for nearly 18 months, European and American tourists seem to have a renewed appetite for travel. This has led to an increase in bookings in the hospitality industry.
Where do you see the main areas of growth or opportunity for companies operating in your country?
One of the areas with great potential for growth and opportunity in Botswana is the agribusiness sector. Botswana is heavily dependent on South Africa for food supplies. The initial closure of borders between the two countries at the start of the first lockdown in April 2020 highlighted the level of dependence on South Africa for most commodities, including food supplies. The government has made improving food security a national priority. This sparked a renewed interest in agriculture. We anticipate that the agricultural sector and its entire value chain will be a major sector of growth, providing more formal and informal employment opportunities and stimulating the growth of small, medium and micro-enterprises.
Which sectors have been most affected by COVID-19 and what have companies in these sectors done to cope with these changes or potentially benefit from new opportunities?
Tourism has been the sector most negatively affected by COVID-19. Needless to say, travel restrictions and concerns about infection rates in southern Africa have caused tourists to either grow weary or simply prevent business or leisure travel. The sector has been particularly hard hit, with revenues down by almost 95% according to tour operators. It devastated the industry. Many establishments had to close or put staff on unpaid leave and the facilities were placed under surveillance and maintenance. Some of the best-performing hotels and lodges that have been blessed with large cash reserves have continued to maintain staff salaries, while reducing operations.
One of the welcome results of the travel restrictions has been that the hospitality industry has been forced to give more priority to domestic tourism. Traditionally, establishments in major tourist areas, particularly the Okavango Delta, have focused on the more affluent consumers and set their prices accordingly. Lately, better rates and packages are being offered to residents to make vacationing in these areas more affordable.
What is the most relevant regional or pan-African economic trend you expect to see over the next 18 months?
Africans have realized the huge economic opportunities that intra-African trade can bring. The establishment of the African Continental Free Trade Area, effective January 1, 2021, is undoubtedly a major positive development towards achieving increased intra-African trade. We are planning other infrastructure projects that will enhance trade and economic development. An example is the recent completion of the Kazungula Bridge over the Zambezi River, linking Botswana and Zambia. The bridge is a major boost for trade links between the industrial and commercial hubs of South Africa and most of the countries in the Southern Africa region.
In terms of the legal services market, what growth do you see on the horizon over the next 18 months?
Over the past two years, Botswana has passed numerous pieces of legislation relating to the fight against money laundering and the financing of terrorism. In addition, on September 24, 2021, the Data Protection Act came into force. The result of these new laws is that compliance will become a major growth area in the provision of legal services. With the risks involved in not complying with the various new laws in this area, companies are seeking more legal assistance on how to implement and maintain compliant practices and processes.
Labor law must also be highlighted. The pandemic-related state of emergency declared by the President came into effect on April 2, 2021. The government takes a very dim view of any layoffs during the state of emergency. With the state of emergency expiring on September 30, 2021, we expect employers to seek legal advice on their obligations to workers, given the financial challenges businesses are facing due to weak exchanges resulting from the pandemic and the resulting financial challenges. . Staff reduction measures will no doubt be a consideration for some companies to stay afloat.