This is because Botswana has preferential access to several important markets for garments and textile products, including the European Union (EU) through the EU/African Caribbean and Pacific (ACP) agreement and the Southern African Customs Union (SACU), BIDPA said in its second quarter briefing this week.
BIDPA is an autonomous non - governmental research institute dealing with development policy analysis.
According to the BIDPA analysis, Africa Growth and Opportunity Act (AGOA) played an even more important role in Botswana’s fortunes.
Under a special trade preference, the United States is the sole importer of AGOA products, which helped the 2004 US-Botswana trade to exceed that of South Africa.
BIDPA said that Botswana’s textile industry is “generally competitive”; as such the devaluation is expected to improve the country’s competitiveness in all major markets.
“The devaluation of the Pula is therefore expected to help the textile sector to take advantage of these agreements and increase its imports to these markets. Even before the devaluation, the textile exports were increasing,” according to BIDPA.
While Tally Tshekiso, Managing Director of the garment manufacturing company Caratex, agrees with part of BIDPA’s analysis, he laments that his industry does not benefit much due to the devaluation as they use US dollars to import intermediate raw materials from overseas.
“BIDPA has a point, but remember that we do not have a raw material endowment. All inputs are exotic. The devaluation has eroded the Pula buying power,” said Tshekiso, adding that the benefits of devaluation are insignificant.
He believes that the BIDPA analysis romanticises the situation in the textile industry ignoring the realities on the ground.
“We pay rent and electricity,” he said.
Caratex is a leading garment manufacturing company in Botswana that enjoys preferential access to the US markets under the AGOA ticket.
With its five subsidiaries, the company has been expanding production to take advantage of the elimination of import duties under AGOA.
Caratex earned over P36 million in 2002 in total apparel export. The export revenues increased in 2003 to P169 million and further to P283 million in 2004.
BIDPA says that tourism can reduce Botswana’s dependence on mining.
“The devaluation of the Pula is likely to boost demand for Botswana tourism products by hard currency holders from the US and the United Kingdom,” BIDPA says.
Further, a tourism expenditure analysis reveals that hard currency holding tourists spend more per day in Botswana than other tourists.
Agreeing with BIDPA, an official at the department of tourism said tourists pay less for the same services they used to get before devaluation.
“When the Pula was stronger, tourists used to prefer cheaper destination where they spent less. Now the situation has changed in our favour,” said a marketing officer at the department of tourism.
In his view, government looks at the broader picture, not small hotel and lodge owners. As such, hotels have not benefited from the devaluation, he reveals. According to BIDPA, both the textile and tourism sectors should take advantage of the devaluation.
“The benefits of devaluation will be realised only if the increase in the imported input prices is outweighed by the devaluation export price advantage,” the institute argues.
BIDPA’s report concludes by stating that due to devaluation, consumers have been the major losers as inflation rose sharply to double digits.
November inflation stands at 11.3 percent. In an effort to arrest the soaring inflation brought about by the devaluation of the Pula, the Bank of Botswana increased the bank rate by 25 points from 14.00 to 14.25 and 14.50.
Commercial banks followed by increasing their lending rate by the same margin, pushing the costs to consumers who have to bare the brunt.
The Pula was devalued by 12 percent early this year partly to improve the competitiveness of Botswana’s goods on the international market.
