Business

FDI precariously dominated by mining

Kenneth Matambo.PIC: MORERI SEJAKGOMO
 
Kenneth Matambo.PIC: MORERI SEJAKGOMO

According to the Millennium Development Goals (MDG) 2015 Status Report launched in Gaborone yesterday, FDI is dominated by mining at almost 75 percent share with the finance sector coming a distant second at 17.5 percent.

The retail sector comes in at third with a 2.26 percent share and manufacturing, transport and communication, construction and hospitality contribute less than one percent.

“What is significant is that these sectors with insignificant shares are, in some quarters believed to be Botswana’s potential future growth poles,” read the report.

While mining has proved to be a major revenue contributor to the fiscus at about 75 percent of foreign exchange income and 50 percent of total revenues, it only employed 3.3 percent of the formal paid workers as at September 2015.

Another welfare implication highlighted by the report is the domination of the capital-intensive diamond sector in the country’s exports. “That the exports are dominated by the capital intensive diamond sector makes the situation even more challenging as the sector has low employment generation capacity.  Welfare implications of this situation are that fuel and food are Botswana’s second and third largest major imports. Botswana has very little control over global fuel and food prices. This has adversely affected the welfare of Botswana consumers particularly the poor and unemployed,” read the report.

According to the report, another risk that Botswana faces is that the bulk of its FDI mainly comes from one source with Europe standing at 74 percent while only 15 percent comes from Africa and only 1.1 percent from the Americas. Reversing the concentration of FDI in one sector as well as the narrowness of its sources was part of one of Botswana eight goals under the MDGs.

Under the development of a global partnership for the development goal, Botswana targeted to develop an environment conducive for beneficial trade and FDI as well as enhance the use of ICT. Delivering the keynote address at the launch of the report, Finance Minister, Kenneth Matambo said Botswana has managed to achieve its target of making available the benefits of new technologies, but progress towards enhancing beneficial trade and FDI diversification has been slow.

Matambo said Botswana managed to achieve nine of the 12 targets it set for itself under the MDGs. “Lessons learnt from the MDGs provide an opportunity for government to increase investments in the provision of high quality education and health services as well as water and energy sectors,” Matambo said.

Cape Verde is the only sub-Saharan African country to have successfully achieved all of its targeted MDGs.

Post the MDGs Botswana has also committed to the adoption of the new Sustainable Development Goals (SDG).

Set to be achieved by 2030, SDGs kicked this year off to replace the MDGs, which were viewed by many as only targeting developing countries due to their poverty reduction-centred theme.

While the MDGs, in theory, applied to all countries, in reality, they were considered targets for poor countries to achieve, with finance from wealthy states.

Under the SDGs, which were adopted September last year at a UN conference, the goals have been increased from eight to 17 to include issues around economic development and human rights. The new agenda also goes far beyond the MDGs by incorporating goals for inclusive and sustainable growth, energy, and infrastructure.