The southern African country of Botswana is providing automotive component and aftermarket manufacturers with an attractive base from which to serve US and European markets, as well as neighboring South Africa, which is home to sub-Saharan Africa’s biggest new vehicle manufacturing sector for both local consumption and exports.
For South Africa Botswana has a delivery time advantage over companies in Asia, Europe and North America. Component exports to the South African OEM and aftermarkets have grown tenfold over the past 20 years, thanks in part to duty-free entry into the market. In addition, exports from Botswana enjoy duty-free access into most of the major global automotive manufacturing regions. They include Europe through the European Union – Southern African Development Community protocol; China and India through a SACU agreement; South American companies which are part of Mercosur; and the United States through the African Growth and Opportunity Act. Gaborone, which is the capital and center of automotive component manufacturing, is nearly equidistant from South Africa’s motor manufacturing hubs of Gauteng, Durban and Port Elizabeth. Manufacturers also have easy access to three major ports for the importation of inputs and export of finished goods – Walvis Bay on the Atlantic Ocean, Durban on the Indian Ocean and Cape Town, which is a strategically positioned hub on the southern tip of Africa. As one of the most successful economies in Southern Africa, Botswana is home to a growing automotive market. It has a vehicle ownership rate of 206 vehicles per 1,000 people which is far above the African average of 43 vehicles per 1,000.
Automotive Industries (AI) asked Keletsositse Olebile, Chief Executive, Botswana Investment & Trade Center (BITC), which are the primary markets served by Tier suppliers based in Botswana. Olebile: Botswana has positioned itself as a supplier of vehicle parts and components to the region and especially to South Africa’s automotive industry. The automotive sector in South Africa is the mainstay of the national industrial base and accounts for 6.9% of GDP (4.4% manufacturing and 2.5% retail). The main products exported from Botswana at present include ignition wiring sets and chloride batteries. In 2008, South Africa’s ignition wiring set imports were dominated by Thailand, the US, Romania, the Philippines and Germany. In 2009 Botswana started to supply the South African market with ignition wiring sets and now controls half of South Africa’s ignition wiring set import market.
AI: What services do you offer the automotive sector as BITC? Olebile: BITC assists investors through the Botswana One Stop Service Centre (BOSSC), to acquire government authorizations within the shortest possible time. Facilitation services through BOSSC are available to both new and existing investors, both local and foreign investors and they include: • Company and Business Registration • Trade and Business License Applications • Entry visas, work and residence permits • Work Permit Exemptions • Connection of utilities e.g. power, telecommunications and water • Income Tax and VAT registration • Access to industrial and commercial land • Allocation of BITC factory space (subject to availability) • Environmental Impact Assessment (EIA) Compliance • Provision of information on the Botswana business climate, regulatory regime and investment opportunities • Opening a Bank Account • Provide specialist business advisory services.
AI: What incentives do you offer? Olebile: Botswana offers many incentives for investors, including: • No foreign exchange controls; remittance and full repatriation of profits and dividends • No restrictions on business ownership • Duty-free import of machinery and equipment for manufacturing purposes • Customs duty exemption on raw materials for goods going outside of Southern African Customs Union (SACU) • Liberal tax regime: 22% corporate and 25% personal tax, with 15% corporate tax for manufacturing and IFSC-registered companies (lowest taxes in the SADC region) • Negotiable tax holiday up to 10 years maximum • Deductible training rebate of 200%. Selebi Phikwe Economic Diversification Unit (SPEDU) Region Incentives The SPEDU Region has the following incentives: • 5% Corporate tax for the first 5 years, 10 % thereafter • Provision of land: minimum 50 years land leases • Zero customs duty on imported raw materials • Added tax rebates for exports outside Common Customs Area (CCA); and • Government offtake: Direct Government off-take on procurement of at least 30% (First preference in Government procurement provided the quantity, quality and price requirements are met), in line with Economic Diversification Drive (EDD). Special Economic Zones Botswana enacted the Special Economic Zones Policy in 2011. A number of sites have been identified across the country; Gaborone hosts two sites – the Sir Seretse Khama International Airport has a land area covering around 540 ha and is expected to be used as a multi sector SEZ which will accommodate auto components and parts manufacturers and logistics support companies, amongst others. The second SEZ site is for Financial and Business services located at Commerce park to make Botswana a regional hub for the finance sector.
AI: How do you support exports? Olebile: We have a two-tier approach: Export Promotion: offering market intelligence on market entry strategies and targeted market research to support all potential exporters with credible market information on existing opportunities and market entry strategies. Export promotion services also cover identifying sector specific trade fairs and mobilising Botswana companies to participate and meet potential buyers of their products in the market. Export Development: BITC runs an Export Development programme that focuses on enhancing export readiness through development of customized interventions to address manufacturers gaps in fulfilling the export market. BITC carries out diagnostic assessment and brings in technical expert to assist the companies in addressing the issues of concern.
AI: Is there a market beyond neighboring South Africa? Olebile: The Southern African Development Community (SADC) market is growing in importance for aftersales. The SADC trade protocol, coupled with road and rail infrastructure network, and continued investments in new infrastructure such as the Kazungula Bridge linking Botswana with Zambia, places Botswana producers at a competitive advantage to service this growing market. Second, an analysis from the Decision Support Model shows that the USA market has a lot of potential to import, duty free, quota free, manufactured goods from Botswana through the African Growth and Opportunity Act. Companies affected by tariffs in their home country could utilize Botswana as a base to supply the USA market under this provision.
AI: Does Botswana have the necessary skills for modern manufacturing? Olebile: Botswana’s literacy rate stands at 83% and the country continues to invest heavily in its human resources. Companies that invest within the automotive sector can draw labour from several institutions locally and from abroad, including:
AI: Botswana International University of Science and Technology (BIUST) Olebile: The University was established to serve as one of the key platforms for transforming Botswana’s economy from being resource-based to knowledge-based through skills capacity building in engineering, science and technology. BIUST works with the private sector to meet emerging skills needs of the industry, as well as identifies challenges that can be solved through applied research.
Madirelo Trade Testing Centre (MTTC)
This centre was established to introduce apprenticeship testing system for the automotive, building and construction, electrical, metal and heavy plant industries. Theoretical training is provided at Vocational Training Centres around the country, as well as at the Auto Trade School, and then testing is carried out at the testing centre, applying the National Trade Test Standards. The centre designs, conducts and evaluates trade tests in the various designated and apprenticeship trades.