Botswana has commissioned a market study on seven of South Africa’s nine provinces in an effort to explore non-traditional markets for its products and services into the South African provinces.
The study, undertaken by Africa House for the Botswana Investment and Trade Centre (BITC), was also aimed at enhancing existing market access for Botswana’s exports into South African provinces through understanding the market size, consumer tastes and preferences, prices, barriers to entry as well as competition matters.
BITC is an organisation established by an act of Parliament, to become an integrated Investment and Trade Promotion Authority (ITPA) with an encompassing mandate of investment promotion and attraction, export promotion, and development, including management of the national brand. The study also aimed to develop recommendations to address the market access constraints in the South African provincial markets.
The specific sectors of focus for this study, were among others, automotive, textile and clothing. The study found that “there is a strong push to see Botswana become a supplier of choice to Original Equipment Manufacturer (OEMs) in South Africa. On leather goods, the study found that the development of a leather products park in Lobatse is a key programme for BITC.
In 2016, South Africa’s exports amounted to US$ 74.1 billion and imports amounted to US$74.7 billion, leaving South Africa with a trade deficit of US$ 0.6 billion. Issues relating to logistics were identified as a barrier to trade by exporters in Botswana, according to the study.
“The reality, according to industry sources, is that Botswana currently exports 10 percent of the volume that the country imports via South Africa. This translates to one return load on every 10 loads into Botswana,” the study says.
The backhaul is, therefore, an issue and South African hauliers struggle to get full loads out of Botswana on a sustainable basis.
“However, given this pressure, the cost of transport from Gaborone to Johannesburg is often a lot cheaper than the cost from Johannesburg to Gaborone as hauliers are happy to simply cover direct costs,” the study says.
It says given the relative size of the Botswana economy vis-à-vis South Africa, it will be difficult to realistically address the imbalance unless Botswana can attract cargoes from Namibia or southern Angola. The market survey has highlighted a few suggestions on how logistics issues could be addressed, including the investigation of specific backhaul opportunities at a provincial level. This also means creating a warehousing and distribution hub for Botswana in Durban to take advantage of the KwaZulu Natal market. This would also ease the issue of empty containers having to be returned to Durban from Botswana. The study says South Africa comprises of nine provinces and each is distinctly different in terms of size, population, buying power and market characteristics. Gauteng is South Africa’s most populous province and the economic heart of the country compared to the sparsely populated Northern Cape to the mid-tier market of Limpopo.
The study says from the perspective of an exporter in Botswana, the provincial nuances and opportunities should be carefully considered as some of the smaller provincial markets are similar in size and attributes to the market in Botswana. Based on that, the study states it would be easier to serve those markets better than an extremely large and competitive market such as Gauteng. In Gauteng Province, the report states that for Botswana, a manufacturer based in the country would assist with localisation targets. Industry insiders suggest that Botswana has an excellent opportunity to attract Tier 2 suppliers to invest in the country for supply into Tier 1 supplier.
In the Western Cape, the report notes the province is experiencing a chronic shortage of plastic water storage tanks, which are difficult to transport over large distances.
“Botswana manufacturers should investigate the opportunity of setting up a manufacturing plant in the Western Cape. The large South African corporate, Steinbuild, has offered to work with Botswana tank manufacturers to consider setting up a manufacturing plant in the Western Cape,” the report says.
In Kwazulu Natal Province, the report highlights that there are several large clothing companies based in Durban that would look at outsourcing to factories in Botswana if they were competitive. There is also the opportunity to supply safety clothing to the agricultural sector (timber and sugar). For the Free State province, the report maintains Botswana could use centrally located, relatively low-cost warehouses as a central distribution centre for goods to be distributed throughout South Africa.
For the Northern Cape Province, the study states that the Provincial Government is a key source of demand in the province, especially across the departments of education and health, as well as the large National Defence Force base at Lohatlha.
“Suppliers of cleaning materials, uniforms, soaps, food for school feeding schemes and clinics have an opportunity to supply into these channels provided they are registered with a local supplier to benefit from local procurement regulations,” the study says.
Regarding the North West Province, the study suggests that proximity should be used as the key advantage for Botswana as Mahikeng and surrounds are closer to Botswana than Gauteng.
“Cheap bulk products are in demand from most of the larger independent wholesalers and distributors, as they service the lower end of the distribution chain. This is across the boarder for Fast-Moving Consumer Goods (FMCG) products, with brands ranging from well-known South African products to some that have little to no branding at all,” the study says.
The study found that Makoro Bricks, a Botswana company, already supplies the Limpopo Province and there is an opportunity for other hardware and building materials suppliers including suppliers of Copper goods, PVC piping, irrigation and piping.
Opportunities also exist for bedding, furniture, low-cost cleaning materials, bulk foods, soaps and similar, as well as uniforms, clothing and other FMCG products provided that prices are competitive.