2006 Speeches

Banking Speech

BOTSWANA AT 40 –- Taking Stock, Taking Charge, Taking Off

Remarks Presented by
Ambassador Katherine H. Canavan
Embassy of the United States of America
to the Botswana Institute of Bankers
September 1, 2006

Good evening ladies and gentlemen. It is my genuine pleasure to be here with you tonight, and I greatly appreciate that you have accorded me this distinct honor and opportunity to address such a distinguished group of professionals from Botswana’s private and public sectors. My sincere thanks go out to the Botswana Institute of Bankers.

Today we enter together the month of September, which I expect will be a festive and celebratory time throughout this extraordinary country, as Botswana approaches the landmark anniversary of 40 years of independence amidst a deeply-rooted democratic tradition and a firm respect for good governance. Indeed, these are noble ideals for other nations to emulate, both throughout Africa and far beyond. Independent Botswana has been, without a doubt, a remarkable success story, for which many of you movers and shakers assembled here tonight can be justifiably proud. You have made positive things happen, and I wish you every continued success.

This is also a memorable moment for me, as I am coming upon my own 1-year anniversary of service as the American Ambassador to Botswana, a mission I have enjoyed immensely. Yes, September 2006 will be a special time for all of us, and as a friend of Botswana please allow me to offer a few appropriate remarks entitled, “Botswana at 40 -- Taking Stock, Taking Charge, Taking Off.”

TAKING STOCK
All of you, as experts and practitioners in banking and finance -- and possibly even a few cattle barons! -- will certainly recognize and appreciate the utility of “taking stock,” a time to tote up assets and liabilities, debits and credits, as well as the achievements and ordeals that have come together to shape the face of Botswana at 40. Let me offer that this historic convergence should be a time of deep reflection for Botswana and its people to appreciate past accomplishments while standing poised for the new challenges of the present and tomorrow. Using revenues from vital diamond finds in Orapa and Jwaneng wisely, Botswana is renowned worldwide for its prudent financial management, a strong currency, and foreign exchange reserves with roughly two years of import cover.

Yes, Botswana has certainly achieved much over these past four decades, with the United States and the American people as partners in your progress, which I was able to observe close-by. While I served as a Peace Corps volunteer in the 1970s in then Zaire, Peace Corps workers were in villages here helping to teach Batswana and build a backbone of literacy across this vast land. In your early independence, Botswana remained a peaceful island in a regional sea of storms, when apartheid plagued South Africa and Namibia and wars wracked Angola, Mozambique, and Zimbabwe. Serving in the U.S. Embassy in Windhoek in the mid-1990s, I witnessed the end to the tragic scourge of institutionalized racism. This event was surely celebrated here in Gaborone, a “Frontline State” redoubt and host to other Southern African Development Coordination Conference stalwarts, which then evolved into the current SADC whose Secretariat remains situated here. As Ambassador to Lesotho in 1998, I appreciated Botswana’s pivotal role and commitment to SADC-led regional peacekeeping. Now we continue to stand side-by-side in the struggle against a new and terrible scourge, HIV/AIDS, with Botswana a focus country and major recipient of substantial U.S. financial assistance under the President’s Emergency Program for AIDS Relief, known as PEPFAR. Indeed, Botswana and the United States have been through much together, with this just the beginning of more to come, notably in the economic domain.

TAKING CHARGE
Whereas the process of taking stock is by its very nature a status quo inventory of sorts, a looking back at where we have been, the activity of “Taking Charge” is dynamic and should underpin the aspirations for continued growth and economic diversification in the years ahead, as embodied in Vision 2016. Indeed, “Taking Charge” now will get Botswana to its take-off trajectory in the not-too-distant future. But before “Taking Off,” let me offer as a friend, my candid assessment of areas that Botswana might wish to focus its current attention to attract greater shares of the foreign trade and investment that will fuel and sustain economic development here. Since my arrival in Botswana, I have come to admire the refreshing candor and common sense that comes out of the Kgotla tradition. This is grass-roots democracy in action at its finest, and it reminds me very much of the town meetings that have been a hallmark of the fabric of American democracy since my own country’s founding 230 years ago. So I hope you all will not consider me an impolite outsider as I offer some observations of Botswana’s socio-economic scene. Indeed, please accept me as a friend and colleague within the circle of the Kgotla. Specifically, here are four slogans where business representatives and officials from Botswana can look hard to take charge. These are:

-- Embrace Entrepreneurial Excellence;
-- Cultivate a Culture of Customer Service;
-- Tout Tender Transparency;
-- Fear Not the Foreigner.

I need not preach to the choir here with the message of economic diversification: indeed, it is a major theme for the upcoming 40th Independence Day celebration. Botswana has done so well, going for its Vision 2016. Yet everyone here acknowledges the urgency of employment creation. You as business and civic leaders understand your moral imperative and obligation to this country’s future well-being: assisting an educated population of young people ready for occupation with appropriate job creation and placement. I applaud the various programs under review such as the Citizens Entrepreneurial Development Agency (CEDA) and the Ministry of Agriculture initiatives to enable young entrepreneurs to take up farming. I encourage you to embrace the drive for an entrepreneurial spirit here, and a lasting commitment to customer service -- which my predecessor addressed before this very audience two years ago -- as Botswana advances on a path to greater growth and widespread prosperity.

Yet the challenge for Botswana is not simply finding a place for its new workers in a growing workforce, it is the challenge for a small market like Botswana to find its place and niche in the global economy. Whether you like globalization or not -- and this remains a hot topic of debate in my own country -- Botswana must reach out to foreign traders and investors and offer a welcoming and level playing field to attract interest here.

With competition fierce worldwide for limited investment capital, Botswana must make certain business representatives from all over feel that the rules of the game are crystal-clear here, particularly when it comes to big-ticket government procurement or projects, such as housing schemes, infrastructure, and new transportation assets. To entice foreign firms to choose Botswana when deciding where to locate a new business or factory and thereby generate new employment opportunities, investors must have strong support from government and an expedited work permit process to allow skilled foreign workers into Botswana as needed.

The United States remains committed to seeing emerging African economies like Botswana’s succeed, with our African Growth and Opportunity Act (AGOA) as tangible proof. We allow for duty and quota free entry into the U.S. marketplace of over 6,400 different products, which has been lucrative and a job creator for many a new enterprise and business here. As Botswana expands and modernizes its economy, such as in the transformational energy and transportation sectors, our Overseas Private Investment Corporation and Trade and Development Agency are eager to assist U.S. individuals and firms seeking business to do in Botswana.

TAKING OFF
Botswana stands poised for economic take-off, thanks to its strategic and central “crossroads” location in Southern Africa. Take advantage and invest wisely yet liberally in the “transport hub” opportunities that are now at your doorstep. In the 1990s in Namibia, I recall the talk and speculation of linking the port of Walvis Bay with the South African industrial heartland of greater Johannesburg. What was once a vision for dreamers has now become a reality -- witness the Trans-Kalahari Trade Corridor. Now is the time for Botswana to move on important rail and air cargo upgrades to support this burgeoning trade with an eye to even greater opportunities, thanks to “World Cup 2010” right next door. But this lucrative and promising window of opportunity will not last forever, which is why Botswana can and should be taxiing “now now” for its own imminent “take-off.”

The bottom line is that genuine public and private sector partnership is the key to Botswana’s continued success and economic diversification, and jet fuel for Botswana’s economic ascent. Let me conclude by noting the pivotal role you as bankers play in this process. And let me suggest a special challenge to the banking community tonight which I hope you will accept to spur Botswana’s “take-off.”

It is easy and pleasant to speak of Botswana’s economic successes and the fact that the banking and finance sector here is so highly rated by observers such as the World Bank, the Heritage Foundation, and many others. Real accomplishments bolster this well-earned praise. In a broader sense, however, I believe it is also appropriate to ask ourselves what may still be missing from Botswana’s banking scene. How, for example, might financial services play an even greater role in Botswana’s economic diversification and growth?

In the simplest terms, one problem appears to be that while there is a sound and advanced banking system that is comparatively flush with money, there is not a matching high level of commercial lending. Too few commercial projects seem to attract your interest or sustain your confidence.

Despite recent gains, for example, total private business credit remains significantly below total household credit. In fact, according to the Bank of Botswana, total private business credit currently amounts to only 40 percent of total commercial lending. This low level of private business lending has been publicly criticized by BOCCIM President Igbal Ebrahim, who has also noted what he sees as an excessive gap between the interest commercial banks pay on deposits versus what they charge for loans.

Rather than point a finger at the banks, though, I would rather ask them (you!) why it remains so hard to find good, creditworthy private business projects here. What can be done to help private businesses in Botswana generate the ideas, structures, and practices needed to earn commercial bank loans from you? Are there patterns to the problems you observe as you evaluate proposed projects, or practical ways to reduce some of the risk you perceive? Is the marketplace generating an adequate volume of commercial loan applications? Is there a need for small, locally-owned commercial banks? The Kuru Savings and Loan scheme failed, as did the Botswana Cooperative Bank -- so are the country’s small agricultural operators adequately served by today’s banking system? Is commercial credit too tight? If so, is that because of government monetary policies, bank profits, or both? If credit is too tight, what can be done to loosen it while still controlling inflation and providing banks a decent return? Finally, is the banking sector ready to supply the required capital to support the Government’s privatization plan?

We all realize that the University of Botswana has a proud track record of preparing exceptional public servants and officials who have served this nation so well. But does the education system here prepare young citizens with the skills for success as entrepreneurs in the business world? How best can foreign direct investment and the sensitive but necessary matter of work permits for expatriates be balanced with the complex issues of citizen empowerment? Are there government-imposed barriers to trade that stifle individual commercial creativity, such as in beef, communications, or public works? These tough questions all go to the heart of what is probably the greatest economic challenge facing Botswana: the need to diversify.

Free market economies grow and diversify on the strength of the creativity and energy of individual business people -- visionary women and men who see new ways to meet the needs of others and then find the wherewithal to give their ideas a try, and at times for trailblazers not without risk. All of you play a crucial role in that process, sorting through all the schemes and dreams to settle upon the best and most promising for the extension of commercial credit -- while in the process providing critical financial expertise and advice.

We all recognize that sustainable economic diversification cannot hinge on occasional government mega-projects -- it must come from the trial and error efforts of firms of all sizes, pushed by people using their own abilities and the money you lend them to better their lives. Right now, it cannot be said that the flow of commercial lending to private business indicates that broad-based economic diversification is underway. Why?

You have the front row seats -- the best in the house -- to see and understand the real economic opportunities and obstacles in Botswana’s private sector. Your insights into this are of profound value to this nation, and I urge you to use this Botswana Institute of Bankers forum to help all of the rest of us -- the government, foreign missions, domestic and international investors, and individual entrepreneurs -- see the overall picture as clearly as you do, and to open every practical door to ensure Botswana’s economic success always.

So as Botswana turns 40, on behalf of your many friends and admirers in America, allow me to salute all you visionary leaders as you take stock, take charge, and take off to an even more prosperous and successful future for the gracious people of this wonderful land. To all of you who have taken the time to share this evening with me, I thank you.