2008 Ambassador Speeches

US-Africa Trade and Botswana's Economic Growth

Ambassador Nolan's Remarks for ABC Breakfast

November 18, 2008
Gabarone Sun Hotel

Good morning.  I would like to extend a warm welcome to all the Botswana Government officials, fellow members of the diplomatic community, business leaders, and everyone else in attendance here today.   I want to thank Kagiso Mmusi and the other members of the American Business Council for inviting me to address this morning’s breakfast.

Before I begin my formal remarks, I would like to congratulate the American Business Council and its board members for all the hard work that went into organizing this event. The ABC is an important institution here in Botswana. Because some of you here today may not be members, I should mention that the ABC was founded in 1994 to foster investment and strengthen commercial ties between the United States and Botswana. The U.S. Embassy has had close and longstanding ties to the American Business Council.

I would like to congratulate the ABC on its charitable endeavors. Later this morning, I will join Kagiso Mmusi as he presents a check for 20,000 pula to the Maru-a-pula school. The ABC has been a strong supporter of the Maru-a-pula school over the years and I am pleased that they will be making a donation to the school's scholarship fund today.

The theme of my speech this morning is quite broad, US-Africa trade. The main point I want to stress is that though the US government is a leader in providing foreign assistance to combat poverty and disease around the world, especially in Africa, at the end of the day charitable contributions are limited in what they can accomplish. Once humanitarian disasters have been averted or infrastructure projects completed, then only sustained economic development and trade can lift people and nations out of poverty and into prosperity. The USG stands ready to help Botswana diversify and grow its economy, and we look forward to expanding our trade with a strong and prosperous Botswana.

Trade Not Aid: The Botswana Experience

As residents of Botswana and businessmen, you may recognize intuitively that trade is the engine of growth and prosperity. Though Botswana has received assistance from the U.S. and other donors both at independence and more recently to combat the HIV/AIDS pandemic, Botswana's economic and political success is really the result of pro-market policies and trade. Botswana was blessed with diamonds and has been able to sell those diamonds on the world market, using the profits to build roads, schools, and clinics. It is trade, not aid, that has allowed Botswana to ascend to middle income status, and the Government of Botswana (correctly) now wants to build upon the successes of the past 40 years by diversifying the economy and encouraging foreign investment and trade. The US government strongly supports the government's efforts to diversify Botswana's economy and encourage trade and foreign investment. We want a strong, prosperous Botswana as a regional ally and trading partner.

Let me note here that as important as trade is, trade and aid are certainly NOT mutually exclusive. I want to stress, so that there is no confusion, that the United States Government gives significant assistance to Botswana, particularly in the area of combating HIV/AIDS, and we will continue to do so for the foreseeable future. Under the President's Emergency Plan for AIDS Relief (often referred to by the acronym PEPFAR) the USG spent over 93 million US dollars in 2008 in Botswana, and cumulatively since 2004 we have given over $300 million. This money went to prevention, care, and treatment programs and was spent in close partnership with the Government of Botswana. The global AIDS epidemic is certainly an example of a complex, international crisis that requires international humanitarian assistance. AIDS will not be stopped through the private sector or one government alone. Even as Botswana continues to develop and grows its economy, the US government and other friends stand ready to help Botswana meet complex humanitarian challenges like the HIV/AIDS pandemic. That is what friends are for.

My interest in promoting a prosperous Botswana with a diverse economy and open trade environment is not merely ideological or altruistic. On the contrary, the US wants to increase trade around the world because the United States is the world’s largest economy and largest exporter and importer. World trade is critical to America’s prosperity – fueling economic growth, supporting good jobs at home, raising living standards and helping Americans provide for their families with affordable goods and services. In just the last 13 years, freer trade has helped the US raise our GDP by 48 percent. Over the same period the United States has added over 23 million jobs. 

Encouraging Economic Development in Botswana

So if the United States cares about Botswana's economic development, not only on moral but on self-interested grounds, then you must wonder what we are doing to help encourage private sector diversification and growth. I want to first mention two US programs that you may not be aware of, the U.S. Trade and Development Agency (USTDA) and Overseas Private Investment Corporation (OPIC), that are active here in Botswana. Then I will continue to discuss the largest tool in our trade toolkit, the Africa Growth and Opportunity Act (AGOA) and the work of the USAID-funded Southern Africa Trade Hub to promote AGOA and facilitate regional and international trade within SADC. 

USTDA

The United States Trade and Development Agency (USTDA) is an independent US government agency that is funded by the US Congress. Its mission is to promote trade and economic growth in middle income countries, while simultaneously helping American companies to export their goods and services, thereby creating US jobs. USTDA provides grant funding to overseas project sponsors for projects that support the development of modern infrastructure and an open trading system.

Here in Botswana, USTDA provided a $368,270 grant to fund financial advisory assistance to the Ministry of Minerals, Energy, and Water Resources on the financial and economic viability of developing an export coal-fired power station at the Mmamabula site. The assistance also includes providing strategic advice on how to develop a financing plan for the power plant. Delphos International was selected to carry out this technical assistance. This project is ongoing, and if successful could lead to an improvement in Botswana's energy supply. 

OPIC

The Overseas Private Investment Corporation (OPIC) was established by the US government in 1971 to help US businesses invest overseas, foster economic development in new and emerging markets, and complement the private sector in managing risks associated with foreign direct investment. In October 2008 OPIC approved a $250 million guaranty facility to help Botswana develop its newly-established diamond cutting and polishing industry. A key objective of OPIC’s guaranty facility is to develop a vibrant and robust lending market for this new industry.

OPIC will provide the guaranty to a company sponsored by Lazare Kaplan International Inc., a U.S.-based publicly traded company, which in turn will pass on the guaranty to participating banks. ABN AMRO has already been approved by OPIC as a participating bank and is expected to establish a subsidiary in Botswana. Other banks operating in Botswana will also have an opportunity to join the facility, subject to OPIC’s approval. Participating banks will provide loans to Botswana-based diamond cutting and polishing companies.

Specifically, the facility will enable diamond manufacturing companies in Botswana to access long-term capital to finance the purchase of rough diamonds for processing, and facilitate the development of a financial sector to support development of a cutting and polishing sector in Botswana. The facility, which will accelerate the establishment of a viable diamond distribution and manufacturing sector within Botswana, is projected to leverage the country’s diamond resources by increasing employment by more than 3,000 new skilled jobs. 

ARGOA

Perhaps the most important tool the USG has to promote trade and economic diversification in Africa is the Africa Growth and Opportunity Act (AGOA)-- a trade preference program that gives qualified African countries duty free, quota free access to the US market on over 6000 products, expanding on benefits available under the Generalized System of Preferences (GSP). Since its inception in 2000, AGOA has helped increase U.S. two-way trade with sub-Saharan Africa. In 2007, U.S. total exports to sub-Saharan Africa totaled $14.4 billion, more than double the amount in 2001. U.S. total imports from sub-Saharan Africa more than tripled during this period to $67.4 billion. In 2007, over 98 percent of U.S. imports from AGOA-eligible countries entered the United States duty-free.

Botswana is one of 40 countries that have taken advantage of AGOA. In 2007, the U.S. exports to Botswana totaled $53.9 million, a 100% increase from 2006 (but still slightly less than total 2005 exports). U.S. imports from Botswana equaled $187.5 million, a 25.6% decline from 2006. In 2006and 2007, Botswana exported almost $30 million to the United States under AGOA. Botswana, however, has not taken advantage of AGOA as aggressively as some other African countries.

Many of the countries that have been successful in utilizing AGOA – such as Ghana, Lesotho, and Mauritius – have undertaken concerted efforts to forge closer cooperation between government and the private sector to improve infrastructure, eliminate bureaucratic red-tape, facilitate customs processing, and build experience in producing and marketing value-added products for the U.S. market. AGOA successes are many and varied: South Africa exports the widest range of AGOA products including luxury automobiles, citrus fruit, wine, and footwear; Lesotho has become the leading sub-Saharan African exporter of apparel to the United States; Kenya’s AGOA exports include fresh cut roses, sport fishing supplies, nuts, plastic products, jewelry, and essential oils, as well as apparel; Ghana’s value-added exports under AGOA include chocolates, jewelry, baskets, and preserved pineapple. In addition, many African businesses that had never previously considered the U.S. market are attending trade shows and getting orders for everything from Ugandan organic cotton T-shirts to Mauritian seafood, Malian tote bags, and Ethiopian flowers. 

Trade Capacity Building and "the Hub"

Trade Capacity Building (TCB) assistance is a key element of the US government's strategy to promote economic growth through trade and to enable developing countries to negotiate and implement market-opening and reform-oriented trade agreements. TCB helps to improve the linkage between trade and development by assisting developing countries to build the physical, human, and institutional capacity necessary to take full advantage of trade opportunities and thereby increase growth and reduce poverty.

A major part of US trade capacity building assistance comes through USAID-funded and -managed regional Trade Hubs for Global Competitiveness, located in Gaborone, Botswana; Nairobi, Kenya; Accra, Ghana; and Dakar, Senegal. Each Hub is staffed by a team of experts in trade-related fields and responds to region-specific needs. The Hubs serve as a central point where African government agencies, donor and civil society organizations, and the private sector can find information on investment, trade, and business activities in the region, including technical assistance and training opportunities. The Hubs work with regional organizations to increase regional economic integration, reduce barriers to regional trade, and facilitate investment in infrastructure.

I hope many of you are already familiar with the Southern Africa Global Competitiveness Hub, which is located here in Gaborone and is funded through and managed by the USAID/Southern Africa Mission in Pretoria. One of the ABC Board members, Amanda Hilligas, is one of two co-directors of the Hub and is an excellent resource to learn more about the Hub's activities and services.

The Hub supports governments, private sector associations, and businesses in their efforts to support efficiencies in regional markets, to be more competitive in regional markets, and to increase exports. This assists the Republic of Botswana and the private sector as they move toward the goal of growth, diversification, and open markets. The Hub works with public and private sectors in Southern Africa to increase export volumes, reduce transaction costs, promote competitiveness-enhancing policies, and facilitate investment in infrastructure.

In the two sectors the Hub focuses on in Southern Africa – specialty foods and apparel – more than $15.8 million in new AGOA-related exports have been achieved via trade shows, business-to-business events, and direct engagement with U.S. buyers. A 2007 business-to-business event organized by the SA Trade Hub in South Africa featured 50 firms from across the continent and generated $2 million in new deals in the first six months, and an expected $6 million over the coming year.

In 2007, for the first time, food companies in Southern Africa were featured as part of an "African Pavilion" at the Fancy Foods Show in New York City as part of a concerted effort to present African producers of specialty food products to the trade. Resulting deals are expected in the range of $5 million over the next two years. These deals include launching an "African Set" in U.S. grocery stores in response to the growing demand for African food products. Also in 2007, the SA Trade Hub sponsored companies from Southern Africa to attend the MAGIC apparel show in Las Vegas. Resulting business from repeated attendance at this show, combined with business-to-business events, is estimated at over $35 million. In addition, the market linkages program at the SA Trade Hub facilitated new exports from Peter Mabeo, a Botswana furniture producer that was launched in April 2008.

In total, in 2007 the SA Trade Hub cultivated more than 300 new relationships with food and apparel companies in the United States resulting in new exports. The SA Trade Hub also assisted more than 100 companies with requests for export logistics, trained more than 500 firms exporting products into the United States, and facilitated and responded to more than 400 requests from the private sector for information on AGOA.

In addition to their success in working with regional businesses, the Hub has also helped to facilitate trade along regional transport corridors by working with governments in the region to develop and implement the "SAD 500," a multi-purpose goods declaration covering imports, exports, cross-border and transit movements, and all the information necessary for advanced customs clearance and risk management. The SAD 500 reduces paperwork and allows for quicker turnaround times with fewer errors, less confusion, lower costs, and improved trade efficiencies. Building on the SA Trade Hub’s successful pilot of the SAD 500 along the Trans Kalahari Corridor over three years ago, South Africa, Botswana, Namibia and Zambia are now using harmonized customs transit procedures and the SAD 500 as a "through customs" declaration across international borders. The SA Trade Hub is currently assisting in the start-up of the SAD 500 in the remaining countries in the region. The SA Trade Hub is also currently assisting countries in the region to implement electronic data exchange (of the SAD 500 and other information) across borders. 

Next Steps: What Can Botswana Business Do?

I have spent a little time telling you what the US government is doing to help promote regional trade and a pro-trade legal/policy environment. The final topic I want to briefly address is what you as Batswana entrepreneurs can do. I would certainly encourage anyone with interest in exporting to the US, especially under the AGOA program, to seek out the advice and services of the Trade Hub here in Gaborone. I am so impressed by the expertise and professionalism of the Trade Hub staff and I know that they will provide excellent advice.

More importantly though, I would encourage you to work with your government and continue to encourage and support pro-business policies that will help the private sector to diversify and flourish. The current government has explicitly stated its goal of growing and diversifying Botswana's economy, and inviting foreign direct investment and trade. To accomplish those goals, Botswana will need to continue on its current path, but work harder to provide tax incentives and a stable regulatory environment for investors. The country will need to find creative solutions to the region's current energy shortages, perhaps through rapid expansion and completion of power projects to make Botswana a net exporter of energy. Botswana will need to continue to facilitate regional transportation of goods, through one-stop border posts, use of common customs documents, and expanding regional rail and road corridors. Planned privatization of parastatals such as the Botswana Telecommunications Corporation and Air Botswana could improve telephone/internet services and air transport options. Botswana could also increase air linkages to the outside world through airport upgrades and signing open skies agreements.

Botswana is a thriving democracy with a grassroots tradition of politicians listening to the will of the people through consultations or "kgotla" meetings. The American Business Council and individual companies and businessmen can play a key role in advocating pro-business policies to the government at every possible opportunity, in order to keep free trade and private sector growth high on government's agenda. 

CONCLUSION

I thank the ABC for organizing this event and am looking forward to what is perhaps the most important part of today's business breakfast: the networking opportunities with everyone gathered here.  The U.S. Embassy is an active part of the Botswana business network, and our Embassy's Economic/Commercial Section looks forward to assisting businesses in Botswana trade and partner with corporations and investors throughout the United States.  Thank you and Pula!