Botswana Untapped Opportunities in 2020

The most anticipated State of the Nation Address (SONA) in 2019 was delivered by the President of the Republic of Botswana to an eager and hopeful Botswana citizens and residents on 18 November 2019. The SONA was jam packed with new opportunities that will see a divergence from old industries to the birth of new industries through a private sector led growth under the cluster development programme.

The special economic zone for agriculture in the northern part of the country, Pandamatenga is now the hub for processing and manufacturing of agriculture products. It was announced through SONA that more land has been earmarked to house twelve silos each totaling 5,000 metric tonnes steel grain storage facility. This presents opportunity for the old and young farmers to step up into the agro-processing industry within the vicinity.

The cluster led programme three key pillars are; business productivity value chains competitiveness

The business community with keen interest in untapped opportunities primarily in Agriculture, Healthcare, Water & Sanitation and Renewable Energy were enthusiastic about the policy developments in these sectors, the commitment from the policymakers to implementing and executing strategies that will drive performance, productivity and efficiency in the new emerging sectors. There has been a renewed hope and assurance to investors that are keen to invest locally and attract strategic partners from other countries.

AGRICULTURE Agriculture was the new comeback kid in 2019 as a rebranding strategy was implemented to attract young commercially minded farmers into the sector. Agriculture contributes less than 5% to the Gross Domestic Product (GDP)with youth participation in commercial livestock production currently at less than 4%.

Youth participation in commercial livestock production is significantly low.

The Ministry of Agriculture and Food Security has a youthful Minister DR Dikoloti who will drive the aggressive marketing and positioning of the sector to attract the youth and reduce the double digit unemployment rate.

The most significant impediments in the agri-business sector has been access to affordable capital, land and climate change. To address climate change the government has rolled out the Climate Smart Agriculture (CSA) programme which is being implemented in order to increase resilient production systems and improve the livelihoods of those dependent on agriculture. The deployment of technology will definitely de-risk this sector and drive down the cost of capital that has been a huge factor in driving interest away from the sector.

From a large scale perspective more infrastructural developments will be needed for value addition. These infrastructural developments come with a huge price ticket that can be realized through the assistance of institutional investors, development finance institutions and private investors. Pension Funds have been dying for more bankable investments locally to diversify the risk of the local equity market, therefore the development in the agriculture in terms of policy enactments and reforms, the use of hybrid systems should entice institutional investors to close the infrastructure finance gap in agriculture.

It is estimated that the food import bill in 2018 was P7.745 billion, which is very high and also demonstrates the opportunities that are available to wean the country from imports and improve food security.

P7.7B 2018 Food Import Bill

Institutional Investors

Local Fund Managers

Private Wealth Individuals/Families

Local Capital Market

Development Finance Institutions

"The green revolution taking the Botswana agriculture sector by storm will drive internal mobilization of local funding resources to invest in agro-processing infrastructure and various projects across the agriculture value chain. We predict more locally made products will be launched in the next 5 years." Lindiwe Mafavuneh-Founder & CEO of LCM Capital

HEALTHCARE As highlighted in our previous issue on healthcare, we expect to see more local or foreign direct investment on this under-invested sector. The President reiterated the government commitment and priority to the provision of quality healthcare and universal health coverage. The local healthcare system will undergo e-Health makeover in the next five years as it catches up with other government organizations or institutions that have already embraced the internet of things to give end users the most efficient and quality experience. According to SONA P261,000,000 was spent on the maintenance of buildings and replacement of key equipment and plants.

There is yet to be an initial public offering for a pharmaceutical or healthcare company on the local bourse. Healthcare equities remain the most sort after asset class that yield attractive alpha for shareholders. We expect to see Local Private Equity Managers investing heavily in this sector to grow and develop the industry to catch up with the rest of the world. According to Deloitte and Touche Global Healthcare Report, global healthcare expenditures are expected to continue to rise as spending is projected to increase at an annual rate of 5.4% between 2017-2022, from USD$7.724 trillion to USD$10.059 trillion (2019).

WATER & SANITATION Climate change has exacerbated the water scarcity crisis in most drought prone countries. The perennial low rainfall experienced throughout the year had devastating consequences on water intensive industries like agriculture. With groundwater representing 60% of water sources for water consumption, the government is feeling the pressure to augment supply through alternatives sources of water. The 2019 SONA highlighted the need to consider recycling of waste water to potable water. In our previous IIMA Water publication we highlighted the massive opportunities of the Glen Valley Wastewater Treatment Plant as a means to close the water gap in the greater Gaborone area. According to SONA the project will bring back the Glen Valley Wastewater Treatment Plant to a treatment capacity of ninety million litres per day (90Ml/day) with completion date April 2020. The Glen Valley Water Reclamation is at feasibility stage. The project is intended to reclaim sixty (60) million litres a day to augment water supply in the greater Gaborone area..

Another exciting project that should see the light of day once approved by parliament is the construction of the one hundred kilometres (100km) pipeline from Masama Well fields to Mmamashia, which is meant to increase water supply to the Southern part of Botswana by sixty four million litres per day (64Ml/day). We expect to see more Private Public Partnerships (PPPs) between government and the private sector for these mega projects in the 2020.

RENEWABLE ENERGY Energy players have been eagerly anticipating changes and major strides in the renewable energy space for a long time. SONA gave some level of assurance and confidence that a solar energy programme is underway and will be unveiled in the next financial year. Climate change policy has been developed and will be tabled in the next parliament debate and the National Energy policy will also undergo review during the year. The progress in policy development and reviews is a welcome change as Botswana scored 57.7 points out of 100 points and ranked 96 out of 128 countries in the World Economic Forum trilemma score that looks at energy security, energy equity and environmental sustainability.

The new administration executive team seems to be passionate about green energy as we have seen the 1st exhibition of the solar powered car by Botswana International University of Science and Technology Engineering Students as well as many exciting research and development projects in the green technology.

CONCLUSION SONA provided insights on the direction of the economy and priority projects of the new administration. Impact focused private equity investors should be thrilled to see focus given to Agriculture, Healthcare, Water & Sanitation and Renewable Energy. We believe internal mobilization of funding resources will be considered to accelerate infrastructural development in these key sectors. Most importantly that there will be more collaboration and strategic partnerships to efficiently execute the aforementioned projects in a cost effective manner.