'Business Department, School of Economics, Business & Accounting USP'
Abstract
Includes bibliographical references.Botswana, which is widely known for its remarkable economic growth and prudent macro-economic management, was one of the poorest countries in the world prior to independence in 1966. The country was primarily a subsistence economy largely founded on agriculture, with a modicum of tourism. However, Botswana has since experienced rapid economic growth. This growth has been propelled by the mining sector, particularly the diamond industry. The reliance of Botswana on a single commodity has prompted the government to engage in efforts to diversify the economy. This objective has been an important thread in the country's economic policy since the 1980's and forms the key theme of recent national development plans. Due to a small domestic market, Botswana has embarked on a strategy to promote export orientated companies and the facilitation of Foreign Direct Investment, (FDI). Manufacturing, which is our primary focus, has been identified as a possible vehicle for economic growth and diversification, due to the fact that certain subsectors are labour intensive and could alleviate the country's pressing employment problem. We conducted a survey of fifteen manufacturing firms with the research objective of capturing their views on Botswana as an investment environment, the level of incentives, economic diversification and other related issues. The field research was based on individual interviews using a questionnaire. We argue that factors, which previous studies identified as impediments to investment in the manufacturing sector, have largely been addressed. However, we concur that investment into this sector has not been as high as expected. Although incentive programmes have been established to promote investment, particularly into the manufacturing sector, research on the effectiveness of incentives is inconclusive. We argue that these incentives have to be retained in their current form. In neighbouring countries the development of the manufacturing sector has frequently necessitated the establishment of Export Processing Zones (EPZs). EPZs have found support from institutions such as the World Bank. which regards them as a powerful signal of a country's departure from import substitution to being an export-orientated economy. It is this paper's contention that the establishment of an EPZ is not the best policy option for Botswana. We argue that the objectives of diversification can best be achieved through a multi-tiered investment promotion strategy that will raise awareness of Botswana as an investment destination, facilitate the entry of foreign firms into the country, and identify valuable projects. The investment promotion strategy should seek to raise awareness of Botswana as a preferred investment destination
