Identifier
Created
Classification
Origin
05GABORONE838
2005-06-17 09:38:00
UNCLASSIFIED
Embassy Gaborone
Cable title:  

PROSPECTS FOR LIBERALIZING BOTSWANA'S

Tags:  BEXP ECON EAGR ETRD BC TRADE 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 GABORONE 000838 

SIPDIS

STATE FOR AF/S JMALONEY

E.O. 12958: N/A
TAGS: BEXP ECON EAGR ETRD BC TRADE
SUBJECT: PROSPECTS FOR LIBERALIZING BOTSWANA'S
CATTLE INDUSTRY


UNCLAS SECTION 01 OF 02 GABORONE 000838

SIPDIS

STATE FOR AF/S JMALONEY

E.O. 12958: N/A
TAGS: BEXP ECON EAGR ETRD BC TRADE
SUBJECT: PROSPECTS FOR LIBERALIZING BOTSWANA'S
CATTLE INDUSTRY



1. Summary. The recently-formed Botswana Cattle
Producer's Association (BCPA) submitted a proposal
to the Ministry of Agriculture (MOA) in late May to
remove the monopoly of the Botswana Meat Commission
(BMC) on the exportation of beef. If the proposal
were accepted, the beef industry would establish an
auction system for live weaner calves for sale to
South Africa. This system would mean cattle farmers
could take advantage of the higher prices offered by
the South African market. It is anticipated that the
shift to a free border for export of weaners would
improve ranching and management practices, generate
better supplies to the Botswana Meat Commission
(BMC) in the long term, and produce immediate
economic benefits through the export of live cattle.
End Summary.


2. Liberalizing the market in cattle could
revitalize the cattle industry, which has played an
important role in Botswana's traditional social and
economic development. It is estimated that 20-25
percent of households in Botswana depend to some
degree on cattle rearing, either as owners or
employees. Income generation from this source
remains essential to the rural communities. Yet the
agricultural industry, which is dominated by the
cattle industry, has experienced a sustained decline
and today accounts for a mere 2.4 percent of GDP.
The impact of improved prices could substantially
reduce rural poverty and encourage more efficient
business practices for a key population segment.

Current State of the Cattle Industry
--------------


3. The BMC Act gives the BMC a monopoly over the
export of beef and related products, and prohibits
the importation of beef. Through a deal struck in
the 1980s with the European Union, Botswana's export
quota for beef is 19,000 tons a year. The majority
of the BMC's production is currently sold as frozen
boneless beef and exported to Europe. Nevertheless,
there have been major problems at BMC in recent
years. These include a declining number of cattle
received, excess capacity, and rising losses. The
BMC is only operating at about 40 percent capacity.
Botswana has consistently failed to export enough
beef to meet the EU quota threshold. The Chairman

of the BCPA told EconOff that if the current system
remains in place, this important sector of the
economy, which still generates nearly 2 percent of
Botswana's export revenue, could collapse
completely.


4. In April 2005, a task force of representatives
from the MOA, the BMC, the BCPA, and other
stakeholders, sponsored in part by USAID,
investigated the potential of the beef export
market. Its report concluded that South Africa is
eager to import live weaners from Botswana and could
function as a sustainable export market. The
Botswana Government has already commissioned a
livestock study to look at ways of improving the
operations within the industry, and the BMC itself
recently contracted International Development
Ireland (IDI) to carry out a strategic review of its
operations with a view towards possible
restructuring. IDI will be meeting with
stakeholders to establish the effect BMC business
has on the relevant sectors of society, including
farmers, and the BCPA is expected to present its
findings as well as those of the MOA task force to
the BMC board of directors in late June.

Important Progress: Formation of the BCPA
--------------


5. Despite the ever-present problems in the
livestock sub-sector and the depth of the sector's
importance to Batswana society, there has never been
a nationally representative group for the cattle
industry in Botswana. So, in March 2005, with
assistance from the USAID-funded Southern Africa
Trade Hub based in Gaborone, the chairpersons of
regional farmers' associations and other
stakeholders met in Gaborone with the aim of forming
the BCPA. Within this group, an interim committee
of the heads of the regional associations was
nominated to guide the BCPA's formation along the
road with the goal of creating a "vehicle for
change." The BCPA is intended to function as the
mouthpiece and reference point for the Botswana
livestock industry and is to build a constructive
relationship with the MOA and the GOB.

Prospects for Liberalization
--------------


6. The MOA supports the proposed weaner export
system (i.e. male calves that have just been weaned
that are roughly 9 months old and weigh a maximum of
260 kg),as well as a restructuring of the BMC and
has encouraged the BCPA, together with officers of
the Ministry, to investigate the export proposal
further and keep the Ministry as well as parliament
informed of the outcome. The proposed export to RSA
could bring additional income: between P4.17 and
P6.38 per kg of live weight as compared to the fixed
monopoly prices offered through the BMC (P2.40),
according to a policy paper commissioned by USAID in
support of the BCPA's efforts. The MOA remains
concerned, however, about the continued viability of
the BMC. While the USAID-funded policy paper states
that the liberalization could, in fact, help
revitalize the BMC, any change is still viewed by
some officials as a direct challenge to the BMC's
monopoly power, and there is obvious resistance to
any move to cut it out of the process.


7. At a gathering during the public presentation of
the USAID policy paper, the CEO of the BMC observed
that the decline in the cattle industry resulted
from management problems among farmers and an
unwillingness to sell cows to the BMC, which has
excess capacity and has been running at a loss for
the past few years. He seemed to be blaming the
farmers for the BMC's failures, but he did say that
if the liberalization would move the beef sector
forward, then he would support it. Importantly,
there is GOB support for change. The Minister of
Trade and Industry, Mr. Daniel Neo Moroka, told the
audience simply, "We need to liberalize the market."


8. The next step requires action by parliament to
eliminate the monopoly powers of the BMC and allow
the export of live weaners. Given the fact that the
IDI study on possible BMC restructuring and the
MOA's livestock study are still not complete, it
appears unlikely that any immediate action will be
taken on the liberalization. However, the BCPA is
pressing its case and is meeting with the House of
Chiefs, a particularly influential body when it
comes to cattle and rural practice. The BCPA has
also received a good deal of positive, nationwide
press coverage for its efforts.


9. Given the crisis in which the cattle industry
finds itself, and important political support, the
prospects for successfully liberalizing the market
are promising. Successful liberalization would
score a feather in the cap of the Trade Hub as well.
It would present a model for effective engagement by
USAID and the Hub in driving policy reforms that
promote economic growth and regional trade
integration. From guiding the BCPA's formation, and
funding a fact-finding mission to Namibia to examine
its cattle auction system as part of the MOA task
force, to commissioning the independent policy paper
supporting the BCPA's objectives, the Hub has
successfully supported a locally driven quest for
changing market policies to revive the cattle
industry in Botswana.
AROIAN