Identifier
Created
Classification
Origin
06GABORONE860
2006-06-28 14:43:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Gaborone
Cable title:  

PRIVATE SECTOR FAULTS GOVERNMENT FOR SLOW GROWTH

Tags:  ECON PHUM BC 
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R 281443Z JUN 06
FM AMEMBASSY GABORONE
TO RUEHC/SECSTATE WASHDC 3333
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RHMFIUU/HQ USEUCOM VAIHINGEN GE
RHEHNSC/WHITE HOUSE NSC WASHINGTON DC
UNCLAS SECTION 01 OF 02 GABORONE 000860 

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E.O. 12958: N/A
TAGS: ECON PHUM BC
SUBJECT: PRIVATE SECTOR FAULTS GOVERNMENT FOR SLOW GROWTH


UNCLAS SECTION 01 OF 02 GABORONE 000860

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SENSITIVE

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E.O. 12958: N/A
TAGS: ECON PHUM BC
SUBJECT: PRIVATE SECTOR FAULTS GOVERNMENT FOR SLOW GROWTH



1. (U) SUMMARY: Despite the Government of Botswana's
generally liberal economic policies, the business community
perceives burdensome regulations and rising corruption as
obstacles to robust growth. Conversations with business
representatives outside of Gaborone revealed concerns that
slowing growth outside the mining sector stems in part from
government failures on these two fronts. Some suggested
that the withdrawal of foreign assistance to Botswana as a
middle income country led indirectly to higher corruption
via experts brought in from other developing countries to
replace advisors from donor countries. While our private
sector colleagues generally were optimistic about Botswana's
long term economic prospects and the pro-market orientation
of Botswana's current political leaders, they believed that
the GOB could best stimulate growth by getting (further) out
of the way. END SUMMARY.

CORRUPTION APPEARS TO BE INCREASING


2. (SBU) Even though Transparency International rates
Botswana the least corrupt country in Africa, corruption is
on the increase according to leaders of the Botswana
Confederation of Commerce, Industry and Manpower (BOCCIM).
In a June 20 conversation in Francistown, Botswana's second
largest city, both Mr. Iqbal Ibrahim, President of BOCCIM,
and Mr. Joshi, a manufacturing business owner, described the
public tender system as corrupt. Typically the judgment of
a single person determines who wins the contract, they said.
Although boards evaluate bids, members of those boards often
lack the necessary knowledge and experience to effectively
assess the tender documents and defer to the opinion of a
single technical expert.


3. (U) Three members of the Maun Business Council traced
rising corruption to the loss of Western technical advisors
pursuant to Botswana's designation as a middle income
country in 2000. Often those experts, who came from
developed economies and found little attraction in the kind
of bribes potentially available in Botswana, were replaced
by experts from other developing countries. Our contacts
claimed that these expats had imported the practice of
bribery. It is becoming common, they complained, to need to
pay a bribe in order to get permits approved and licenses
issued. Participants in a June 6 transportation sector

conference hosted by the American Business Council in
Botswana complained that demands for bribes by customs
officials - averaging about P1000 (roughly $200) -- have
increased as well.

"HOW CAN I STOP YOU TODAY?"


4. (U) BOCCIM members believe regulations are being poorly
implemented and see mid-level civil servants as the
culprits. Politicians, they asserted, generally share the
private sector's vision of a free market path to prosperity
and are remarkably accessible. BOCCIM Vice-President Geoff
Williams recounted a meeting at which Minister of Lands and
Housing Ramadeluka Seretse handed out his phone number and
office hours. At the middle level, however, officials are
insufficiently trained to regulate and support an
increasingly complex economy. Their rigid reading of laws
and regulations and reluctance to break bureaucratic log-
jams makes doing business in Botswana a slower, costlier
proposition than it need be. Kevin Leo-Smith, owner of the
up-scale Kwando mobile safari company, quipped that their
motto has become, "How can I stop you today?" Leo-Smith has
encountered numerous problems with work permits, pilot
licenses, and starting new businesses. He has had employees
spend up to five years on waivers which had to be renewed
quarterly awaiting work and residence permits.

CEDA NOT HELPING THE COMMUNITIES


5. (SBU) Several contacts expressed skepticism at the
impact of Botswana's Citizen Entrepreneurial Development
Agency (CEDA). Leo-Smith told of an employee who wanted to
start his own game-drive business in Chobe, a popular
tourist destination. He had a guaranteed contract with the
biggest and most established safari lodge in the region,
only to be told by CEDA that his plan was not viable and,
therefore, would not receive funding. Iqbal Ibrahim,
President of BOCCIM, lamented the political influence over
the appointment of CEDA's board. He also claimed that board
members often work as consultants for CEDA applicants,
raking in fees to put together attractive but inaccurate
proposals. Although some contacts detected an improvement
in CEDA's performance in collecting on its loans, the

GABORONE 00000860 002 OF 002


general consensus was that the GOB would do better to remove
obstacles to entrepreneurship rather than spend money to
help its citizens overcome them. A local paper reported on
June 21 that CEDA had a high rate of bad debts and an
accumulated loss of P128.9 million ($21.1 million).


6. (U) Private sector contacts affirmed that skilled labor
remains scarce in Botswana and said government initiatives
to address that gap frequently miss the mark. Training for
workers in the hospitality industry, for example, focuses
too much on booking flights and accommodation, which
typically takes place in the tourists' country of origin
rather than destination. Rather, he argued, they should
emphasize operation and management of lodges or safari
companies. The Brigades, a network of vocational training
centers, provides instruction in a limited range of skills -
mechanical engineering, brick-laying, welding, etc. - but
produces low-productivity workers who lack an understanding
of the business context in which their skills can be
marketable.

LAND ACCESS IS A PROBLEM


7. (SBU) Access to serviced land is becoming a significant
impediment to domestic business growth and to foreign
investment. Francistown Mayor Buti Billy, along with
business leaders, attributed lack of manufacturing growth
and low foreign investment in Botswana to the acute shortage
of serviced land. BOCCIM Vice-President Geoff Williams
observed that local land boards, which allocate land, often
consist of traditional leaders with little economic
knowledge or business background. They fail to ensure that
those who are allocated land have the capacity to pursue the
development proposed for that property. The boards also
fail to enforce the time-frames in which persons allocated
land are supposed to make improvements according to their
business plans.

VP KHAMA INVOKES POSITIVE THINKING


8. (U) Vice President Seretse Khama Ian Khama earned the
praise of our interlocutors as a no-nonsense man who will
whip an inefficient bureaucracy into shape. Mr. Williams and
Mr. Ibrahim described Khama as responsive to the needs of
citizens and intolerant of laxity in the civil service.
They believed that he had brought into the Cabinet other
military veterans - Minister of Lands and Housing Seretse
and Minister of Environment, Wildlife and Tourism Mokaila -
who have brought a disciplined, pro-market approach to their
ministries. Significantly, he was cited as the man to go to
when the bureaucracy was being troublesome or unresponsive.

COMMENT


9. (SBU) Overall, our interlocutors were optimistic on
Botswana's long-term economic prospects. Several were
expats who had lived elsewhere in Africa but settled
permanently in Botswana in part because of its relatively
open economy. They appreciated that Botswana's performance
on corruption and regulation far exceeds most African
countries. Nonetheless, they see room for continued
improvement and even detected the emergence of negative
trends, including rising corruption and more burdensome
regulatory requirements. Many set their hopes on the likely
next President, Ian Khama, to reverse these trends by
reforming the bureaucracy. While he might fulfill those
expectations, it is also possible that Khama will allow the
inefficiencies to persist and consolidate his highly-
personal political following on the strength of his
reputation as the one person who can move the bureaucracy -
one personal, loyalty-building appeal at a time.


10. (SBU) The observation that withdrawal of foreign
assistance to Botswana following its designation as a middle
income country indirectly boosted corruption highlights one
of the dangers of failing to sustain support for governments
that make wise policy choices. U.S. interests are better
served by continuing to support developing countries that
are making political and economic progress than by
withholding support until these countries have slid back
into less developed status thanks to encroaching ills such
as corruption and poor implementation of regulations.
AROIAN