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PRIVATE SECTOR IN BOTSWANA

KGOTLA MMUSI

In the early years after independence, Botswana, like many other African nations,
adopted state-led economic development strategies based on import substitution.
This approach aimed to achieve rapid industrialization and modernization by
creating large state-owned/public-private enterprises such as Botswana Railways,
Debswana, Botswana Power Corporation, Botswana Television , Botswana
Telecommunications, Air Botswana, Botswana Housing Corporation e.t.c. in
strategically important sectors and implementing trade barriers to protect domestic
industries. The government also established agricultural marketing boards to
regulate prices, resulting in a redirection of resources and credit away from
agriculture towards manufacturing.
The pursuit of import substitution policies had significant implications for
Botswana's economy. While the intention was to promote industrialization, the
focus on manufacturing often came at the expense of the agricultural sector, which
experienced stagnation in output and productivity. With resources diverted away
from agriculture, the sector faced challenges in meeting its full potential as a driver
of economic growth and employment generation.

The state-led model also had consequences for the private sector in Botswana. As
the government played a dominant role in the economy, the private sector was
marginalized, limiting its ability to contribute to economic development. The heavy
reliance on state-owned enterprises created an environment where innovation was
stifled, and the lack of competition prevented these enterprises from adapting to
changing market dynamics. The inefficiencies associated with state-owned
enterprises were further exacerbated by their reliance on inappropriate
capital-intensive technologies and dependence on imported inputs.

Consequently, Botswana's exports struggled to gain competitiveness in the global

market, leading to persistent fiscal and trade deficits. The failure to foster
export-oriented industries hindered the country's ability to generate foreign
exchange earnings and diversify its sources of revenue. This situation had severe
and prolonged economic implications, constraining the country's overall
development and hindering its ability to improve the living standards of its citizens.

Nonetheless, it is important to note that Botswana's economic trajectory has since

deviated from the state-led model. Recognizing the limitations of import
substitution, the government pursued a shift towards market-oriented policies and
diversification strategies. This change in approach, particularly in the 1970s and
1980s, allowed Botswana to leverage its natural resources, such as diamonds, and
promote private sector-led growth.

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Through effective governance, prudent macroeconomic management, and policies
that fostered private sector development, Botswana achieved remarkable success
in promoting economic stability, attracting foreign investment, and diversifying its
economy beyond traditional sectors. The country's commitment to good
governance and responsible resource management has contributed to its
reputation as one of Africa's success stories, but the story is far from over.

Private Sector Involvement

The term "private sector" refers to a wide range of participants in the economy,
including private corporations, households, and non-profit institutions serving
households. In simple terms, it mostly involves for-profit businesses and private
foundations.

However, it's important to note that within the private sector, there is a great
diversity of actors with different interests, contributions, and impacts on the
development process. This includes large multinational companies, small and
medium-sized enterprises (SMEs), cooperatives, and even informal economy
structures.

When it comes to development effectiveness, it is essential to distinguish between

domestic companies and foreign multinationals. Their interests can sometimes
clash, so understanding their roles separately becomes crucial.

Therefore, as Botswana just entered into a momentous deal with the De Beers
group that guarantees efforts towards “accelerating Botswana’s economic
diversification through the creation of a multi-billion Pula Diamonds for Development
Fund, with an upfront investment by De Beers of BWP 1 billion (c. $75 million) and
further contributions over the next 10 years that could total up to BWP 10 billion (c.
$750 million) – which will aim to create substantial additional value to the Botswana
economy.”

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It is important to understand that, in line with the goals outlined in the National
Development Plan (NDP 11) of Botswana, the government aims to maximize the
value derived from minerals through mineral beneficiation. This strategy seeks to
promote private sector development and drive economic growth. Additionally, the
government plans to adopt a cluster-based approach that focuses on sectors where
the economy has a comparative advantage, such as diamonds, beef, tourism,
financial services, mining, education, and health services, and some which aren’t
export driven (meaning we do not possess comparative advantage) such as
agriculture and manufacturing.

SMEs and large domestic companies must in turn take care of their organizational
structures to put themselves in line to fully utilize the benefits presented and work
with the government to achieve set development targets. Various issues have been
presented to assist these enterprises with the service orientation and ensuring
market competitiveness.

For instance, identification and classification of market segments, effective

targeting, and strategic positioning have been identified as the most vulnerable
subcategories across all industries. This entails comprehending the marketplace,
delineating distinct segments using easily recognizable criteria, and directing efforts
towards those segments exhibiting growth potential. Developing customized
marketing strategies, tailoring product offerings, pricing strategies, promotional
activities, and distribution channels to suit each specific market segment becomes
pivotal in positioning the organization favorably.

It has been well noted and researched by (Thembe & Josiah, 2015), and the findings
suggest that the failure of a significant number of entrepreneurs funded by CEDA
(Citizen Entrepreneurial Development Agency) can be attributed to their inadequate
ability to analyze and comprehend the market. Insufficient emphasis placed on the
marketing aspect of business by government institutions responsible for fostering
entrepreneurship, particularly CEDA, has contributed to this situation. Recognizing

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this issue, the Government of Botswana established LEA (Local Enterprise
Authority). This realization holds an essential lesson, highlighting that the marketing
aspect of a business holds equal, if not greater, importance compared to the
production side.

Consequently, strategic Management empowers organizations to concentrate on

their desired destinations, charting a step-by-step path to reach them while
efficiently allocating and leveraging resources. It also facilitates the alignment of
strategic objectives with the organizational structure and operations, ultimately
leading to enhanced performance and return on investment.

Only a limited number of companies possess a comprehensive roadmap, even

among those undergoing growth and aspiring to expand into new markets. Proper
maintenance of financial records, effective financial administration, accurate
product costing, and strategic pricing to ensure satisfactory profit margins,
alongside astute management of working capital are only some of the
pre-requisites the private sector, particularly SMEs, need to tick off as they
strategically position themselves to leverage the opportunities that shall present.

Furthermore, during the growth phase of companies, a notable observation has

been made regarding the absence of competent line managers. This deficiency
hampers the overall functioning of the business. Establishing an effective system
necessitates the investment of skills, time, and resources.

However, companies often prioritize short-term gains, leading them to neglect

investing in their human resources by providing training, aligning competencies
with responsibilities and resources, granting autonomy in decision-making, and
evaluating performance. Consequently, there is a high turnover of staff, resulting in
low productivity and hindering the progress of the business to the next stages.

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In conclusion, as Botswana embarks on transformative initiatives, the private sector
holds the key to driving economic growth and realizing the nation's development
goals.To succeed, businesses must adapt to market dynamics, identify growth
opportunities, and position themselves strategically. Prioritizing marketing,
alongside production, empowers them to gain a competitive edge and seize new
prospects.

Moreover, investing in human resources and supporting young entrepreneurs

fosters innovation and ensures sustainable growth. Let's embrace innovation,
collaborate, and create generational companies that shape Botswana's prosperous
future.The time is now for the private sector to step up, unleash its potential, and
lead the way towards a thriving and inclusive economy. Together, let's make
Botswana's vision a reality!