Presented by

Ernest Somolekae
Local Enterprise Authority
30 June 2023
Email Contact: esomolekae@lea.co.bw
 BOTSWANA’S TEXTILE
INDUSTRY CAPACITY BUILDING
WORKSHOP
Interventions Geared Towards Promoting
Sustainable Business Growth

‘CLUSTERING’
 Presentation Outline
• Background Challenges of the Textile Industry in Botswana
• Definition
• Clusters and productivity
• Clusters and Economic Development
• Why Clusters
• Resources available for clusters
• Advantages of Business Clusters
• Disadvantages of Business Clusters
• Summary & conclusion
Generic Challenges of the Textile
Industry in Botswana
• Difficulty in accessing of raw materials
• Difficulty in accessing funding
• High rental spaces
• Fragmented SMME operations
• Shortage of technical and management skills
• Disjointed associations
• Lack of support from other institutions
• Obsolete machinery
 Definition & Focus
Definition

• “Clustering” is the tendency of vertically and/ or horizontally

integrated firms in related lines of business to concentrate
geographically.

A business cluster is where many businesses from the same industry or of a

similar nature operate in a given area.

Economic Focus

• Competitiveness for SMEs in a globalised economy

• Competitive peer pressure to innovate
• Co-operation and competition
• Specialised labour force/ concentration of industry-specific skills engaged in
learning
 Detailed Definition
What Is a Cluster?
Clusters are geographic concentrations of interconnected companies and
institutions in a particular field. Clusters encompass an array of linked industries
and other entities important to competition. They include, for example, suppliers
of specialized inputs such as components, machinery, and services, and
providers of specialized infrastructure. Clusters also often extend downstream to
channels and customers and laterally to manufacturers of complementary
products and to companies in industries related by skills, technologies, or
common inputs.
Finally, many clusters include governmental and other institutions—such as
universities, standards-setting agencies, think tanks, vocational training
providers, and trade associations—that provide specialized training, education,
information, research, and technical support.
 Clusters and Productivity
Being part of a cluster allows companies to operate more productively in sourcing
inputs; accessing information, technology, and needed institutions; coordinating
with related companies; and measuring and motivating improvement.
Access to Specialized Information.
Extensive market, technical, and competitive information accumulates within a
cluster, and members have preferred access to it. In addition, personal
relationships and community ties foster trust and facilitate the flow of information.
These conditions make information more transferable.
Better Access to Employees and Suppliers.
Companies in vibrant clusters can tap into an existing pool of specialized and
experienced employees, thereby lowering their search and transaction costs in
recruiting. Because a cluster signals opportunity and reduces the risk of relocation
for employees, it can also be easier to attract talented people from other locations,
a decisive advantage in some industries.
 … productivity
Complementarities.
A host of linkages among cluster members results in a whole greater than the
sum of its parts. In a typical tourism cluster, for example, the quality of a
visitor’s experience depends not only on the appeal of the primary attraction
but also on the quality and efficiency of complementary businesses such as
hotels, restaurants, shopping outlets, and transportation facilities. Because
members of the cluster are mutually dependent, good performance by one
can boost the success of the others.
Complementarities come in many forms. The most obvious is when products
complement one another in meeting customers’ needs, as the tourism
example illustrates. Another form is the coordination of activities across
companies to optimize their collective productivity.
Clusters as tools for local and
regional economic development
• Create favourable political, legal and economic framework
conditions benefiting SMEs in general

• Cluster policies as example of pro-active industrial policy with

shared responsibilities among actors

• the agglomeration of firms and their suppliers can confer

competitive advantage to the enterprises
involved.
 Why do clusters occur ?
The economic drivers of cluster formation in particular industries
can include:

• proximity to markets. Despite low-cost international transportation, being

near to markets can be important in cluster development (products that are
not easy to transport, that require continuous interaction with customers)

• supplies of specialised labour. The existence of specialised pools of labour,

such as occur around many universities;

• the presence of input and equipment suppliers. A high frequency of

exchanges between co-located capital goods producers and users
 …why clusters

• the availability of specific natural resources; economies of scale in

production. Such economies may allow only a small number of efficient-
scale plants in a given market;

• the availability of infrastructure. Some types of infrastructure may also be

quite specific, such as with certain transport or tourist facilities, further
encouraging agglomeration;

• low transaction costs. When firms and their suppliers operate near to
each other, and the frequency of interaction is high, the costs of
negotiation and contract enforcement may be reduced.

• superior access to information.

What can enterprises in clusters share?

Joint:
• Product and market information
• product design
• marketing
• training, recruitment services, human resources, skills upgrading
• purchasing (lower prices for raw material and supplies)
• transportation and delivery
• quality control
• testing facilities
• equipment and infrastructures
• financing (credit guarantees at collective level), sponsorships achieve what
enterprise alone can' t achieve
What are the Advantages of Business
Clusters for Businesses?
Increased Productivity
By being close to other similar businesses, a company can easily access a broad range of relevant goods, services,
knowledge and infrastructure. This will allow it to reduce the time needed to do tasks related to their business.

Increased Innovation
In a business cluster businesses can more easily collaborate with related businesses because as they are close by.
This can assist a company with the creation of new products or services.
More Customers
More customers will go to the cluster area as there is a large range of similar products and businesses.

Increases Business Visibility

Small businesses are seen by more people because they are near other similar big businesses.

Improved Brand Perception

People might link a business with the quality of other products from the cluster in which it trades. E.g. Consumers
may think a wine is good because they know the region it is from makes good wine.
What are the Advantages of Business
Clusters for Customers?
Cheaper Prices
Having many similar businesses close to each other creates competition.
Competition is good for customers as it drives down prices.

Broader Range of Products or Services

Where there are more businesses there are more goods and services for the
consumer.

Comparison Ability
Consumers can easily compare similar products and substitutes because the
businesses selling them are close together.
What are the Disadvantages of
Business Clusters for Businesses?
Increased Competition
Operating in a business cluster can be hard for businesses because of the increased competition. Businesses
operating in a cluster all compete for customers, resources, services and talented employees.

Commercial Spaces at a Premium

The best office or retail spaces in a cluster area will be even more sought after. This demand results in high rental
prices.

Knowledge of Employees
Employees will always retain some specialised business knowledge from their time in the business. Therefore, if a
business loses an employee to a competitor they also lose that business knowledge to the competitor.

Loss of Proprietary Knowledge

There will inevitably be a lack of secrecy surrounding a business’ innovations or new launches because many
employees will be working in close proximity to employees of competing businesses.
What are the Disadvantages of
Business Clusters for Customers?
May Limit Access to Businesses
Successful business clusters may reduce the number of certain businesses
operating in other locations. This may reduce consumers access to such
businesses in locations other than that of the cluster.
Summary & Conclusion
 The End

Empowering the entrepreneur

To start and grow their business.