4.
4 The role of manufacturing industries in Botswana’s economy
An industry is a type of work that produces goods/services that aid in the production of goods.
4.4.1-Types of manufacturing industries in Botswana
Manufacturing industries combine two or more raw materials to give a nished product which is
di erent from the raw materials used, while processing industries change raw materials into
nished products which resemble the raw materials used.
In Botswana there are small scale industries ( eg textiles, pottery, weaving, blacksmith) and large
scale manufacturing industries ( eg automobiles production, iron and steel manufacturing, oil and
gas production)
Characteristics of small scale and large scale industries
Small Scale Large Scale
Labor - Semi-skilled - Skilled
- Use traditional skills - Work done by machines
- Employ mostly women
- Work done by hands
- Labor Intensive (more manpower needed)
Capital - Little capital invested Large capital invested
Raw materials - Local raw materials used - Raw materials are the imported
- Few raw materials needed - A lot of raw materials needed
Location - Mainly located in rural areas eg - Mainly found in urban areas eg
sorghum milling meat processing, car assembly,
brewery
Output - Few products produced - Goods produced in large quantities
- - Goods are exported
Products sold locally eg by the roadside,
hotels etc
Machinery - Simple tools are used - Rely heavily on machines
- Modern technology used
Building - Use small premises eg backyard - Operate in large buildings eg
factories
Power - Need little power - Need more power for lightning,
heating/cooling and operating the
machines
Waste - Produce little waste - Produce more waste
4.4.2- Factors in uencing the location of manufacturing industries in Botswana
Industries are located where they are likely to be more pro table. A number of factors are
considered before an industry can be established. They include:
1. Availability of raw materials - These should be available and cheap. If raw materials are bulky/
heavy and the goods produced are light, it is wise to locate the industry close to source of the
raw materials to reduce transport cost. eg coal for electricity.
2. Availability of market/demand - For nished goods to be sold there has to be a high demand
for the goods produced. The size of the market is determined by the population size and
purchasing power. Most industries are located in towns where there are lots of working
people.
3. Availability of Labor/skills - Some industries are labor intensive ( need a large number of
workers ) and therefore need to be located where labor is readily available. Eg mining and
agriculture
4. Availability of capital - It is needed for purchasing raw materials, construction of buildings,
buying and maintenance of machinery and paying laborers.
5. Availability of infrastructure - Roads, railway lines, communication networks are essential for
the production of goods. Inputs and outputs need to be transported to and from factories.
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Buildings/factories need to be well maintained, serviced and secured for production.
Technology needs to be developed as well.
6. Government Policy - It emphasizes controlled development within designated areas,
particularly industrial parks and special economic zones, to foster economic diversi cation
and growth. The policy encourages manufacturing through incentives, infrastructure
development, and skills development initiatives, while also addressing challenges like limited
domestic market size and competition. The government also gives loans, subsidies and
technical assistance.
7. Availability of land - Flatland/ landscape is necessary for easy transport and to cater for
expansion/growth (,and large land)
4.4.3 - Economic impacts of manufacturing industries in Botswana
Manufacturing industries play a vital role in a country's economy. For Botswana, which has
historically relied heavily on diamond mining, growing the manufacturing sector is crucial for
building a stronger and more diverse economy.
- Statistical trends and reasons for the trends
* Low GDP Contribution: Manufacturing generally contribute
s a modest 5-7% to Botswana's GDP, signi cantly less than mining or services. While it saw a
peak in 2014, it has uctuated.
* Moderate Employment: It accounts for a larger share of formal employment than its GDP
contribution, around 7-10%, indicating it's relatively labor-intensive.
* Limited Exports: Manufacturing output is primarily for the domestic market, with exports still
heavily dominated by diamonds (nearly 90%).
Reasons for the Trends:
* Why it's low (Challenges):
* Small Local Market: Limits demand and economies of scale.
* Import Competition: Faces strong competition from cheaper or better-quality imports.
* Skills Gap & Productivity: Shortage of skilled labor and lower productivity.
* Infrastructure Issues: Historically, inconsistent power and water, and "red tape" have increased
costs and hindered operations.
* Reliance on Diamonds: Historical focus on mining meant less diversi cation.
- Skills development Factories and associated businesses create many di erent types of jobs.
Manufacturing provides employment for both skilled (e.g., engineers, managers) and unskilled
workers (e.g., assembly line workers). This helps reduce unemployment, provides income for
families, and improves people's living standards. The Botswana Chamber of Mines is even
targeting 12,000 new jobs in manufacturing in the next two years!
- Increased Contribution to GDP (Gross Domestic Product):
GDP is the total value of goods and services produced in a country in a year. Manufacturing adds
to this national wealth. While still relatively small (around 5-6% of GDP in recent years), a growing
manufacturing sector means Botswana is producing more within its borders, contributing to
overall economic growth and prosperity.
- Export Earnings and Foreign Exchange: When Botswana manufactures goods and sells
them to other countries, it earns foreign currency (like US dollars, Euros).
This foreign exchange is essential for Botswana to buy goods and services from other countries
that it cannot produce itself (like certain machinery or specialized technology). It also strengthens
the country's nancial position. While diamonds still dominate, the aim is to increase
manufactured exports.
- Development of Infrastructure:
As manufacturing grows, there's a need for better roads, railways, ports, electricity, water supply,
and telecommunications.
This improved infrastructure bene ts not only the manufacturing sector but also other industries
and the general population, making the country more attractive for further investment.
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- Skills Development and Technology Transfer:
Manufacturing requires speci c technical skills. As industries develop, workers are trained, and
new technologies are introduced into the country.
This leads to a more skilled workforce and helps Botswana adopt modern production methods,
improving productivity across the economy.
4.4.4 Challenges facing manufacturing industries in Botswana
While manufacturing has many bene ts, Botswana's sector also faces challenges:
- Skills Gaps: Despite e orts, speci c technical skills might still be lacking in certain areas,
requiring more investment in education and vital role in a country's economy.
- Capital - Many manufacturing businesses, especially Small and Medium-sized
Enterprises (SMEs), struggle to get loans from commercial banks. Banks often require a strong
track record, signi cant assets, and detailed sales projections, which new or smaller
businesses may lack. Limited access to capital hinders businesses from investing in new
machinery, expanding their operations, buying raw materials in bulk, or even covering day-to-
day running costs. This directly limits their ability to grow and compete.
- Market (Limited Size and Competition):
- * Small Domestic Market: Botswana has a relatively small population, meaning the local
demand for many manufactured goods is limited. This forces businesses to look beyond
Botswana's borders for sales.
- Competition from other countries: Local manufacturers face signi cant competition from
imported goods, particularly from South Africa, which has a much larger and more established
manufacturing base. These imports can often be cheaper or perceived as higher quality.
- Technology (Adoption and Skills):
- Outdated Technology: Many local manufacturing rms, especially SMEs, use older or less
e cient technology. This can lead to lower productivity, higher production costs, and products
that are less competitive in terms of quality or features.
- Infrastructure: (Reliability and Connectivity):
- * Power Supply: Despite e orts, reliable electricity supply can still be a challenge. Frequent
power outages or "load shedding" disrupt production, increase operating costs (e.g., due to
generators), and can damage machinery. Getting new electricity connections can also take a
long time.
- * Water Supply: securing a consistent and su cient water supply is an issue, especially given
Botswana's arid climate. Delays in obtaining water connections are also reported.
- * Transport & Logistics: Major connections to regional and international markets present
logistical hurdles and costs, impacting the competitiveness of exports.
- * Internet Connectivity: improving, stable and a ordable internet connectivity is crucial for
modern manufacturing, especially for adopting digital technologies and e-commerce.
4.4.5 - Strategies for promoting development of manufacturing industries in Botswana
Botswana wants to build a stronger economy beyond mining by growing its manufacturing
industries. Here's how they're doing it:
* Special Economic Zones (SEZs):
These are dedicated areas that o er special bene ts like tax breaks and easy setup to attract
factories and businesses eg special business parks designed to make manufacturing easier and
more appealing for investors.
* Policies and Programs:
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The government is creating rules and initiatives to support businesses. This includes making it
easier to start a business, o ering funding, and ensuring products meet high-quality standards.
* Foreign Direct Investment (FDI): Botswana is actively encouraging companies from other
countries to invest money and set up factories. This brings in capital, new technology, and skills,
and can help access international markets.
* Regional Infrastructure Integration:
Working with neighboring countries to improve shared roads, railways, and power grids makes it
easier and cheaper to transport raw materials and nished goods across Southern Africa.
* Access to International Markets / Export-Led Growth: To truly grow, Botswana's
manufacturers need to sell their goods beyond the local market. They're focusing on exporting,
especially with agreements like the African Continental Free Trade Agreement (AfCFTA), to reach a
much larger customer base.
* Knowledge-Based Economy: This means moving towards industries that use advanced skills
and technology, like processing diamonds into jewelry, rather than just exporting raw materials.
It's about adding more value and encouraging innovation.
* Private Sector Engagement:
The government is working closely with private businesses, which are the main drivers of job
creation and investment in manufacturing. They listen to what businesses need to succeed and
adjust policies accordingly.
* Infrastructure Development: Essential facilities like reliable electricity, good roads, water
supply, and internet connectivity are being improved. These are crucial for factories to operate
e ciently and cost-e ectively.
These strategies aim to make Botswana a more attractive place for manufacturing, creating jobs
and a more diverse economy for the future.
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