Ailing textiles sector wants bail out

A Special task Team has proposed a raft of incentives which could deliver 10 000 jobs in the sector over a period of five years

Ailing textiles sector wants bail out

The Botswana Textiles and Clothing Association (BTCA) has proposed a number of incentives to the government aimed at resuscitating the ailing textiles sector and creating over 10 000 jobs within five years period.

In an interview with The Business Weekly & Review, the president of BTCA, Banusi Mbaakanyi, said they are currently in talks with the government through a Special Task Team that consists of BTCA itself, Women In Business Association (WIBA), Botswana Exporters and Manufacturers Association (BEMA), Business Botswana, the Local Enterprise Authority (LEA), Botswana Bureau of Standards (BOBS), the Public Procurement and Asset Disposal Board (PPADB) as well as the Botswana Investment and Trade Centre (BITC). The section on the proposed incentives was led by BITC, the organization being the main drivers of both domestic and foreign investment and trade.

The Special Task Team identified challenges in the Botswana textiles and clothing sector, and compiled a report titled “Re-Booting the Economy through the Textiles and Clothing Sector” which has been submitted to the Ministry of Investment, Trade and Industry, specifically the Department of Industrial Affairs (DIA). In the report, Mbaakanyi said the Task Team proposed that in order to resuscitate the textiles and clothing industry, there is need to put in place incentives that will aid the development of the sector and improve its productivity.

“These incentives should be aimed at addressing the major production challenges and therefore serve as a catalyst of development of the sector,” the report reads. “It is recommended that government prioritize subsidies that are not monetary but match those that the textiles and clothing sector in neighbouring countries enjoy and hence can compete more than the local firms,” read the report.

Mbaakanyi said the proposed incentives are targeted at encouraging investment into the textiles and clothing sector to create significant employment opportunities and for sustainability of the industry . Focus is on cost based incentives to support the sector. The incentives will apply to both new and existing textile and clothing manufacturers.

Under Logistics and Customs duties, the task team proposed introduction of a transport allowance at 25 percent of imported raw material and exports outside the Common Customs Area. It further proposed for customs rebates for raw materials and intermediate goods imported outside SACU.

Regarding financing of the sector, the Task Team proposed that there be some loan financing with longer repayment periods. They also proposed concessional funding through loans from the Citizen Entrepreneurial Development Agency (CEDA), as well as introduction of a development fund administered by CEDA which also includes concessional interest rates.  In order to enhance the sector’s competitive advantage, a Supplier Development Programme which aims to develop the capacity of SMEs to supply large enterprises, improve linkages and reduce import bill and develop exportable products is proposed.

The Task Team also proposed a 50 percent grant for the cost of approved tools, machinery and equipment to a maximum of P1,000,000 and an 80 percent grant for approved training and business development services to a maximum of P200 000. An Export Marketing Assistance Scheme aimed at developing export markets for the sector is proposed. Under the scheme, the sector proposes introduction of subsidies for international representation, travel and accommodation for participation at expos and trade fairs, interpretation fees, publicity and advertising fees, product samples, inward buyer missions, patent trademark and copyright registration costs.

Regarding Product Registration in a Foreign Market, they proposed that a 50 percent refund of the total cost of patents, trademarks and quality marks. The BTCA Task Team also proposed what they call Industry Competitiveness Support under which they want a 25 percent preferential tariff on water, electricity, internet and communication costs for the first five years of operation. Since service providers are under obligation to recover costs, the Association proposed that the incentive should be in the form of a subsidy paid directly to the service provider by the government. “The utility providers should come up with appropriate tariffs and propose 25 percent on total cost,” says   the report.

Further, the sector wants an innovation grant for activities involving technology or skills which are above the average existing in Botswana and are likely to enhance the textiles and clothing technological development. BTCA also wants a 50 percent wage subsidy for the next three to five years, as well as a tax subsidy from 15 percent to 5 percent for three years.

“In addition, it is proposed that the import permit on the textile and clothing sector should exclude products that can be produced locally, save for the importation of the raw materials needed for the production of such products. Some of the products include uniforms and protective clothing, and some home textiles (sheets, dusters, masks, bath and dish towels, aprons, elastic cook’s caps, etc.) This instrument should be binding to all who import these items,” BTCCA proposed.

The textiles and apparel sector is seen as a strategic industry with the potential to be the largest employer in the manufacturing sector, moreso that in excess of 80 percent of jobs in the industry are held by women. The sector generates low-skilled, youth-oriented jobs, and thus plays a significant role in the livelihoods creation. Therefore, the textiles and clothing sector has the potential to contribute to the growth of the economy as well as contribute towards Botswana’s economic diversification drive.

In recognition of these, the country has been promoting the growth of the sector from its humble beginnings in the 1980s through the ‘90s which saw a significant growth of the sector, mainly driven by introduction of the Financial Assistance Policy (FAP). During the period 2000-2008, the industry contributed significantly to the economy through foreign earnings from US and EU markets, with export earnings peaking at P2.2 billion in 2007. But today these are currently almost nonexistent save for a small contribution to regional exports. In order to avert a further decline of the industry, the government introduced a Special Support Programme (SSP) after the recession of 2008, to the value of P30 million, which resulted in an increase in exports. However, expiry of the bailout period saw another decline in the industry.

Recent reports indicate that in 2018, exports from the industry stood at P280 million, which is coupled with a steady increase in imports of finished goods as well over the same period. In terms of employment, there has been a significant decrease, from 5,728 workers in 2014 to 4,733 workers in 2018 (BIDPA, 20201).