The manufacturing sector in Botswana is relatively small due to a small domestic market as well as the fact that South Africa supplies most of the country's needs. The manufacturing sector accounts for an estimated 5% of Botswana's GDP, although employing more labour than the mining sector.
This sector is seen as having the most growth potential and the government's objective is to diversify away from mining and cattle ranching to the development and processing of other raw material resources in order to increase its export trade. An example is the Soda Ash Industry which has stimulated local manufacture of detergents, potash and fertilisers, while the production of copper and nickel boosts local production of electrical components.
The Botswana Development Corporation (BDC) promotes industrial development through project identification, joint venture partnerships and site developments for small manufacturers. The BDC has interests in: sugar, furniture, clothing, milling, beer, packaging and handicraft.
Apart from meat processing, Botswana had no manufacturing activity at its independence in 1966. By 1995 there were some 630 medium to large scale manufacturing enterprises registered in Botswana, 200 owned by citizens, 300 by non-citizens and the remainder being joint-ventures.
The majority of manufacturing enterprises are located in the urban areas, specifically around Gaborone. Manufacturing activity includes textiles, building materials, household products, beverages and vehicle assembly operations.
Botswana's motor industry is the second-largest net foreign exchange earner after minerals. The Korean automotive manufacturer, Hyundai Motor Distributors is now the country's largest industrial exporter. Other vehicle assembly operations are carried out by the Swedish Motor Corporation and Leading Auto Engineering which assembles Scania buses and trucks from completely knocked-down kits and is soon to commence production of a limited range of Chevrolet vehicles, chiefly for the South African market.
Currently, by-products from the country's main economic activities of mining and livestock production have been little exploited. The manufacturing sector is open to foreign investors and offers opportunities in the manufacture or assembly of garments, paper products, leather goods, jewellery, packed and processed meat, computer assembly, bottling facilities, household equipment, and office and household furniture.
The motor industry sub-sector is one of the government's priority sectors through which it hopes to intensify its economic diversification efforts. This sector offers the following manufacturing opportunities : vehicle assembly, tyre manufacturing, leather finishes, paint manufacturing, batteries, and spare parts manufacture.
Botswana has access to regional and international markets through its membership of numerous international trade agreements. There is free movement of goods within the Southern Africa Customs Union (SACU). Customs and excise duty tariffs are set by South Africa and applied throughout the SACU although Botswana has the right to levy additional duties on imports to protect new industries. To qualify for a certificate of Botswana origin, at least 25% of the production cost must be represented by materials produced and labour performed in the country.
Over the next decade there will be a reduction in protective tariffs and a dismantling of non-tariff barriers. South Africa has also agreed to abolish its export incentive schemes that subsidised exports outside the SACU. These changes will result in Botswana no longer having to face unfair competition from South Africa in exporting to non-SACU countries.
