TRALAC - Trade Law Centre

Botswana: Textile sector eyes P500 million bailout

Friday, 15 February 2013

Source: Mmegi Online

The ailing textile sector is keeping its fingers crossed as the trade ministry prepares a strategy that will accompany the re-tabling of a bailout request to Cabinet for P500 million over five years.

Last year, Cabinet coolly received the initial tabling by the ministry, questioning where the funds would be sourced from in a time of fiscal consolidation and asking for further justification of the request. The new bailout request follows a P38 million rescue package government pumped into the sector between 2009 and 2011, which ultimately secured 5,591 citizen jobs, mostly through wage support.On Tuesday, Trade and Industry Minister Dorcas Makgato-Malesu told BusinessWeek that a textile sector strategy currently being developed by the National Economic Diversification Council (NEDC) would accompany a new attempt at Cabinet consideration.

"I went to Cabinet with this proposal and they asked where the funds would come from and also how sustainable this was," she said during a press briefing. "(As the ministry) we said, 'under the NEDC there's a textile strategy.'Let's take what the strategy says and put it against this bailout proposal so that we can say this is how the sector will perform against the bailout amount.'""It should be that if government grants the bailout, in return the sector will produce these jobs and contribute in this way. After the strategy is produced, that's when I can go back to Cabinet and say 'this is what we have.'" The textile strategy, due out soon, is expected to take the form of a blueprint for the extraction of optimal economic value from the sector on a public and private sector platform.A similar strategy for the leather industry, containing proposals for a P245 million Leather Industry Park in Lobatse, is circulating in senior government circles. That strategy suggests that the P151 million in annual leather imports could be wiped away and replaced with greater exports of processed hides and leather, thus enhancing economic diversification and growth. Makgato-Malesu traced the roots of the textile sector's current request for relief.

"Government came up with a bailout of P38 million and it was given out over two years," she said."As is usual, the private sector came back and asked for an extension. They were now looking at P500 million in total over five years as an extension.Compare that to P38 million over two years."The developments come as latest export figures indicate that textile exports up to November 2012 amounted to P575.5 million compared to the full year 2011 figure of P1.8 billion.During the P38 million bailout years, by comparison, textile exports averaged P1.45 billion, as the government support enabled factories to focus on arranging capital, rebuilding capacity and securing markets.The key US market, guaranteed to local exporters via the duty and quota free AGOA, remained underutilised last year, with only one firm able to export. Boosted by the entry of Asian investors eager to tap into AGOA, the textile sector has generally been a fragile sector where market availability has not always been matched by technical or financial capacity. The 2009 global recession jolted the sector while the removal of a key Southern African Customs Union (SACU) trade provision further eroded the industry's viability.

 

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