The ban that Botswana and Namibia imposed on the import of South African citrus and vegetables is a strong political “win” for the two countries, but economically it puts them on the losing side, says Donald MacKay, CEO of XA Global Trade Advisors.
In short:
- The real reason Botswana and Namibia have closed their borders to South African vegetables and citrus may have less to do with protecting domestic markets than with scoring political points.
- Botswana earns most of its income from mining diamonds. This leaves it vulnerable to price fluctuations and drives up inflation.
- Botswana claims it wants to empower local farmers and promote its economy through the closure. Yet most of its domestic citrus production is not intended for the local market and is exported.
MacKay said in an opinion piece that measures seen domestically as promoting the local economy and employment are viewed abroad as protectionism. “It does more harm than good, but governments gain considerable political capital from it.”
The ban that the two Southern African Customs Union (SACU) members placed on the import of vegetables such as potatoes, tomatoes, carrots, cabbage and lettuce was implemented in December 2021 and extended for another two years in December 2023. No notice was given about the extension.
“Our ban on imported vegetables is a powerful step to promote our local farmers and economy. This initiative empowers Botswana by promoting self-sufficiency and improving people’s livelihoods,” President Mokgweetsi Masisi said on X when the ban was extended and a two-month citrus ban was announced.
But is that really the reason for the ban?
MacKay says Botswana is almost exclusively dependent on the diamonds it mines, which means economic diversification is essential. “But it’s really difficult to get right, for the same reason Saudi Arabia struggles to wean itself off its oil dependency.
“If your country has minerals, it’s like having money in the ground, and very few other products weigh up against the economic value added by simply extracting the minerals from the ground.”
With just one mineral, every price fluctuation has major consequences for Botswana’s economy. “The price rises and cash flows into the country, which causes your exchange rate to fall. Then it’s cheaper to import products than to manufacture them locally. So logically you will import.
“When the price of the mineral falls, which still costs the same to mine, you earn just a fraction of the income, your exchange rate weakens, inflation rises, and there are no local industries to protect you against it.”
Thus, economic diversity, just like a diversified personal investment portfolio, can reduce the risk of price fluctuations.
MacKay says SACU member countries are totally dependent on South Africa for the customs union’s industrial policy, but there is no indication that they are involved in any meaningful way in the formulation and implementation of the policy.
“Worse still, South Africa has actively undermined their economies in its master plans developed for certain industries over the past five years. But they can do nothing about it because they are also dependent on the income allocated to them according to the SACU formula for sharing income within the union.”
The answer, as South Africa and many other countries worldwide have found, is to close your borders to free trade. “This is no small decision for any of the SACU member countries, because their slice of the pie gets bigger the more they import from South Africa. Botswana earns up to 30% of its total income from this and Namibia up to 32%,” says MacKay.
If Botswana wants to implement its strategy successfully, without the benefit of import duties that South Africa levies against the rest of the world, it must produce its own vegetables and citrus more competitively than South Africa.
According to MacKay, prospective citrus farmers in Botswana have established trees and started harvesting. “As far as I could determine, most of these citrus fruits are exported abroad, including to America, the European Union and Asia. What remains goes to the Southern African market. There is no significant domestic market.”
Yet it is its domestic market that Botswana has closed to South African products. With this, it risks its income from SACU membership and access to the rest of the union, especially the South African markets.
“It’s a poor economic strategy that won’t improve just because the story the politicians tell sounds good,” says MacKay.
Instead, Botswana should concentrate on expanding its export markets and increasing its competitiveness. “The local market can take care of itself.”
