Botswana's Snacks Import Restriction:Genuine Citizen Empowerment Or Populist Rhetoric?

Yesterday, the government of Botswana through the Ministry of Investment, Trade, and Industry announced the restriction on the importation of maize extruded snacks with import permits only issued if 40% of the monetary value of snacks is sourced locally. This restriction, according to the government, is meant to promote local production, build competitiveness and sustainability of local companies who manufacture similar products, stimulate investment, job creation, and economic diversification in the sector.

On the surface, this decision seems great, especially for local manufacturers who now have one less problem to worry about—competition from mostly South African manufacturers of maize extruded snacks whose brands like Doritos, Nik-Naks, etc have been taking up most of the shelf space in local establishments. The problem however is that, currently, there is only one manufacturer of maize extruded snacks in the country, being one "Worldwide Commodities PTY LTD" trading as "Redo's" based in Tonota. Worldwide Commodities has only one shareholder, an entity called "Meisty Limited" which is incorporated in Mauritius. This entity holds all 780052 shares under Worldwide Commodities. So in essence, it appears that this restriction on maize extruded snacks will create a monopoly for this Botswana incorporated but  Mauritius-owned company.

Seeing that the local maize extruded industry is currently a monopoly, the most important question now becomes, how easy will it be for new local manufacturers to enter such a capital and skills-intensive industry? Even if CEDA loans— which are the main go-to funding source for local entrepreneurs— are much easier to acquire nowadays, how easy will it be for a CEDA-funded startup to compete with a 36-year old industry veteran like Redo's?  How the government will manage to strike a balance between preventing this monopoly and also ensuring citizen participation without easing standards on the quality of products entering the market to accommodate new startups in the industry will be interesting to see.

The intentions behind government's restriction on maize extruded snacks are applaudable but, as the good intentions fallacy states, just because the intentions behind a policy are pure and "good" does not mean the said policy is logical and the right route to go. So much can go wrong with implementing this kind of protectionist policy. For starters, if new manufacturers fail to penetrate and garner significant market share, it can create a monopolistic industry for the current sole manufacturer of maize extruded snacks, creating a snacks mafia in the process. A monopoly would mean that end consumers such as informal traders who sell these snacks for a living will be at the mercy of this monopoly as, without imports, they would have no other alternatives. This might create a sort of snack industry mafia, the same way that restriction of chicken meat imports some years back ended up creating a poultry industry mafia which to this day still tramples on small scale poultry farmers.

There is also the issue of whether the current sole manufacturer of maize extruded snacks has the capacity to meet demand and fill up the void which will be created by the restriction on imports. One can only hope that prior to coming to this decision, government did enough due diligence to ensure that the country does not eventually experience a "snack shortage crisis" and that they did not device this policy as a populist tool to try to convince the electorate that they are serious about citizen empowerment.

To ensure that this restriction does not end up bringing about the forementioned unintended consequences like creating a monopoly in the industry, creating a "snack shortage crisis" and forcing consumers to settle for below par alternatives in the name of supporting local, it is on government to follow it up with a regulatory framework which will ensure that the restriction actually achieves what it was set up to.

Comments

  1. Innteresting one. I am curious about tomatoe market. Do u have an article about this? I am curious about supply and demand. Do you know an article hopefully released this year. Thanks

    ReplyDelete
  2. Interesting one. I am curious about the tomatoe market in Bots. Particularly our supply and demand, but cant find a clear source. Do you have an article on this? Or do you know where I could look?

    ReplyDelete

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