IMPLEMENTATION OF THE NATIONAL COMPETITION POLICY IN BOTSWANA

by

Thula Kaira - CEOPresentation to CUTS National Seminar on Need for National Competition Policy for India: How to overcome challenges

18th February 2014Le Meridien Hotel, New Delhi, India

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PRESENTATION OUTLINE1. Introduction

2. Genesis of the National Competition Policy

3. Key Government Actions to implement NCP

4. Challenges

5. What Lessons from Botswana???

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1. INTRODUCTION

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• POPULATION: 2 million (2012)• GDP: US$ 14.14 billion (2013

3rd quarter)• PER CAPITA GDP: (US$ 7,191)• MAIN EXPORTS: Diamonds,

copper, nickel, soda ash, beef and textiles

• GOVERNMENT STYLE: Multi-party Democracy

• INDEPENDENCE: Since 1966• SOURCE: CSO Botswana

FACTS on Botswana

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The Government of Botswana adopted the National Competition Policy for Botswana in

July 2005

The Policy was preceded by an Economic Mapping for Botswana (2002) that noted high levels of structural impediments to industrial

growth. Almost at the same time, a Legislative Inventory of Botswana Laws Relevant for a

Competition Policy was undertaken

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2. GENESIS OF THE NATIONAL COMPETITION POLICY

At the turn of the century, the Govt of Botswana realised that industrial growth was not as expected and the economy largely dependent on mining

Government, in conjunction with UNCTAD, contracted the Botswana Institute for Development Policy Analysis (BIDPA) to map out the economic structure of Botswana in order to identify the key constraints on competition in all sectors of the economy

BIDPA’s detailed Economic Mapping (EM) of the Botswana of market in 2002 informed Govt on policy reform. Key EM findings follow below:

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2.1. KEY FINDINGS FROM THE EM EM confirmed Govt concerns that:→Conditions in the economy were not conducive to

sustainable growth & development→Economic diversification had failed to remove focus on

diamond and beef, leaves Botswana vulnerable - there was need for a broad-based economic structure

→A more diversified economy was generally better able to respond & adjust to shocks

→There was lack of a competitive market structure, with entry difficult in key sectors (with high concentration levels in manufacturing sector with CR3 of 70% in most sub-sectors)

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KEY FINDINGS FROM THE EM cont’d→The private sector had to play an increasing role in

development→For the private sector to thrive, competition had to

be promoted and encouraged→There was need for a more comprehensive policy

and national strategy to develop SMMEs→The non-fuel import bill was too large→There was need for more affirmative citizen

economic empowerment initiatives→Government procurement system was not overly

supportive of local industry development

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KEY FINDINGS FROM THE EM cont’d→While funding of citizen-owned businesses was key to

ensuring an effective spread of benefits, competition policy was vital to sustainable citizen economic empowerment initiatives

→Competition policy should not only ensure the effective implementation of empowerment policy, it should also ensure that citizen economic empowerment is implemented in a competitive environment

→Structure & functions of regulatory & legislative environment should be aimed at promoting competition

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KEY FINDINGS FROM THE EM cont’d→Competition policy should play a crucial role to help

ensure the proper functioning of the economy→Competition policy should also be consistent with

other policies on e.g.,SMMEs, Privatisation, Industrial Development Policy

→Botswana should adopt a comprehensive national policy on competition and a law

→ In addition to the EM, Govt sought UNDP support to carry out another parallel review of the inventory of policies, laws or regulations that had a bearing or impact on competition[ see Inventory of Botswana Laws Relevant for Competition Policy by Prof. Clement Ng’ong’ola of University of Botswana, March (2002)]

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KEY LAWS THAT NEEDED TO BE REVIEWED

1. Companies Act Efficient registration system for local & foreign firms

2. Industrial Development Act Review of the Industrial Licensing Authority & Minister’s arbitrary powers to issue general and exclusive manufacturing licences and revise ID Policy. Review of reservation of certain licenses to citizens

3. Trade & Liquor Act Review the Minister’s powers to revoke a license without reasons/appeal. One year licence span. Manager to be on cite

4. Botswana Meat Commission Act Grants statutory monopoly status to BMC over export of fresh and canned meat and live cattle

5. Control of Goods, Prices & Other Charges Act

Licence applications for goods & pricing as determined by the Minister

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3. KEY GOVT ACTIONS NCP was adopted in 2005 A Competition Act was passed in 2009 An Economic Diversification Drive (EDD) was

established as a dept in the Ministry of Trade & Industry A review of the National Development Plan (NDP 10)

was undertaken Local Enterprise Authority (LEA) was set up The Citizen Entrepreneurial Development Agency

(CEDA) was set up Trade & Liquor Acts were revised to address concerns Telecommunications Act has been repealed & replaced

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KEY GOVT ACTIONS cont’d Various Committees formed, including:

→National Doing Business Committee→Technical Committee on Competition Policy→National Economic Diversification Council→High Level Consultative Council

Quarterly progress reports sent to the office of Minister of Trade, National Strategy Office and the Office of the President

CA given express mandate to advise government on matters of competition (Sect. 5 of the Comp. Act)

Review of the National Development Plan (NDP 10)

High level affirmations Botswana has established a Cabinet Sub-Committee on Doing Business and

Global Competitiveness to oversee the work of the National Doing Business Committee, and are mandated to coordinate applicable reforms. Competition Authority ensures that businesses do not engage in price-fixing, market allocation and bid-rigging: Lt. Gen. S. K lan Khama, President, Botswana

Anti-competitive environment makes life difficult for new entrants, especially small and medium sized businesses… Competition Authority has to ensure that new entrants do not have to put up with undue impediments by existing operators, including laws and regulations :

Dr Ponatshego Kedikilwe , Vice- President, Botswana

…Government is committed to ensuring fair competition. Creating a culture of competition is one of the pre-cursors to competitiveness. There is a growing concern that there should be some form of prohibition of large firms from entering certain market segments: Dorcas Makgato-Malesu, Minister of Trade and Industry, Botswana

4. CHALLENGES

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Assuring the local business community that NCP is in their interests as well, including the SMMEs

There are generally still protectionist tendencies from the local business community, in particular the SMMEs, where they desire and lobby for a discriminatory application of the NCP

Reform process and legal review are matters that are subject to long debates and bureaucracy and may take a long time to be adopted and implemented

CHALLENGES cont’d

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There is general resistance to review policies, laws and regulations that may have been working well for a large or small powerful group of citizen-owned businesses (as happened in the retail and traditional beer sector in Botswana)

The understanding of industrial policy and competition policy and intervention therefrom may bring about different and perhaps conflicting strategies and outcomes

Public expects tangible results from any reform process and this may not be easy to show in the short-term e.g. SMME entry into the supply chain to big businesses or Government procurement

5. WHAT LESSONS FROM BOTSWANA???

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NCP needs the highest political & government support in order for the reform process to be comprehensive and sustainable

Civil Society, academia, industry experts and associations, SMMEs, etc must form part of the constituent consultative assembly when developing an NCP

There are some things that are difficult to change and time must be allowed to take its course and ensure that consensus is reached - where possible

Reform process may require too many committees being formed and Govt of Botswana is currently considering merging some of them

WHAT LESSONS…??? cont’d

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NCP should clearly and deliberately fuse into other policies, laws and regulations that impact on competition and industrial growth

A policy and legislative inventory of all polices and laws that impact on competition and create barriers to growth and development must be undertaken

A national support base must be created for the NCP to be successful - Civil society involvement in advocacy is key

International benchmarking is also an important pre-requisite

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