Now is the time to invest.

While international globalisation may ne sending shivers down the backs of many African countries, Botswana has grasped the nettle and has embarked steadily towards rapid industrialisation.

The pace of industrialisation is expected to increase from this year on. 1997 marks the beginning of Botswana's new development plan which aims specifically at diversifying the economy away from reliance on diamonds and the huge revenues the government accrues from its own capital.

The most crucial economic and political issue facing the country is finding employment for the army of school-leavers who join the labour pool every year. Thus the emphasis is on labour-intensive sectors such as manufacturing, textiles and tourism.

To achieve its ambitious growth targets and fulfil its social obligations, the government has set out with a will to woo foreign investors. The task of persuading investors, spoilt for choice in terms of locations world-wide, to invest in Botswana is the province of the Trade and Investment Agency (TIPA).

Talk to any of TIPA's officers and they will tell you that no other country in the world offers better terms or greater promises of profit for the investor. While this is touchingly exaggerated, they are not too far off the truth.

Botswana is arguably the most politically stable country in Africa and last year registered the 11th-fastest growth in the world. It has huge foreign reserves, equal to an astonishing 23 months export cover, a convertible currency, a number of investment incentives and the most liberal exchange controls in Africa.

With a population of 1.5m, Botswana does not provide a sufficiently attractive domestic market for foreign investors so the orientation is towards manufacturing for export.

Although Botswana is land-locked, it occupies a very central geographic position in Southern Africa. It is bordered by South Africa, Zimbabwe, Namibia and Zambia. Angola, Mozambique, Malawi, Lesotho and Swaziland are all within reach. Collectively, these countries form a solid trading block and an expanding market.

As a member of the Southern African Customs Union, Botswana enjoys duty-free access to some of the most lucrative markets in Africa. Exports of vehicles assembled in Botswana are a case in point. In 1993, vehicle exports formed only 2.3% of all exports at a value of P102.2m. In 1996, this had gone up to 14% of all exports at a value of P1.2bn and constituted the country's second-highest foreign-exchange earner.

Vehicle exports are expected to increase sharply when Hyundai Botswana's completely-knocked-down (CKD) assembly plant becomes fully operational in April next year.

Some 95% of vehicles assembled in Botswana go to South Africa, where there is a large and willing market. Import duties of 125% on new cars in South Africa persuaded Hyundai to build its first assembly plant in 1993. SACU regulations allowed Hyundai to assemble semi-knocked-down vehicles and export them to South Africa at less than a third of the duties levied on finished imported vehicles. By 1996, Hyundai was producing 3,000 cars a month.

Hyundai's state-of-the art saloons, complete with all the trimmings including power steering, stereo systems and air conditioning became such a hit with the public that they captured some 10% of South Africa's car market. This so worried the South Africans that they began poring over the small print in SACU regulations. The upshot was that the South Africans demanded a quota of 1,000 cars at the lower tariff and the full higher duty levied on finished units for the remainder. They claimed that the assembly plant in Botswana was "only sticking wheels" on otherwise finished units and thus undercutting cars assembled in South Africa.

The alternative was to assemble cars from CKD units and compete on a level pegging with South African assemblers. Undaunted, Hyundai set about converting its plant for CKD and the first cars should roll out early next year.

The success of Hyundai Botswana and other assemblers, such as Leading Auto which produces Volvo trucks, is ample proof that the sub-regional market, judicially tapped, can be very rewarding indeed.

As a signatory to the Lome Convention, Botswana also enjoys duty-free access to the European market and quota-free preferential access to North American markets. This has led to a number of foreign textile manufacturers, mainly from Asia, setting up factories at places like Selebi-Phikwe and other urban centres. They produce flannel shirts, tee-shirts, denim jeans, sports wear, blankets and other goods for the European and American markets. A small number of computer-related industries are also being set up but the shortage of skilled manpower is proving an obstacle and it will be some time before Mauritius-style hi-tech industries can be introduced.

Following a review of the institutional set-up of TIPA, the government has decided to transform it into an independent statutory body with full autonomy to undertake its investment and export promotion mandates and leave other activities, such as the provision of one-stop investment services to the Ministry of Commerce and Industry.

Missions by TIPA to such countries as Mauritius, Malaysia, South Korea, Belgium, the USA and China have resulted in a number of new projects in pharmaceuticals, polyethylene foam sheets, foam tubes, rods and mats while assessments into the use of palm oil and leather and construction materials is going on.

At independence in 1966, there was hardly any manufacturing in Botswana; today, there are over 650 medium to large-scale enterprises and some 25,000 people are employed in the sector. Products include beverages, bread, building materials, chemicals, furniture, meat products and textiles. Vast scope for further investment exists in leather and leather goods, processed meats, shoes and boots, outdoor clothing and equipment, sports goods such as footballs, brake linings, clutch plates, windscreens and assembly items such as television sets, computers and radios.

In addition to the usual investment incentives such as tax holidays and remissions on import duties, Botswana also offers financial incentives to both local and foreign investors in certain areas of the economy.

The Financial Assistance Policy provides grants for capital, training and unskilled labour to businesses involved in import substitution, export promotion, employment creation and some linking services and tourism. Grants range from P1,000 per unskilled job created, to around 40% on capital and up to 50% on training costs.

In an effort to support indigenous entrepreneurs, the Government introduced a Local Procurement Programme from April this year. Under the programme, a proportion of government's supplies procurement will be channelled to local small and medium-scale organisations. The scheme is to be operated on a pilot basis for three years.

Given this spate of activity, it is clear that the gloves are now off and Botswana has well and truly embarked on the path of industrialisation. For businesses that want to get in on the ground floor for what promises to be one of the most exciting industrial adventures in Africa, this is the time to invest.

RELATED ARTICLE: BSE performance best in the world

Stockbrokers Botswana Limited is currently the sole registered stockbroker in Botswana, and is responsible for the trading functions of the stock exchange.

Stockbrokers Botswana Limited began trading in June 1989 with five companies capitalised at P120m. A flurry of listings plus upward price movement increased the capitalisation to P225m within six months, over which period the index rose 49%. This was followed by two and a half years of strong advances.

However, late in 1992, high interest rates and depressed conditions in both the diamond industry and the economy in general resulted in the index retreating over the next year. The pickup in activity from the second half of 1993 can be associated with the Botswana Development Corporation reducing holdings in listed companies and domestic institutions shifting their investment focus to foreign equity markets. Both made scrip available to foreign investors and in the 12 months to August 1994, foreign buying accounted for 75% of secondary market activity.

Activity in the stock market in 1994 was dominated by the Botswana Insurance Holdings Limited rights issue and the effective listing of the two commercial breweries. Market capitalisation was up 53% from P669m to P1,021m. The index opened the 1994 year at 279 and closed the year up at 13% at 314. The December 1994 the Mexican stock market collapse and general lack of liquidity and unease about emerging market funds adversely affected Botswana. However, in the second half of 1995, there was improved interest in the Botswana Stock Market and the BSM all-share index reached an all-time high of 332 at the end of December.

The formalisation of the Botswana Stock Exchange Act of 1994, and implementation of a fully fledged stock exchange was the highlight of 1995. The long-awaited listing of Metro Sefalana Cash & Carry (Metsef) took place in August and increased the number of listings to 12.

The BSE all-share index went up 5.8% in Pula terms in 1996 but down 18% in US Dollar terms as the Pula fell against the major currencies. As a result of rapid depreciation in the currency, foreign investor activity slowed. Liberalisation of capital accounts allowing Botswana life insurance and pension funds to invest 65% of their assets outside the country in 1996 led to all- new cash flows being invested offshore. Secondary market activity slowed considerably, P99m shares were traded in 1996 and 76% of that volume was the BDC's divestment in Sechaba and Sefalana.

The Bank of Botswana's approval of dual listings on the BSE at the end of 1996 was a further indication of the gradual liberalisation of exchange controls. Liquidity was generally tight, due in the case of Barclays, Engen, Pep, First National Bank Botswana, RDC, Metsef and Stanchart to large controlling interests and long-term institutional holdings, while Sechaba and Sefalana have substantial floats and remain fairly liquid.

1997 has seen substantial increased interest in domestic stocks. The year started with the voluntary liquidation of KYS, which resulted in reasonable-sized blocks of listed shares becoming available to investors. Good corporate results, increased liquidity and a greater general interest in Southern Africa as an investment location have resulted in the Domestic Companies Index rising over 75% in the year up to July 1997, making the BSE one of the top performing stock exchanges in the world.

The year was also marked by the first dual listing on the BSE, with De Beers and Regent Undervalued Africa Fund leading the way. Other dual listings include McCarthy Retail, Forbes and Avis and Profum.