VZCZCXRO3422
RR RUEHDU RUEHJO RUEHMR
DE RUEHOR #0860/01 1791443
ZNR UUUUU ZZH
R 281443Z JUN 06
FM AMEMBASSY GABORONE
TO RUEHC/SECSTATE WASHDC 3333
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RHMFIUU/HQ USEUCOM VAIHINGEN GE
RHEHNSC/WHITE HOUSE NSC WASHINGTON DC

UNCLAS SECTION 01 OF 02 GABORONE 000860 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
AF/S FOR MUNCY 
 
E.O. 12958: N/A 
TAGS: ECON PHUM BC
SUBJECT: PRIVATE SECTOR FAULTS GOVERNMENT FOR SLOW GROWTH 
 
 
¶1. (U)  SUMMARY:  Despite the Government of Botswana's 
generally liberal economic policies, the business community 
perceives burdensome regulations and rising corruption as 
obstacles to robust growth. Conversations with business 
representatives outside of Gaborone revealed concerns that 
slowing growth outside the mining sector stems in part from 
government failures on these two fronts.  Some suggested 
that the withdrawal of foreign assistance to Botswana as a 
middle income country led indirectly to higher corruption 
via experts brought in from other developing countries to 
replace advisors from donor countries.   While our private 
sector colleagues generally were optimistic about Botswana's 
long term economic prospects and the pro-market orientation 
of Botswana's current political leaders, they believed that 
the GOB could best stimulate growth by getting (further) out 
of the way.  END SUMMARY. 
 
CORRUPTION APPEARS TO BE INCREASING 
 
¶2. (SBU)  Even though Transparency International rates 
Botswana the least corrupt country in Africa, corruption is 
on the increase according to leaders of the Botswana 
Confederation of Commerce, Industry and Manpower (BOCCIM). 
In a June 20 conversation in Francistown, Botswana's second 
largest city, both Mr. Iqbal Ibrahim, President of BOCCIM, 
and Mr. Joshi, a manufacturing business owner, described the 
public tender system as corrupt.  Typically the judgment of 
a single person determines who wins the contract, they said. 
Although boards evaluate bids, members of those boards often 
lack the necessary knowledge and experience to effectively 
assess the tender documents and defer to the opinion of a 
single technical expert. 
 
¶3. (U)  Three members of the Maun Business Council traced 
rising corruption to the loss of Western technical advisors 
pursuant to Botswana's designation as a middle income 
country in 2000.  Often those experts, who came from 
developed economies and found little attraction in the kind 
of bribes potentially available in Botswana, were replaced 
by experts from other developing countries.  Our contacts 
claimed that these expats had imported the practice of 
bribery.  It is becoming common, they complained, to need to 
pay a bribe in order to get permits approved and licenses 
issued. Participants in a June 6 transportation sector 
conference hosted by the American Business Council in 
Botswana complained that demands for bribes by customs 
officials - averaging about P1000 (roughly $200) -- have 
increased as well. 
 
"HOW CAN I STOP YOU TODAY?" 
 
¶4. (U)  BOCCIM members believe regulations are being poorly 
implemented and see mid-level civil servants as the 
culprits.  Politicians, they asserted, generally share the 
private sector's vision of a free market path to prosperity 
and are remarkably accessible.  BOCCIM Vice-President Geoff 
Williams recounted a meeting at which Minister of Lands and 
Housing Ramadeluka Seretse handed out his phone number and 
office hours.  At the middle level, however, officials are 
insufficiently trained to regulate and support an 
increasingly complex economy.   Their rigid reading of laws 
and regulations and reluctance to break bureaucratic log- 
jams makes doing business in Botswana a slower, costlier 
proposition than it need be.   Kevin Leo-Smith, owner of the 
up-scale Kwando mobile safari company, quipped that their 
motto has become, "How can I stop you today?" Leo-Smith has 
encountered numerous problems with work permits, pilot 
licenses, and starting new businesses.  He has had employees 
spend up to five years on waivers which had to be renewed 
quarterly awaiting work and residence permits. 
 
CEDA NOT HELPING THE COMMUNITIES 
 
¶5. (SBU)  Several contacts expressed skepticism at the 
impact of Botswana's Citizen Entrepreneurial Development 
Agency (CEDA). Leo-Smith told of an employee who wanted to 
start his own game-drive business in Chobe, a popular 
tourist destination.  He had a guaranteed contract with the 
biggest and most established safari lodge in the region, 
only to be told by CEDA that his plan was not viable and, 
therefore, would not receive funding.  Iqbal Ibrahim, 
President of BOCCIM, lamented the political influence over 
the appointment of CEDA's board.  He also claimed that board 
members often work as consultants for CEDA applicants, 
raking in fees to put together attractive but inaccurate 
proposals.  Although some contacts detected an improvement 
in CEDA's performance in collecting on its loans, the 
 
GABORONE 00000860  002 OF 002 
 
 
general consensus was that the GOB would do better to remove 
obstacles to entrepreneurship rather than spend money to 
help its citizens overcome them.   A local paper reported on 
June 21 that CEDA had a high rate of bad debts and an 
accumulated loss of P128.9 million ($21.1 million). 
 
¶6. (U)  Private sector contacts affirmed that skilled labor 
remains scarce in Botswana and said government initiatives 
to address that gap frequently miss the mark.  Training for 
workers in the hospitality industry, for example, focuses 
too much on booking flights and accommodation, which 
typically takes place in the tourists' country of origin 
rather than destination.  Rather, he argued, they should 
emphasize operation and management of lodges or safari 
companies.  The Brigades, a network of vocational training 
centers, provides instruction in a limited range of skills - 
mechanical engineering, brick-laying, welding, etc. - but 
produces low-productivity workers who lack an understanding 
of the business context in which their skills can be 
marketable. 
 
LAND ACCESS IS A PROBLEM 
 
¶7. (SBU) Access to serviced land is becoming a significant 
impediment to domestic business growth and to foreign 
investment. Francistown Mayor Buti Billy, along with 
business leaders, attributed lack of manufacturing growth 
and low foreign investment in Botswana to the acute shortage 
of serviced land. BOCCIM Vice-President Geoff Williams 
observed that local land boards, which allocate land, often 
consist of traditional leaders with little economic 
knowledge or business background.  They fail to ensure that 
those who are allocated land have the capacity to pursue the 
development proposed for that property.  The boards also 
fail to enforce the time-frames in which persons allocated 
land are supposed to make improvements according to their 
business plans. 
 
VP KHAMA INVOKES POSITIVE THINKING 
 
¶8. (U)  Vice President Seretse Khama Ian Khama earned the 
praise of our interlocutors as a no-nonsense man who will 
whip an inefficient bureaucracy into shape. Mr. Williams and 
Mr. Ibrahim described Khama as responsive to the needs of 
citizens and intolerant of laxity in the civil service. 
They believed that he had brought into the Cabinet other 
military veterans - Minister of Lands and Housing Seretse 
and Minister of Environment, Wildlife and Tourism Mokaila - 
who have brought a disciplined, pro-market approach to their 
ministries.  Significantly, he was cited as the man to go to 
when the bureaucracy was being troublesome or unresponsive. 
 
COMMENT 
 
¶9.  (SBU)  Overall, our interlocutors were optimistic on 
Botswana's long-term economic prospects.  Several were 
expats who had lived elsewhere in Africa but settled 
permanently in Botswana in part because of its relatively 
open economy.  They appreciated that Botswana's performance 
on corruption and regulation far exceeds most African 
countries.  Nonetheless, they see room for continued 
improvement and even detected the emergence of negative 
trends, including rising corruption and more burdensome 
regulatory requirements.  Many set their hopes on the likely 
next President, Ian Khama, to reverse these trends by 
reforming the bureaucracy.  While he might fulfill those 
expectations, it is also possible that Khama will allow the 
inefficiencies to persist and consolidate his highly- 
personal political following on the strength of his 
reputation as the one person who can move the bureaucracy - 
one personal, loyalty-building appeal at a time. 
 
¶10.  (SBU)  The observation that withdrawal of foreign 
assistance to Botswana following its designation as a middle 
income country indirectly boosted corruption highlights one 
of the dangers of failing to sustain support for governments 
that make wise policy choices.  U.S. interests are better 
served by continuing to support developing countries that 
are making political and economic progress than by 
withholding support until these countries have slid back 
into less developed status thanks to encroaching ills such 
as corruption and poor implementation of regulations. 
AROIAN