'Botswana textile sector relies on US & EU tax incentives'

29 May '13

2 min read

The textile and apparel exports of Botswana, a landlocked country located in Southern Africa, may continue to decline due to the withdrawal of tax incentives by the US and the EU under the Financial Assistance Policy (FAP) as the country is depending on preferential tariffs, according to a research report by the Botswana Institute for Development Policy Analysis (BIDPA).

The research report prepared by Mr. Roman Grynberg and Mr. Masedi Motswapong of BIDPA states that Botswana’s textile and garment industry has benefitted from trade preferences and it remains to be seen whether the sector can survive without such preferences.

Botswana established the textile and clothing industry during the period 1980-90 and the sector expanded rapidly as a result of the trade preferences available to it under the Southern African Customs Union (SACU) agreement, the Cotonou agreement and the African Growth and Opportunity Act (AGOA).

The research report states that the textile and garment sector of Botswana grew by making use of a number of policies including protective tariffs, quotas and export incentives. Furthermore, the preferential trade regimes put in place by the US, the EU and SACU were crucial to the economic growth and development of the country.

“The textile and clothing industry of the country did not perform well after the financial crisis in the US and the EU, which led to laying off of workforce by several Botswana firms,” according to the report.

In order to boost the growth of textile and apparel sector of the country, Botswana Government developed a special support program to resuscitate the industry. The special program set aside a total of P38 million during 2010-2011 period.

However, BIDPA research report states that whether the subsequent rise in textile and garment exports from Botswana can be directly attributable to the government subvention cannot be readily determined.

According to the report, if the Government wishes to further develop the textile and clothing sector, then the policies and interventions need to be put in place to secure the sector's productivity and competitiveness.

“Bostwana Government needs to first address whether the sector will survive the inevitable further erosion of trade preferences and if so, the interventions need to be revised and focused on those firms best able to survive in the longer term,” the report concludes.

Fibre2fashion News Desk - India

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