International Competitiveness of Botswana’s beef industry

Tebogo B. SelekaPinkie G. Kebakile

Botswana Institute for Development Policy Analysis

Outline

• Introduction• Measuring international Competitiveness• Results- Against SADC countries- Against leading beef exporters• Factors underlying Botswana’s beef industry

competitiveness

Introduction• Beef industry in Botswana plays a key role in the

economy.- It accounts for a large proportion of agricultural value

added.- It is the second leading source of export revenue

after minerals.- It is one of the key sources of livelihood among rural

dwellers – as a source of income and employment (including self-employment).

• However;- Its share of agricultural value added has

declined over time.

- Beef exports have declined

0

10,000

20,000

30,000

40,000

50,000

Year

Quanti

ties (M

t)

0.00

200,000.00

400,000.00

600,000.00

800,000.00

1,000,000.00

1,200,000.00

Real V

alues(

2006

price

s) QTY (Mt)

Real Values

Measuring international competitiveness

• RCA1ij= xij/xnj

• RCA2ij=(xij/xnj)/(xik/xnk)

• RCA3ij=(xij-mij)/(xij+mij)

• NPij=(xij-mij)/pij

• PCij=pij/cij

- RCA=Revealed comparative advantage, x= exports, m=imports, I= country I, j = beef, k= all agricultural commodities, n=set of countries (SADC or leading beef exporters), NP = ratio of net trade to production, PC=ratio of production to consumption, p = production, c= consumption.

Results: Botswana more competitive than SADC countries but its competitiveness has decline over time – RCA2

0102030405060708090

100

Botswana Namibia South Africa Zimbabwe

Ratio of net trade to production

19611964

19671970

19731976

19791982

19851988

19911994

19972000

20032006

2009-0.2

0

0.2

0.4

0.6

0.8

1

Botswana Namibia South Africa Zimbabwe

Ratio of production to consumption

19611964

19671970

19731976

19791982

19851988

19911994

19972000

20032006

20090123456789

Botswana Namibia South Africa Zimbabwe

Botswana Compares well with leading beef exporters by its relative competitiveness has

declined over time: RCA2

19611964

19671970

19731976

19791982

19851988

19911994

19972000

20032006

200905

10152025303540

Argentina Australia Botswana Namibia New Zealand Uruguay

Ratio of net trade to production19

6119

6319

6519

6719

6919

7119

7319

7519

7719

7919

8119

8319

8519

8719

8919

9119

9319

9519

9719

9920

0120

0320

0520

0720

0920

11

-0.2

0

0.2

0.4

0.6

0.8

1

Argentina Australia Botswana Namibia New Zealand

Uruguay USA

Ratio of production to consumption19

6119

6319

6519

6719

6919

7119

7319

7519

7719

7919

8119

8319

8519

8719

8919

9119

9319

9519

9719

9920

0120

0320

0520

0720

0920

11

- 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00

Argentina Australia Botswana Namibia New ZealandUruguay USA

Factors underlying competitiveness: Supply-side factors – cattle population

19791981

19831985

19871989

19931996

19982000

20022004

20072009

20110

500100015002000250030003500

70

75

80

85

90

95

100

Cattle Share of communal

Hea

ds (t

hous

ands

)

Ratio

of c

omm

unal

(Per

cent

)

• Poor productivity indicators - Mortality rates averages 12 percent in communal

system – although they have improved over time- Off-take rates averaged 8 percent under communal

arrangements- Calving rates averaged 57 percent and have

stagnated over time.- Cattle prices declined consistently from 1974 to

2006.- Disease outbreak (FMD).- Recurrent drought

Demand-side factors – increasing domestic demand for beef – Cattle sales for export slaughter declined from 80 to 40 percent

050,000

100,000150,000200,000250,000300,000

0102030405060708090

Total BMC Year

Hea

ds s

old

Shar

e of

BM

C

BMC throughput declined two fold from 1984 to 2012

19661969

19721975

19781981

1984

1987/88

1990/91

1993/94

1996/97

20002003

20062009

0

50,000

100,000

150,000

200,000

250,000

300,000

Year

Hea

ds

Institutional factors: one channel export marketing through the BMC a threat to industry

sustainability

-200000-150000-100000

-500000

50000100000150000200000250000

• Preference erosion in the EU market due to future policy reforms.

Conclusions• Botswana’s beef industry is more competitive

than other SADC countries, but compares well with leading beef exporters.

• Declining competitiveness levels are due to low and stagnant productivity.

• Increasing domestic demand for beef in Botswana, which has resulted in declining exports.

• Future threats include single channel export marketing and possible preference erosion in the EU market.