Botswana’s automotive & component industry overview
As one of the most affluent economies in Southern Africa, with a robust growth outlook, Botswana is home to a growing automotive market. It has a vehicle ownership rate of 206 vehicles per 1,000 people, which is far above the African average of 43 vehicles per 1,000 people.
Botswana’s automotive market is expected to receive a boost in terms of sales growth in the short to medium term due to the development of domestic coal deposits and the unlocking of agricultural opportunities.
Opportunities in the Botswana Automotive Sector
While Botswana acknowledges its relatively limited market size, future demand in the SADC region in particular presents multiple opportunities for investors seeking to tap the automotive and component sector in the region.
Among the key opportunities in the sector are:
- Supply of parts & components to South Africa’s automotive sector
- Supply of replacement parts for vehicles of large-scale projects (e.g. coal, agricultural projects)
- Expansion of existing component manufacturing industries (e.g. batteries, ignition wiring sets)
- R&D services for the automotive sector (e.g. extreme weather & terrain testing)
- Diversification of after-sales services for private & commercial vehicles
- Development of vehicle maintenance service offering for cross-border/regional vehicles
- Establishment of skills development/training facilities for auto mechanics and technicians
The sector’s most promising opportunity is the supply of inputs to the automotive sector in neighbouring South Africa, Africa’s largest vehicle market and manufacturer.
South Africa’s automotive manufacturers produced close to 550,000 vehicles in 2013 and are expected to increase production to 1.2 million units by 2020, providing regional suppliers with ample opportunities to supply components and parts.
Botswana’s value proposition in the automotive & component industry
One of Botswana’s strongest value propositions is its location. It is both in close proximity of the largest automotive market in Africa, as well as the largest automotive manufacturer and exporter in Africa − both being South Africa. Botswana has a delivery time advantage over major competitors in Asia, Europe and North America. In this regard, Botswana has a proven track record in supply to the South African components market, increasing its component exports tenfold in the past 20 years.
Furthermore, unlike some of its peers in the region, labour-employer relations are harmonious. This is a key advantage for the component manufacturing industry, as it allows timely and uninterrupted supply of parts to major automotive manufacturing plants in South Africa.
An additional advantage that Botswana offers is that due to its membership in the South African Customs Union (SACU), its exporters enjoy duty-free access to the South African market. Investors in the manufacturing sector also enjoy one of the most competitive manufacturing tax regimes in the region.
The government’s prioritisation of other sectors including leather, mining, tourism and logistics will lead to the development of synergies between these sectors and the automotive and components industry. This may be very beneficial as input and transport costs are expected to be lowered in the short to medium term.
Recent success story
The recent expansion of Botswana’s ignition wiring set output and exports is testimony to the country’s increasing competitiveness and success in the component manufacturing sector. In 2008, South Africa’s ignition wiring set imports were dominated by Thailand, the US, Romania, the Philippines and Germany. In 2009 Botswana started to supply the South African market with ignition wiring sets and now controls half of South Africa’s ignition wiring set import market.
Robust investment incentives
Botswana offers many incentives for investors. These include:
- No foreign exchange controls; remittance and full repatriation of profits and dividends
- No restrictions on business ownership
- Duty-free import of machinery and equipment for manufacturing purposes
- Customs duty exemption on raw materials for goods going outside of SACU
- A liberal tax regime: 22% corporate and 25% personal tax, with 15% corporate tax for manufacturing and IFSC-registered companies (lowest taxes in the SADC region)
- Negotiable tax holiday (up to 10 years maximum)
- Deductible training rebate of 200%
Beyond incentives, and as one of the most business-friendly and stable countries in the region, Botswana provides investors with a conducive and welcoming operating environment. A high degree of safety and security as well as a strong focus on the rule of law gives Botswana an edge over its regional peers.
Contact the Botswana Investment & Trade Centre (BITC)
For further information and inquiries related to Botswana and opportunities in the automotive & component manufacturing sector, please contact the BITC.
How the BITC can assist you to go further with your investment
Botswana Investment and Trade Centre (BITC) is an integrated Investment and Trade Promotion Authority with an encompassing mandate of investment promotion and attraction; export promotion and development including management of the Nation Brand.
The organisation plays a critical role of driving Botswana’s economic growth through attraction of FDI, domestic investment, facilitation of expansions and further spearheads the growth of exports by promoting locally manufactured goods to regional and international markets.
Of great importance within the role of the BITC is building and maintaining a positive and impressive image of Botswana locally and internationally. Through this encompassing mandate, BITC is committed to assist you through a one-stop-shop with the following services to ensure your ease of setting up and doing business in Botswana:
- Company and business registration
- Trade and business license applications
- Entry visas, work and residence permits
- Work permit exemptions
- Connection of utilities e.g. power, telecommunications and water
- Income tax and VAT registration
- Access to industrial and commercial land
- Facilitation of construction permits
- Allocation of BITC factory space (subject to availability)
- Environmental Impact Assessment (EIA) compliance
- Provision of information on the Botswana business climate, regulatory regime and investment opportunities
- Opening a bank account
BITC is ready to facilitate your investment.
You may also download the Automotive & Component Manufacturing fact sheet for more information.