II. Leading Trade Prospects for U.S. Business A. Consulting and Design Engineering Services and Project-associated Equipment. Provision of design and consultancy services, including feasibility studies, together with the sales of follow-on project management skills and big-ticket equipment during the project implementation phase, remains the area of greatest potential in Botswana for U.S. firms. Major infrastructure development projects identified in the Botswana Government National Development Plan (NDP-7) in the water and power sectors will continue to go forward despite slowed economic growth. Several U.S. consulting firms were short-listed and two won major pre-feasibility studies and consultancies in 1993. This is indicative of the respect shown by senior Botswana civil servants -- many of whom have studied in or made professional visits to the U.S. -- towards American engineering and design skills. An obstacle for U.S. consulting firms: high bid costs A reputation for quality, international experience, and cutting-edge technology are the U.S. design and consulting firm's biggest advantages in bidding on major infrastructure projects in Botswana. High-costs are the major disadvantage. Botswana tender board officials often observe that an unsuccessful U.S. bid was the "Cadillac" among the competing offers: promising more than needed, with resulting high costs. Familiarity with the Southern Africa region and specific project requirements should help deter an interested American firm from building in unneeded extras in a bid proposal. Investing in a pre-bid trip to Botswana to speak to project officials will also serve to "put a face" on a U.S. company and assist in determining what the client really wants, details of which are not always explicit in the project terms of reference. Bidding costs often escalate for U.S. firms due to salary, transportation and logistics costs for professionals to travel to Botswana and live in hotels for extended periods of time. However, the alternative -- preparing the lion's share of a feasibility study in the bidder's U.S. home office -- will not be received well by the Technical Review Board drawing up a short-list for submission to the full Tendering Board. A local partner helps keep costs down. European and South African design and consulting firms with long-established ties to the market through Botswana-based affiliate offices have a strong advantage over U.S. - based firms in this sector: knowledge of key actors, local name recognition, and a ready logistical base which cuts overhead costs in the bid. A U.S. company can level the playing field by forming a partnership with a Gaborone - or Johannesburg - based firm. Early action after notification of a tendering opportunity is vital to find the best partner. The U.S. Embassy can assist in identifying appropriate local associates and making initial business contacts. Financing is key to bidding success An important strategy for U.S. firms to win feasibility studies and follow-on sales during project implementation is to maintain close working relationships with U.S. government trade development promotion offices, in particular the Exim Bank and Trade and Development Agency (TDA), to arrange grant support for their feasibility studies and concessional financing for the sale of capital equipment. B. Trade Opportunity: Heavy Mining Machinery The mining and road construction sectors in Botswana continue to grow with several expansion projects in the pipeline for the next five years. All heavy equipment and machinery for these sectors are imported. Best prospects include earth-moving trucks, dump trucks, bull-dozers, road-graders and fork lifts. Imports of machinery and electrical equipment accounted for 18.8% of total imports in 1992 (the single largest category of imports) and were valued at approximately USD 330 million. The cream of the Botswana market is the mining sector, with sales prospects of plant equipment estimated over USD 50 million. Earth-moving equipment, particularly 170-ton trucks, is the best sales target. About 30 of these may be purchased in the next five years. Approximately 36 pieces of ancillary equipment, including graders and loaders, may be purchased to support expansion programs and replace existing equipment during the same period. Debswana Diamond Company is the main customer for mining equipment in Botswana. Debswana operates the Jwaneng, Orapa and Letlhakane diamond mines which produce over 16.5 million carats every year. There are a number of non - U.S. equipment brands which compete successfully for the market (mining and roads) through locally registered agents and distributors in Botswana. Komatsu and Caterpillar compete equally for all kinds of trucks, especially for front-end loaders and 85 ton trucks. However, Caterpillar dominates the market for bull-dozers. C. Sale of Consumer Telecomms Liberalized. The past 24 months saw the first steps toward liberalization of sales of consumer telecommunications equipment, which had been a monopoly enjoyed by Botswana Telecommunications Corporation (BTC). An agreement in principle was reached by the BTC board in late 1992 to allow private supply of certain ancillary equipment -- cellular telephones, car phones, and pocket-phone service. Still pending, however, is Parliamentary action needed to implement most of the changes in the parastatal BTC's charter. A BTC-owned paging system was introduced in May, 1992, providing initial coverage within a radius of 35 kilometers in central Gaborone and Francistown. Authorized dealers supply alpha-numeric pagers. BTC also opened a retail outlet in December, 1991, offering feature and cordless phones, as a preliminary step towards liberalization of sales to the residential telephone market. Agent/distributor relationships are the best marketing avenue for U.S. companies interested in selling residential/business telecomms equipment. Standardization of a cellular telephone network in Botswana is still some ways off. BTC appears to be favoring the GSM Standard, however. In addition to voice and telex communications systems, BTC is implementing high-speed data communications, based on the X.25 worldwide packet switching protocol, using U.S.- origin Telematic equipment. This market will need a year or two to take off, however, as BTC has preceded the ability of banks and other businesses to utilize this cutting-edge technology. D. Service Sector Opportunities: Off-Shore Banking and Insurance With a stable political and economic environment, a strong and convertible currency, and relative lack of exchange controls, Botswana has the potential to become a center for financial services in Southern Africa. As a banking center, Botswana is well-situated to act as a conduit for the increased flow of investment into South Africa that has followed the demise of apartheid. Exchange controls will likely remain in place in South Africa itself, and South African firms now able to expand may turn to Botswana as their banker for future development there, as well as for expansion into other countries in the region. Considering Botswana's liberal financial and tax regimes, companies investing in South Africa may choose Botswana as their domicile. Another potential growth sector in financial services is that of off-shore banking. Central location, the availability of capital and foreign exchange, good telecommunications and political stability are all ingredients for the development of off-shore banking -- prerequisites that Botswana has already satisfied. The Central Bank, the Bank of Botswana (BOB), is encouraging government review of those remaining obstacles to an ideal regulatory environment for the growth of this industry: a further relaxation in exchange controls, or legislative provisions to allow offshore banks and other offshore businesses exemption from remaining exchange provisions. The insurance (and reinsurance) industry represents another opportunity for U.S. financial companies. The recent establishment in Botswana of a credit-rating service will facilitate the availability of export credit insurance, and will give Botswana greater credibility in international markets. Since reinsurance rates are determined on world markets, with further foreign exchange liberalization, Botswana reinsurers will be able to compete internationally. Only two insurance companies are presently operating in the country. Consumer banking services for Botswana's small economy, traditionally a condominium shared by two U.K. banks, (Standard Chartered and Barclays), has become a crowded market due to liberalization of the sector in 1991 and the subsequent entry of three new commercial banks. Better opportunities for U.S. service sector companies are in the personal/property insurance and financial consultancy fields, the latter in support of Botswana's five year old stock market. The Botswana stock market now trades in shares from only twelve companies, but the trend is toward greater trading expansions. E. Tourism: With Careful Selection, Some Gems. Good potential for U.S. hotel/tourism firms exists in the small but lucrative tourism sector in Botswana. The Government of Botswana will spend USD 23 million in the next five years to promote and protect its environmental gems: the pristine ecological reserves of the Okavango Delta and Chobe National Park. An additional USD 8.6 million will be spent promoting investment in the development of a wildlife industry (hides, trophies, sport hunting). A new tourism policy introduces several measures to make investment more attractive to U.S. partners: increasing the length of concession leases for safari camps, ending a ban on permanent structures, and establishing a system of grading hotels, lodges, and safari camps that conforms with World Tourism Organization standards. Joint-venture initiatives by Cresta Hotel Group (Zimbabwe) and Orient Express Hotels (U.S./U.K.) in 1993 to substantially upgrade the hotel and safari camps in Chobe and Okavango are a sign of future directions in tourism development. They should provide a small but growing market for U.S. suppliers of transport equipment, "eco-tourism" goods and services, and hotel-related equipment.