The Bank of Botswana – A key player in trade facilitation reforms
Tlotlo Mooketsi
INTRODUCTION
Over the past decades, international trade has largely grown in volume and significance across all countries (World Trade Organization, 2013). However, as trade continues to rise in volume and significance, more trade related challenges and complications also began to rise (UNCTAD, 2015). Some of the prominent trade barriers included technical challenges that emerge at border posts due to bureaucratic procedures and a lack of harmonization on the classification of commodities which all cause delays in clearing goods at border posts.
As an attempt to minimize these trade barriers and maximize trade benefits, several international organizations were established such as the World Trade Organization, as well as regional trade blocs such as the Southern African Development Community (Mooketsi & Mogotsi, 2019).
A key example of such efforts to reduce trade barriers was the adoption of the Trade Facilitation Agreement (TFA) by member states of the World Trade Organization (WTO). After two-thirds of the WTO members formally accepted this agreement, the TFA entered into force on 22 February 2017 with a view of enhancing trade facilitation and expediting the movement, release, and clearance of goods (World Trade Organization, 2021).
Upon ratification of the Agreement, each member of the WTO has to ensure the provisions of the Agreement are applied and put to practice. Botswana, being a member of the WTO, was the eighth member to ratify the WTO TFA on 18 June 2015 (World Trade Organization, 2018). Having ratified the WTO TFA, this article outlines how the Bank of Botswana (the Bank) as a key institution in Botswana, is crucial for the implementation of trade facilitation reforms and how the Bank contributes to trade facilitation reforms in helping Botswana adopt and implement the provisions of the WTO TFA.
SPECIFIC FUNCTIONS OF THE BANK OF BOTSWANA IN RELATION TO TRADE FACILITATION
The Bank of Botswana (the Bank), which is the central bank of the Republic of Botswana, was established in 1975 and has a regulatory role over the financial system of the country. It is further responsible for the implementation of monetary policy and exchange rate policy. Its primary objective is to promote and maintain monetary stability, an efficient payments mechanism, and the liquidity, solvency, and proper functioning of a soundly based monetary, credit and financial system (Bank of Botswana, 2019). In a nutshell, the Bank endeavors to foster monetary, credit, and financial conditions that are conducive for the sustainable economic development of the country (Bank of Botswana, 2019).
Over and above ensuring a stable and sound payments system, it is worth noting that the Bank has another key role of issuing bank notes and coins (currency), which ensures economic units and international traders have the means to carry out and settle economic transactions, which contributes to ensuring the country can participate in international trade.
Two main reasons make the Bank of Botswana crucial for the implementation of trade facilitation reforms: the implementation of the exchange rate policy; and its regulatory role.
Implementing the monetary and exchange rate policy
The exchange rate policy is of particular importance in trade related matters as trade usually involves the payment of goods in foreign currencies. As such, by implementing the exchange rate policy, the Bank is crucial in trade facilitation as it ensures the exchange of foreign currency between trading partners is always reliable. It is further worth noting that if there are any trade facilitation reforms that need to be implemented and involve the exchange rate structure, Bank of Botswana would be the gateway to implementing these as it is mandated to implement the exchange rate policy. This is therefore one way in which Bank of Botswana is crucial for the implementation of trade facilitation reforms.
A regulatory body over commercial banks
Within the Buy-Ship-Pay reference model developed by the United Nations Centre for Trade Facilitation and Electronic Payments (UN / CEFACT), commercial banks are identified as one of the key intermediaries within the trade cycle. Their key role is to help traders pay suppliers for goods and services rendered, as well as to pay customs bodies for tariffs and other related payments. Without these banks as intermediaries, the settlement process between traders and other involved parties would collapse and potentially hinder trade.
Therefore, to ensure there is a stable and reliable intermediation of banks, Bank of Botswana has the responsibility of licensing, supervising, and regulating commercial banks. This ensures they operate within the stipulated rules and regulations that protect them from end consumers from exploitation, and help prevent the commercial banks from collapsing, through for example, setting reserve ratio requirements. All in all, such regulations aim to ensure commercial banks operate effectively which ensures a stable intermediation of banks within the Buy-Ship-Pay model.
Furthermore, as commercial banks develop new payments and settlement processes and products thanks to Fintech advancements, the Bank is mandated to oversee that these are safe, efficient, and reliable before they are implemented, which ensures end-users such as traders are not exploited but rather are able to complete secure payment transactions through such means.
HOW DOES BANK OF BOTSWANA CONTRIBUTE TO TRADE FACILITATION REFORMS?
There are two concrete things the Bank of Botswana is doing to contribute to trade facilitation reforms. These are: the collection and publication of macroeconomic and trade related statistics; serving as an economic and financial advisor to the government; as well as maintaining an efficient and reliable payments system.
Collection and publication of key macroeconomic and trade related statistics
The Bank of Botswana collects key macroeconomic and trade related statistics, such as Botswana’s gross domestic product (GDP) and balance of payments statistics (e.g., total value of exports and imports, currency flows, etc.) which help reveal and understand Botswana’s trade and economic patterns. These statistics are then analyzed and published for public consumption, through means such as the monthly Botswana Financial Statistics. There are also stored in a national database for future reference.
The collection, analysis and publication of these statistics can help in trade facilitation reforms through the creation of a baseline, which would give a general overview on the stance of the country before the reforms are implemented, as well as how certain economic indicators change overtime upon the implementation of the reforms. This plays a vital role in monitoring and evaluating trade facilitation reforms and can help reveal how the reforms have affected trade patterns over time.
Furthermore, the bank also publishes daily foreign exchange rates through its website. The publication of such information is in line with Article 1 of the WTO Trade Facilitation Agreement on publication and availability of trade related information. This information on exchange rates is particularly important because international trade most often involves the settlement of transactions in foreign currencies for the purchase of goods and services. Therefore, by publishing these rates, traders would be informed well on time of the prevailing rates, enhancing the predictability of cross-border trade.
Serving as an economic and financial advisor to the government
The Bank’s Research Department collects data and undertakes research on economic developments and trends to help inform discussions and develop new economic policies (Bank of Botswana, 2007). The Bank then disseminates its research findings through publications such as the Research Bulletin and the Bank of Botswana Annual report for public consumption, and directly submits its policy recommendations to the government.
Through this, the Bank can therefore conduct research on trade related matters and provide key insights on, for example, trade barriers that may exist between major trading partners, shedding light in to potential trade facilitation reforms for the country. Therefore, the Bank can contribute to trade facilitation reforms through its continuous research efforts and policy recommendations on trade related matters.
Maintaining an efficient and reliable payments system
As a central bank, the Bank of Botswana acts as a payment clearing house for all payments conducted through various channels within the economy. The Bank has a legislative oversight of the National Payments System (NPS) of the country and aims to ensure an efficient and reliable payments system at both the domestic and international level (Bank of Botswana, 2021).
This is a particular important function in relation to Article 7 of the WTO TFA on electronic payments. By maintaining an efficient and reliable payments system, the Bank ensures that all trade related payments are conducted swiftly and securely, allowing traders to pay tariffs and suppliers on time, which contributes to reducing the clearance time of goods.
Furthermore, the Bank actively ensures the continuous development of initiatives that support and promote financial technology driven payments operations, allowing for simplification and modernization of payment methods. For example, online electronic payments have been adopted over the years, which has helped traders carry out fast and secure online payments, which has reduced payment queues at border posts. Consequently, this quickens the clearance of goods and contributes to the facilitation of cross-border trade.
Lastly, secure electronic payments can be implemented within online Single Window platforms and also forms an integral part of e-commerce, breaking some of the trade barriers that might occur due to the need of physical payments. Without a secure and efficient payments system, these would be difficult to attain. Therefore, through its function of ensuring a safe, sound, and reliable payments system, the Bank of Botswana contributes to trade facilitation reforms as it ensures the simplification and modernization of payments processes for traders.
Tlotlo Mooketsi
Botswana’s National Trade Facilitation Committee
Born and raised in Botswana, Tlotlo Mooketsi is a young and enthusiastic gentleman who is very passionate about Economics. At just the age of 23, he possesses a first-class Bachelor of Arts degree in Economics obtained from the University of Botswana and was among the top 3 Economics graduates. He has gathered laudable work experience from reputable organizations within the insurance and banking industry, with 1 year 5 months’ work experience as an insurance claims technician at Botswana Insurance Company, and approximately 1 year work experience as a Trainee Economist at the central Bank of Botswana, a position he currently holds. Evidenced by his hard work, diverse skillset, and intelligence, Tlotlo Mooketsi is also a committee member of Botswana’s National Trade Facilitation Committee.
References Bank of Botswana. (2007). Bank of Botswana at a
Glance. Gaborone. Bank of Botswana. (2019). Annual Report 2019. Bank of
Botswana. (2021). Payments Systems. Retrieved from Bank of Botswana:
https://www.bankofbotswana.bw/content/payments-systems#:~:text=The%20Bank%20of%20Botswana%20has,with%20the%20SWIFT%20international%20network.
Mooketsi, T., & Mogotsi, D. B. (2019). A Regional Analysis of
Botswana's Revealed Comparative Advantage. Asian-African Journal of
Economics and Econometrics, 19(2), 281-302. UNCTAD. (2015). Reaping
Benefits from Trade Facilitation. 42. World Trade Organization. (2013).
World Trade Report: Factors Shaping the Future of World Trade. Retrieved
from
https://www.wto.org/english/res_e/booksp_e/world_trade_report13_e.pdf
World Trade Organization. (2018, June 18). Botswana Ratifies Trade
Facilitation Agreement. Retrieved from
https://www.wto.org/english/news_e/news15_e/fac_18jun15_e.htm#:~:text=Botswana%20has%20become
%20the%20eighth,has%20formally%20accepted%20the%20Agreement.
World Trade Organization. (2021). Agreement on Trade Facilitation.
Retrieved from World Trade Organization:
https://www.wto.org/english/docs_e/legal_e/tfa-nov14_e.htm Disclaimer: These articles are contributions from members of the National Trade Facilitation Committees in the framework of UNCTAD e-Learning for Trade Facilitation. The articles may contain advice, opinions and statements of various information providers. The United Nations does not represent or endorse the accuracy or reliability of any advice, opinion, statement or other information provided by any information provider, any User of this Site or any other person or entity. Reliance upon any such advice, opinion, statement, or other information shall also be at the User's own risk. Neither the United Nations nor its affiliates, nor any of their respective agents, employees, information providers or content providers, shall be liable to any User or anyone else for any inaccuracy, error, omission, interruption, deletion, defect, alteration of or use of any content herein, or for its timeliness or completeness, nor shall they be liable for any failure of performance, computer virus or communication line failure, regardless of cause, or for any damages resulting therefrom.
