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Gaborone, Botswana

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Botswana car market slows down

The country’s used car market which has grown significantly over the past decade, is apparently slowing, and this figure is expected to decrease due to declining consumer demand and legislative changes. 

The recently published Botswana Transport and Infrastructure Statistics for the third quarter of 2019 shows that the number of registered vehicles increased to 18,081, an increase of 4.9% compared to the second quarter, which is the largest increase in over a decade.

The growth in the third quarter was due to the dynamics achieved in the second half of 2019, when the number of registrations increased by 29% to 17,239, which is a significant improvement over the sluggish growth in the first quarter.

As in the case, car registration was caused by high demand for used imported vehicles, representing 84.9% of registrations, while brand new cars contributed 15% to the total number. South Africa, which is Botswana’s main trading partner, was responsible for 82.5% of brand new cars that arrived in Botswana.

Available public data show that demand for used cars began to decline. Although the number of  vehicle registrations has grown by 65% between 2008 and 2018, the last five years have reflected a slowdown. In 2015, registrations increased by 11.2%, then decreased to 9.5% in 2016, and weakened even more in 2017 with an increase of 5.5% and ended in 2018 with a growth rate of 4%. 

The slowdown was due to lower incomes, higher unemployment, and most recently regulatory crack downs. The Botswana Unified Revenue Services (BURS) has raided used car dealers, trying to get custom duties from businesses that allegedly underestimate their bills, resulting in lower taxes.

Importing cars outside the Southern Africa Customs Union (SACU) entails a 25.0% import tax  plus a 12.0% value added tax (VAT), which increases spending by 37.0%. Car dealers say that strict adherence by BURS to its valuation methods will lead to higher car prices, which will affect sales. 

Currently, also borders closure with all imports locked due to the coronavirus pandemic is expected to decrease sales significantly. Supposedly, Botswana borders remain closed for 3 weeks, and there is not a single confirmed case yet, however, there is no certainty whether these restrictions will be lifted without further prolongation in order to keep the country safe. 

Along with the car industry, Botswana's core diamond industry is expected to be seriously affected by the coronavirus pandemic. 

Buyers usually come to Botswana several times a year for sales organized by De Beers, a leading global diamond corporation. But the travel prohibition means that buyers will not be able to attend the diamond sale, scheduled for March 30.    

Maclean Letshwiti, a diamond trader from Gaborone, says that the industry will suffer. It is likely that most factories will run at half capacity if the virus persists.

The diamond industry has already faced poor sales in the Chinese market due to an outbreak of coronavirus. De Beers Group Chief Executive Officer Bruce Cleaver said in a statement that sales were projected to fall by approximately 40% from January to February. Because of the outbreak of COVID-19, people are not buying as much as they would like. The demand for diamond jewelry will be weaker over the next few months. 

Botswana is the largest diamond producer in Africa and the second largest in the world after Russia, which accounts for more than 80% of the country's foreign income. 

The outbreak came at a terrible time for an industry already experiencing a disastrous 2019. De Beers made its smallest profit in more than a decade last year after an excess of rough and polished stones destroyed profits for key industry intermediaries who cut, polish and trade them. 

Such a huge decrease in the country's major industry will definitely have an impact on the other sectors of the economy, including car sales, and how severe the impact will be we are all about to see in near future.


Published on 25.03.2020 by AutoGuide.co.bw

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