Botswana Investment Guides
Botswana Investment Climate Statement
The Government of Botswana is committed to creating an attractive climate for foreign investment. Credit ratings received from Moody’s and Standard and Poor’s for Botswana were the highest given to an African country, ranking it equally with other successfully developing economies like the Republic of Chile, Czech Republic, and Hungary. Botswana has a strong and well-managed minerals economy, coupled with a long record of political and macroeconomic stability. Botswana’s per capita income of roughly USD 5,300 as of 2005/06 makes it a middle-income developing country.
The Government and the private sector in Botswana increasingly acknowledge the need for significant foreign investment, which will require a privatization strategy of state-owned enterprises. While this policy is not without its political and ideological opponents, the Government is committed to maintaining Botswana's position as one of the developing world’s most competitive economies and to attracting serious foreign investors to enhance efficiencies, productivity, and secure transfers of skills and technology. Efforts are now focusing on developing the country’s service sector through the International Financial Service Center (IFSC) and Botswana’s unique tourism potential, as well as making the agriculture sector, especially beef, more competitive, productive, and efficient.
Botswana continues to develop a regulatory framework favorable to investors. The Government abolished all foreign exchange controls in February 1999. It has undertaken largely successful efforts to combat crime, including corruption. The Government has instituted low corporate tax rates, the increasingly speedy processing of applications for business ventures, a stable macroeconomic environment, and a commitment to transparency. In 2006, the Ministry of Trade and Industry announced that it had taken measures to simplify and expedite the issuance of work and residence licenses, although evidence of arbitrary implementation and occasional politicization of the process appears to be on the rise. The Registrar of Companies has progressed in implementing its commitment to reduce the turnaround time to register a company from twelve weeks to ten working days. In addition, the Government provided assistance to investors through investment incentive schemes, including grants and tax relief.
The Botswana Export Development and Investment Authority (BEDIA) is an autonomous organization established in 1998 to promote investment in Botswana with a special emphasis on export-oriented manufacturing industries. BEDIA serves as the primary government contact point for both domestic and foreign investors. Through its One Stop Service Center, BEDIA provides services for investor needs and aftercare to both new and existing foreign and citizen-owned enterprises. The Center focuses on enabling investors in both the manufacturing and service sectors to secure all clearances and approvals as quickly as possible under one roof. BEDIA promotes the sectors through incoming and outgoing missions as well as through direct mailing campaigns in the targeted markets, such as the European Union, South Asia, and southern Africa. BEDIA is increasingly reaching out towards the United States as a source for foreign investment and is eager to work with established businesses seeking to expand their operations into Botswana.
In order to help position Botswana favorably in the face of increased global competition for FDI, BEDIA is in the process of developing a national FDI strategy including the drafting of a FDI Bill, which will articulate the country’s investment climate. BEDIA continues to support and give momentum to efforts towards attracting FDI and developing export markets including a branding exercise to create a comprehensive ‘Brand Botswana’ strategy for Botswana, which was launched in November 2007.
Trade liberalization and investment promotion remain key elements of Botswana’s trade policy framework and its development strategy. The Government’s main objectives are to promote export-led industrialization and to diversify the economy away from diamonds into non-traditional goods, such as textiles, clothing, leather products, glass products, information technology, pharmaceutical, and tourism.
The foreign investment climate in Botswana calls for foreign investors to be law-abiding, identify with Botswana's national principles and objectives, assist in the diversification of the economy, and share Botswana's commitment to maintenance of a democratic, open and non-racial, society. Botswana has little tolerance for corruption.
All foreign investors wishing to invest in Botswana are required to register a company in Botswana in accordance with the Companies Act and comply with other applicable legislation, transfer technology to Botswana, and transfer skills to Batswana by promoting their involvement and participation in positions of supervisory, middle and senior management levels in the company in an effort to localize the companies within an agreed period. There are no ownership transference requirements. These initiatives are aimed at securing citizen involvement in the development of Botswana’s private sector.
The Government of Botswana is aware that for Botswana to be competitive in both the regional and global markets there is a need to continue to create a favorable environment for private sector investment and growth by both domestic businesses and foreign direct investors. The 2005 Competition Policy prevents and redresses anti-competitive practices and conduct by firms, encourages competition and the effective use of resources, promotes investment, and reduces prices. With assistance from the United Nations Development Program (UNDP) the Government now has a National Competition Policy in place and is drafting a Competition Bill. In addition, the new Companies Act will create an updated, simplified and clarified framework for incorporating companies.
While generally open to foreign participation in its economy, Botswana does reserve some sectors solely for citizen participation and has a number of citizen-empowerment programs that are closed to foreign investors. Most were imposed by Parliament out of a fear that other non-citizen African and South Asian residents were opening businesses in areas traditionally controlled by Batswana. The restrictions are not retroactive, and businesses in existence prior to the law's passage remain in the hands of their non-citizen owners. In addition, many foreign investors have continued to invest in certain areas, such as gas stations, through franchising to Botswana citizens.
The Ministry of Trade and Industry, which has responsibility for licensing businesses, issues licenses to foreigners to operate businesses related to these areas whenever there has been any ambiguity as to whether the licensing prohibition applied. At present, the law prohibits foreign participation in school furniture manufacturing, and the welding and bricklaying trades. The law limits the following trades or businesses to those ventures wholly controlled by Batswana:
- hawkers and vendors
- butchery and fresh produce
- general trading
- petrol filling station
- bottle stores (liquor stores)
- bars other than those related to hotel establishments
- chibuku (traditional beer) bar
- village type restaurant take-away including restaurant liquor license
- supermarkets, but excluding chain stores and franchise operations,
- simple specialty operations such as clothing boutique, footwear, etc.
- Government building projects
- registration as building contractor
- building projects up to P 150,000 (USD 25,000)
- maintenance and minor building works of government properties
- Road contracts and railway maintenance
- fencing, reserve and draining, culvert construction, transport and plant hire, clearing and scrubbing bush, road marking, carting gravel, bridge painting, stock piling of material
- Industrial activities
- school furniture, uniforms, ordinary cement and baked bricks, ordinary bread baking, sorghum milling, burglar bars
- transportation of mail, purchase furniture by local authorities and government, procurement of uniforms, overalls and dust coats by government, local authorities and parastatals.
In February 2006 the Government imposed an indefinite suspension on the issuance of new licenses and transfer of licenses for importers/exporters, wholesalers, specialized wholesalers, and specialized dealers in an effort to curb the potential abuse of the specialty trading licenses for the operation of general dealerships, which are reserved for Batswana citizen companies.
The Ministry of Trade and Industry has taken an expansive interpretation of "chain stores" to mean any store with more than one outlet and has allowed the exemption to apply not only to supermarkets, but also to simple specialty operations and general trading stores. Hence, large general merchandise markets, restaurants, and the dominant grocery network, all owned by foreigners, operate without restriction. Foreign investors are allowed to participate in all other sectors. Business licenses are issued following a routine review of proposed commercial activities, which is carried out in a transparent and non-discriminatory manner. There are no stringent screening mechanisms for licensing that could cause an impediment to investment, limit competition, or protect domestic interests at the expense of foreign investment.
Foreign investors are given equal access to general investment incentive schemes for medium and large projects in most economic sectors. Foreign investors do not, however, have access to Botswana Government assistance loans and grants designed for citizen-owned contracting firms or for small enterprises, defined as those involving investments of less than Pula 75,000 (approx USD 12,500 ). Investment of foreign capital in job-creating industrial projects, particularly those that have an import substitution component or have export potential, is strongly encouraged.
The Government is continuing to reorganize and restructure some Ministries and Departments, with the aim of improving efficiency and effectiveness of service delivery, and is moving towards privatizing a number of parastatal businesses. Part of the reform development has required the Government to establish autonomous authorities or boards, working largely on commercial principles. One of these is the Public Enterprise Evaluation and Privatization Agency (PEEPA), established in 2000 to oversee the implementation of the Privatization Policy. PEEPA will ultimately decide the extent of foreign participation in the privatization process and determine the mechanics that will be used to promote citizen participation. The Government intends to use privatization as a tool to increase foreign direct and portfolio investment in the country, while on the other hand addressing the concerns that privatization will cost jobs and only reward wealthy foreign interests.
The Ministry of Finance, to which PEEPA reports, welcomes foreign participation in privatized companies, as, in addition to capital, foreign investors bring advanced technology, managerial expertise and useful market connections. The Ministry has also stated that local investors may be given preference in some instances; "restrictions may need to be imposed on foreign participation in certain companies for strategic or other reason that will be considered on a case-by-case basis."
The 2005 Privatization Master Plan provides the Government with a concrete basis for implementation of different privatization-related activities in a systematic manner. As part of the preparations for implementation of the Privatization Master Plan, PEEPA is carrying out extensive diagnostic reviews covering the performance of public enterprises. The privatization of national airline Air Botswana, which was Botswana’s first test at privatization, was not successful after many attempts and is now currently on hold. Future plans according to the Privatization Master Plan are to privatize Botswana Telecommunications (BTC) by 2009, and involve the private sector in the expansion plans of Botswana Vaccine Institute (BVI). The Government intends to proceed with the sale of its stake in the Botswana Building Society and has instructed PEEPA to proceed with the privatization of the National Development Bank.
Despite the well-intentioned Privatization Master Plan, privatization remains controversial in Botswana, as evidenced by the repeated failure to privatize Air Botswana. The main concerns are the potential job losses in the affected enterprises, and the reduction in services provided, especially to poorer households. The other concern relates to the sale process, particularly in regard to who will be able to buy the privatized assets and how the proceeds will be used.
The ability of PEEPA to push through the privatization of state-owned enterprises is hampered also by its legislative restrictions. There is no privatization implementing legislation, meaning the decision for privatizing particular parastatals still rests with the Ministries in question; a situation that has led to some inertia in moving the privatization process forward.
Conversion And Transfer Policies
Botswana has abolished exchange controls, which enhances Botswana’s competitive position as a regional investment destination. In addition, the abolition of exchange controls has allowed for further development of Botswana's financial markets through the creation of new portfolio investment options. This new change in policy has necessitated the development of government capacity to monitor data on capital flows so as to provide early warning signals of potentially destabilizing activity. Commercial banks are required to have investors complete basic forms indicating name, address, identity, purpose and details of the beneficiary prior to processing investors' transfer requests or loan applications. The Ministry of Finance monitors data collected on the forms for statistical information on capital flows, but the form does not require Botswana Government approval prior to the processing of a transaction and does not in any way delay capital transfers. Other government agencies also monitor large international capital inflows so that appropriate policies can be implemented to reduce any destabilizing effects on the economy.
There are no restrictions on converting or transferring funds associated with an investment into a freely convertible currency and at a legal clearing rate. Investors are allowed to remit funds through financial institutions. To encourage portfolio investment, develop a domestic capital market, and diversify investment instruments, non-residents are able to trade in and issue Botswana Pula-denominated bonds with maturity periods of over one year, provided such instruments are listed on the Botswana Stock Exchange. Foreigners can hold shares in Botswana companies.
Residents are permitted to invest overseas and borrow offshore. Travelers are not restricted to the amount of currency they may carry on their person or in their baggage, but they are required to declare to customs at the port of departure any cash amount in excess of Pula 10,000 (USD 1,667.00). All quantitative limits on foreign currency access for current account transactions have been removed. Dual listings are permitted on the Botswana Stock Exchange. Botswana's "Letlole Saving Certificate" (the equivalent of a U.S. Treasury bond) can be purchased only by Botswana citizens.
The government permits the establishment of foreign currency denominated accounts in Botswana (in U.S. dollars, British pound, German marks or South African Rand). Businesses and other bodies incorporated or registered under the laws of Botswana may open such accounts without prior approval from the bank of Botswana. The government also authorizes the issuance of foreign currency denominated loans.
Upon disinvestment by a non-resident, the person is allowed immediate repatriation of proceeds of up to Pula 100 million ($25 million), and if the money exceeds that amount, the excess may be required to be repatriated in tranches over a period not exceeding three years. This measure is intended to attract foreign investment and to allay fears such investors may have about their money if they wished to disinvest and repatriate proceeds.
Investment returns such as profits and dividends, royalties, franchise fees and service fees can all be repatriated without any quantum limit. There is no difficulty in obtaining foreign exchange. Although amounts exceeding Pula 1 million require referral to the Bank of Botswana, it is highly unlikely that such a severe shortage of foreign exchange could occur as to lead the bank to block transactions. With international reserves of approximately $5.7 billion, Botswana will not experience foreign exchange difficulties in the foreseeable future. The Botswana Pula is, for all intents and purposes, freely convertible.
Expropriation And Compensation
The constitution of Botswana prohibits nationalization of private property. The government of Botswana has never pursued a policy of forced nationalization, and we have no reason to believe that it would consider expropriatory actions.
The Botswana constitution provides for a judiciary, which is independent of both the executive and legislative authorities. Civil law is based on Roman-Dutch law while criminal law is built on familiar tenets of the English legal system. The legal system is sufficient to conduct secure commercial dealings. Foreign and domestic parties have equal access to and standing under the judicial system. Botswana courts will, in general, accept and enforce decisions of a foreign court found to have jurisdiction in a given case. However, due to a caseload backlog, some U.S. companies facing legal challenges have expressed impatience with the resolution of disputes.
Botswana has written and consistently applied commercial and bankruptcy laws. Secured and unsecured creditors enjoy the same rights under bankruptcy proceedings as they would in the United States. Botswana is a member of the International Center for the Settlement of Investment Disputes (ICSID) and the Multilateral Investment Guarantee Agency (MIGA), and as such accepts binding international arbitration of investment disputes.Last Updated on Tuesday 15th December 2009