Botswana: Country and Foreign Investment Regime

Botswana Population

The population is estimated at a little over 2 million, and is made up of Tswana (or Setswana) 79%, Kalanga 11%, Basarwa 3%, and other (including Kgalagadi and white) 7%.

Some of the population has indigenous beliefs but 72% are Christian. English is the official language, and Setswana is also widely spoken.

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Botswana Government

The bi-cameral Parliament consists of the House of Chiefs (a largely advisory 15-member body consisting of the chiefs of the eight principal tribes, four elected subchiefs, and three members selected by the other 12 members) and the 57-seat National Assembly in which members serve five-year terms.

National Assembly elections were last held in 2009. The Botswana Democratic Party won 45 seats and the Botswana National Front won 6 seats. The next elections are due to be held in 2014.

The head of state and head of government is Seretse Khama Ian Khama; his deputy is Vice President Mompati Sebogodi Merafhe. The Cabinet is appointed by the president, who is elected by the National Assembly for a five-year term.

There is a well-developed legal system based on a mixture of civil and common law, as well as African tribal customary law. There is a High Court and a Court of Appeal. There are Magistrates' Courts in administrative districts.

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Botswana Economy and Currency

Botswana is a stable democracy with an excellent track record since independence in 1966. Botswana has been one of the world's fastest growing economies since 1965 with average 9.2% growth as against South Korea with 7.3% and China with 6.7%. However, growth dipped below 5% in 2007/8 and the economy shrank by an estimated 5.2% in 2009. Through fiscal discipline and sound management, Botswana has transformed itself from one of the poorest countries in the world to a middle-income country with a per capita GDP of USD14,000 in 2010.

Botswana is a member of the Southern African Customs Union (SACU), an economic grouping free of tariffs that also includes South Africa, Namibia, Lesotho and Swaziland. It is also a member of the Southern African Development Community (SADC), and serves as the headquarters of the regional organization that has a market of 200 million people.

Botswana has consistently invested a high proportion of its budget on education and skills training. The country has a thriving domestic financial sector, which includes banks, insurance companies and a growing stock market. Botswana has acceded to international conventions and is strictly observing internationally accepted guidelines on combating money laundering and financial crime. Transparency International, in its Corruption Perceptions Index of 2010, rated Botswana to be the least corrupt country in Africa, and 33rd least corrupt in the world on this score.

GDP at purchasing power parity was estimated at USD28.49 billion in 2010. Diamond mining has fueled much of Botswana's expansion and currently accounts for more than one-third of GDP and for four-fifths of export earnings. Tourism, subsistence farming, and cattle raising are other key sectors. Unemployment is a problem and there remains considerable poverty; high rates of HIV infection are also a challenge to the government.

Botswana's currency is the pula (BWP). One US dollar was worth 7.56 pula in November 2011. In February, 2004 the Pula was devalued by 7.5% but then appreciated by 12.8% against the US dollar by the end of 2004. A new exchange rate regime introduced in late May 2005 reversed the cumulative real appreciation of the Pula since the year 2000. The new regime, called the crawling band, also entailed widening of the margins between the Bank of Botswana foreign exchange buy and sell rates.

The Pula is divided into 100 Thebe (t). The word 'Pula' means rain and 'thebe' means shield. The shield appears on the national coat of arms. There are no foreign exchange controls in Botswana. Two major investment services rank Botswana as the best credit risk in Africa. Standard and Poors and Moody’s in 2003 gave Botswana an investment grade sovereign credit rating higher than any other sub Saharan African country, and this 'A' rating was maintained in 2011.

In June, 2004, a World Economic Forum Africa Competitiveness report rated Botswana as Africa’s most competitive nation. Botswana’s top position in the Index results from the fact that the country achieved the highest scores with regard to the state of its public institutions and the condition of its macroeconomic environment. In its 2011 report, the World Economic Forum ranked Botwana on the same competitiveness level as the North African average, meaning it is performing better than most sub-Saharan countries.

In June 2007, a joint report by the US-based Heritage Foundation and Wall Street Journal rated Botswana among the top three African economies. In a report which surveyed over 40 countries, Botswana, alongside Mauritius and South Africa, was rated as one of the continent’s freest economies.

The 2008 'Doing Business' report by the World Banks and IFC placed Botswana in the top ten of countries which achieved the most regulatory reforms helping business between June 2007 and June 2008.

According to the 2009 Corruption Perceptions Index, Botswana ranks 1st in Africa and 37th in the world in terms of transparency.

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Botswana Entry and Residence

All visitors entering Botswana must hold a passport that is valid for at least six months, except those with United Nations Convention travel documents. Visitors must also have outgoing travel documents and sufficient funds to finance their stay. Visas are not required by British Commonwealth citizens, and nationals from EU member states, the US, Switzerland, Mauritius, and a number of other countries.

Valid entry visas for the countries which do require them may be obtained from Botswana's various embassies and high commissions abroad. In countries where Botswana is not represented, visas may be obtained from the British High Commission. Entry visas obtained at border posts are valid for a maximum of 30-90 days. Extensions may be obtained from any immigration office in Botswana. No visitor is allowed more than a 90-day stay in every calendar year, unless permission has been granted in the form of a waiver pending the outcome of a residence permit application.

Requirements for visa application include (at the time of writing):

• Waiver from Labour and Immigration department.
• Copy of acknowledgment slip for residence permit application.

In June 2010, The Minister of Labour published an amendment to the Immigration Act which will result in streamlined processing of residence permits for certain employees in the International Financial Services Centre (IFSC). The changes apply to IFSC employees who hold the following positions:

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Botswana Business Environment

Botswana has invested in a world-class multi-service telecommunications system that facilitates provision of services remotely. Botswana is readily accessible by road from Cape Town, Johannesburg and Durban, as well as from the other neighbouring countries like Namibia, Zimbabwe, Zambia and Mozambique. Electricity and water supplies for industrial use are readily available.

There is a wide range of incentives for business:

There is a corporate tax of only 15% for manufacturing enterprises and profits, dividends and capital can be readily repatriated. (Botswana has foreign exchange reserves to the tune of USD9 billion, representing 28 month's imports). (See Direct Corporate Taxation and Personal Taxation.) VAT was introduced in 2002, replacing an existing sales tax regime.

Botswana is an Associate Member of the European Union, whereby products manufactured in the country enter the EU markets free from duties and quotas. As regards the United States, Botswana suffers no restrictions on exports of textile products; at the same time, a large number of other manufactured products benefit from the GSP Scheme.

Major credit cards, including Visa, MasterCard, American Express and Diners Club, are accepted widely. Most hotels and lodges accept foreign currency or travellers' cheques. There are also Exchange bureaus at major border posts. Credit card cash advances are available in major cities through Barclays Bank or Standard Chartered Bank.

At the time of writing, there are 8 commercial banks in the country, with branches in major towns and many main villages: Barclays Bank of Botswana, Standard Chartered Bank, First National Bank, Stanbic Bank Botswana, Capital Bank Limited, Bank Gaborone Limited, African Banking Corporation of Botswana and Bank of Baroda.

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Botswana Stock Exchange

The Botswana Stock Exchange is a small but thriving exchange located in Gaborone, Botswana. The market was established in 1989 and became the Botswana Stock Exchange in 1995. It is governed by the Botswana Stock Exchange Act. All listings were initially included in the only index, the Botswana Share Market Index, which is weighted according to the volume of shares in issue and the current bid price. However, as the market developed and diversified in terms of domestic companies and dual foreign companies listed, the need for additional markets indicators arose. Three distinct indices were introduced to reflect the market diversity and these are; domestic company index (DCI), foreign company index (FCI) and the all company index (ACI). As well as equities, BDC bonds and Investec Floating Rate Notes are traded. Private investors are estimated to account for under 10% of the total market capitalisation.

The number of companies listed on the Botswana Stock Exchange increased from 16 in 2001 to 30 in 2010, market capitalization, including domestic and foreign companies, was just under USD56bn, this was a 16% increase on December 31, 2009. The number of listings stood at 30 at the end of 2010, consisting of 21 domestic listings and 9 foreign listings.

The Government has proposed to repeal the Botswana Stock Exchange Act and replace it with a Securities Act, which will provide for trading of all types of bonds in the Stock Exchange, modernise trading through the introduction of electronic clearing, settlements and record storage, streamline the governance of the Stock Exchange by defining the roles of different stakeholders, update the capital requirements for members of the Exchange, and introduce provisions to deter market manipulation and inside trading. According to the exchange's 2009 annual report, the new Securities Act was slated to be introduced during 2009 but appears to have been put on hold.

In June 2004 seven medium and long term Quasi-government bonds valued at P1 billion were listed on the stock exchange increasing the total value in the bond market four-fold to P1.8 billion.

The licensing authority for brokers in Botswana is the Ministry of Finance. Membership may be corporate or individual.

Trading occurs by the open outcry system, and settlement is on a T + 5 basis for both local and overseas clients.

As part of the BSE’s strategy to develop the capital market, a major development underway at the BSE is the implementation of a Central Securities Depository (CSD), which commenced in October 2007. This implementation of the CSD will bring prompt, efficient clearing and settlement of trades and the reduction of risks inherent in the process. The CSD was implemented in 2008.

With the introduction of the CSD, the settlement cycle was tightened and the BSE shortened it to T+3 in conforming to international standards and to reduce settlement risk. The CSD also made it possible for the BSE to record and analyze trading information more efficiently thereby assisting in the deployment of its marketing strategy more effectively.

Subsequent to implementing the CSD, the BSE hopes to commence to work on implementing an Automated Trading System (ATS). This development will support the BSE’s marketing initiatives by making it easy for both Botswana and Foreign investors to trade on the BSE. It was originally intended that the ATS would be implemented in 2009, but this was pushed back to 2010 and at the time of writing the BSE plans to complete the process by December 2011.

In addition, the BSE Act of 1994 is to be replaced by the Securities Act and was due to be put before Parliament in summer 2011 but appears to have been delayed. Once in force, the Securities Act will set up an appropriate operational and regulatory legal framework in efforts to align it with International Best Practice and cater for innovations in financial markets around the world. The exchange is also involved in the development of more instruments which are more than traditional shares (equities) to be listed in the exchange, and in July 2010 listed the Newgold ETF which had risen by 6.9% by the end of December 2010.

There is a 15% withholding tax on dividends, reduced by the 2011/2012 budget to 7.5% with effect from the 2012 tax year, although IFSC companies are exempt; Capital gains tax is 15%, but, again, IFSC companies are exempt.