Doing business in Botswana

Botswana is one of the few countries in Africa that has achieved an economic miracle since independence in 1966. It is a peaceful, democratic country where people of different races religions and creeds live in harmony. Genuine elections have been held at regular intervals since independence. Botswana has been a bastion of political stability in a region of turmoil.

A poor, predominantly agricultural country has been transformed by the mining of diamonds, in 1971, into one of Africa's wealthiest nations with a per capita income of $3,300. The nation boasts a high literacy rate and a flexible, well-educated workforce.

Investment policy
Government policy is to diversify economic growth away from diamonds by encouraging tourism, export manufacturing, and financial services. Its sound economic and fiscal policies have maintained economic growth and low inflation since independence. After record growth rates in the post independence years, growth continued at 9% in the 1990s, though it is slowing in recent times.

Botswana's strong financial position has been recognised recently by being awarded an international sovereign credit rating. It received an A2 rating from Moody's and an A rating from Standard and Poors. These ratings are among the highest for any African or developing country.

Botswana offers a secure environment for foreign capital with liberal and flexible investment policies. There is no restriction on ownership, size of investment, sources of funds, marketing products or methods of training.

Residents as well as non-residents are free to operate foreign currency accounts at local banks. Investors can repatriate dividends and profits from Botswana freely.

Investment requirements
According to the Ministry of Trade and Industry foreign investors wishing to invest in Botswana are required to meet the following conditions:

• Register a company in Botswana in accordance with the Companies Act
• Transfer technology to Botswana
• Transfer skills to the Batswana people by promoting their involvement and participation in supervisory, middle and senior management
• Develop training programmes in collaboration with the Commissioner of Labour

Business licensing
Business licences are granted by the Ministry of Trade and Industry to investors who can produce evidence that they have sufficient funds available on deposit in Botswana. Renewals of licences need certified audited financial statements and accounts prepared in accordance with international financial accounting standards. The processing of applications normally takes four weeks and licences are issued a week later. Among the licences required are:

• Industrial (manufacturing) licences
• Trading licences
• Wildlife and National Parks licences
• Financial service licences

Investment incentives
The government is actively encouraging private sector development through an attractive tax system, by abolishing exchange controls and providing a range of investment incentives. Investors in Botswana can be encouraged by the following:

• The economy is stable, well managed, growing strongly, with low rates of inflation
• No foreign exchange controls including free repatriation of profits, dividends and capital
• A low tax regime — corporate tax is only 15% for manufacturing and certified financial companies and 25% for others
• The highest bracket of income tax is 25%
• The government is committed to promoting economic growth through private sector development
• It adopts a policy of zero tolerance towards corruption. The international organisation Transparency International confirms that the incidence of corruption in Botswana is low.
• Botswana respects the rule of law and protects the rights of private ownership of property
• Botswana enjoys a good transport infrastructure of frequent air services, tarred roads and modern telecommunications.
• It has a stable workforce, good industrial relations and competitive labour costs
• New opportunities have opened through the US Africa Growth and Opportunities Act which allows quota and duty free entry of goods manufactured in the Botswana market to the USA
• Products manufactured in Botswana can enter the European Union free of duty and quotas

Requirements for foreign investment in manufacturing
According to the Ministry of Trade and Industry foreign investors wishing to invest in the manufacturing sector are required to meet the following conditions:

• If the investment is wholly owned by non-citizens, investors must bring a minimum investment of $100,000 into Botswana.
• For joint ventures with Batswana citizens the minimum investment is $75,000.
• For enterprises with more than two shareholders an additional $50,000 is required per shareholder.

Incentives for manufacturing industries include:

• All machinery and equipment imported for purposes of manufacturing is duty free
• Manufacturing companies are eligible for the exemption of sales tax on imported raw materials provided the produce is for export outside the customs area
• A duty drawback facility is available to manufacturing companies that export outside the customs area
• Companies securing development approval order can get a tax holiday and special treatment of capital expenditure

Companies certified by the International Financial Services Sector (IFSC) have additional incentives:

• A corporate tax rate of 15%
• Exemption from withholding taxes in Botswana
• Credits for withholding taxes levied elsewhere
• Access to Botswana's Double Taxation Treaty network

Investment Opportunities
Government policy is to diversify investment into any profitable and sustainable sector of the economy to ease current dependence on mining. Investment is particularly encouraged in manufacturing, tourism and its infrastructure, in the "knowledge economy" and in financial services through the new International Financial Service Centre.

The Botswana Export Development and Investment Authority (BEDIA) places emphasis on the manufacturing sector in order to produce an export stream and tackle widespread unemployment. BEDIA is particularly interested to help investors in the following sectors:

• Textiles and garments
• The establishment of a modern tannery
• Diamond cutting and polishing
• Jewellery
• Glass manufacturing
• Engineering products
• Printing and publishing
• Plastics
• Ceramics
• Information technology
• Data processing
• Tourism

Trading opportunities
Importers and exporters can take advantage of Botswana's membership of the Southern African Customs Union (SACU) where there is totally free movement of goods between Botswana, Lesotho, Namibia, South Africa and Swaziland. There is also a relatively high level of protection against imports from the rest of the world.

Botswana also has access to the Southern African Development Community (SADC), which comprises 14 African countries where there is free trade in locally produced goods. The SADC Free Trade Agreement will reduce barriers to imports into the SACU area and provide improved access for exports into the SADC market.

The USA passed the Africa Growth and Opportunity Act (AGOA) in October 2000 allowing duty free access for local manufactures into the American market. Privileged access for Botswana manufactures is also granted by Europe under the Cotonou agreement.

Trade fair and Conference centre
The Botswana International Trade Fair (BITF) is held each year. In September 1997. BITF was partially privatised by transferring all the commercial activities to Fairgrounds Holdings (Pty) Ltd. The company has successfully organised annual trade fairs since that time.

The Gaborone International Convention Centre is due to open in January 2003. It is being built next to the Grand Palm Hotel Casino Resort in Gaborone. It is a joint development between the Botswana Development Corporation and Global Resorts SA. It will meet the needs of international and local meetings, conferences and exhibitions.

Tax information
Extensive changes were introduced to Botswana's taxation system in 1995/7 to enhance the incentives for domestic and foreign investment, improving competitiveness and increasing the disposable income of individual taxpayers. The top personal tax rate was brought into line with the corporate rate of 25%. In the budget of 2001 the rate for top marginal tax was increased to P100,000, with no tax to pay up to P25,000.

From 1999 a new non-negotiable mining tax formula was introduced in order to provide international investors with greater certainty. A variable rate income tax was introduced with parameters set at internationally competitive levels, between a minimum of 25% and a maximum of 55%.

Value Added Tax
Value Added Tax was introduced to replace sales tax from July 2002. It was set at a uniform rate of 10% applied to all goods and services. Its aim is to broaden the government's revenue base. Traders with an annual turnover exceeding P250,000 are required to register for VAT. VAT applies to almost all goods and services supplied. The list of exempt and zero rated supplies is very limited. All queries should go to:

Department of Customs and Excise
PB 0041, Gaborone
Tel: 322 855 or 364 2100
Toll free: 0800 600 702
E-mail: vat@gov.bw

Botswana workforce
Botswana has a large, well-educated, English-speaking workforce and many unemployed workers eager for work and training in new jobs. Over 90% of schoolchildren get a primary education.

Expansion is now concentrated on secondary education. Labour relations have generally been harmonious with labour laws under continual review. Recently an industrial court was established to ensure impartiality in labour disputes.

The normal working week varies between 45 and 48 hours. The minimum wage is only P1.90 per hour. Workers are entitled to 14 days sick leave yearly.

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