Contents 1 Background 2

Botswana –
Country Profile
Contents
1
Background 2
5.11 Right to private ownership
9
1.1History
2
5.12 Protection of property rights
1.2
Population figures
2
5.13 Transparency of the regulatory system
10
1.3
Population growth rate 2
5.14 Efficient capital markets and portfolio investment
10
1.4
Age structures (2011 estimates)
2
5.15 Competition from state-owned enterprises (SOEs) 10
1.5
Gender ratios (2011 estimates)
2
5.16 Corporate social responsibility
11
1.6
Life expectancy (2011 estimates)
2
5.17 Political violence
11
1.7
Ethnic groups
2
5.18Corruption
11
1.8Religions
2
5.19 Bilateral investment agreements
11
1.9Language
3
5.20 OPIC and other investment insurance Programmes 11
1.10Education
3
5.21Labour
1.11Health
3
2Economy
3
2.1
Latest Economic indicators
4
2.2
Two-year forecast summary
4
9
11
5.22 Foreign-trade zones/free ports
12
5.23 Foreign direct investment statistics
12
5.24 Step-by-step procedures for starting a
business in Botswana
13
14
2.3
Annual trends
5
6
Country Risk Summary (2012 – 2016)
2.4
Natural resources
5
6.1
Sovereign risk
14
6.2
Currency risk
14
3
Government and Politics
6
3.1
Political structure
6
4
Transport and Communications
6
4.1Railways
6
4.2Roads
6
4.3
6
Air transport
6.3
Banking sector risk
14
6.4
Political risk
14
6.5
Economic structure risk
14
7
Country Outlook for 2012 – 2016
14
7.1
Political stability
14
7.2
Election watch
14
7.3
International relations
14
4.4Telecommunications
7
5
Doing business in Botswana
7
7.4
Policy trends
14
5.1
Overview of Foreign Investment Climate
7
7.5
Economic growth
15
5.2
Investment support
7
7.6Inflation
15
5.3
Licensing requirements 7
7.7
Exchange rates
15
7.8
External sector
15
A
Appendix - sources of information
15
5.4
Privatisation efforts
8
5.5
Competition policy
8
5.6
Conversion and transfer policies
8
5.7
Expropriation and compensation
8
5.8
Dispute settlement
8
5.9
Performance requirements and incentives
9
5.10 Financing options
9
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
1
1Background
1.1History
Sometime between 200500 AD, Bantu speaking
peoples, who originated
in the Katanga area (today
part of the DRC and
Zambia), and had been
expanding across subSaharan Africa, crossed
the Limpopo River,
entering the area today
known as South Africa.
There were two broad
waves of immigration
to South Africa; Nguni
and Sotho-Tswana.
The former settled in the eastern coastal regions, while the latter
settled primarily in the area known today as the Highveld – the large,
relatively high central plateau of southern Africa.
By 1000AD the Bantu colonization of most of South Africa had been
completed, with the possible exception of what is now the Western
Cape and the Northern Cape, which are believed to have been
inhabited by Khoisan people until Dutch colonisation. The Bantuspeaking society was highly a decentralized feudal society organized
on a basis of kraals (an enlarged clan), headed by a chief, who owed a
very hazy allegiance to the nation’s head chief.
In the late 19th century, hostilities broke out between the Shona
inhabitants of Botswana and Ndebele tribes who were migrating
into the territory from the Kalahari Desert. Tensions also escalated
with the Boer settlers from the Transvaal. After appeals by the
Batswana leaders Khama III, Bathoen and Sebele for assistance,
the British Government on 31 March 1885 put “Bechuanaland”
under its protection. The northern territory remained under direct
administration as the Bechuanaland Protectorate and is today’s
Botswana, while the southern territory became part of the Cape
Colony and is now part of the northwest province of South Africa;
the majority of Setswana-speaking people today live in South Africa.
The Tati Concessions Land, formerly part of the Matabele kingdom,
was administered from the Bechuanaland Protectorate after 1893, to
which it was formally annexed in 1911.
When the Union of South Africa was formed in 1910 out of the
main British colonies in the region, the Bechuanaland Protectorate,
Basutoland (now Lesotho), and Swaziland (the “High Commission
Territories”) were not included, but provision was made for their
later incorporation. However, a vague undertaking was given to
consult their inhabitants, and although successive South African
governments sought to have the territories transferred, Britain kept
delaying, and it never occurred. The election of the National Party
government in 1948, which instituted apartheid, and South Africa’s
withdrawal from the Commonwealth in 1961, ended any prospect of
incorporation of the territories into South Africa.
An expansion of British central authority and the evolution of tribal
government resulted in the 1920 establishment of two advisory
councils representing Africans and Europeans. Proclamations in
1934 regularized tribal rule and powers. A European-African advisory
council was formed in 1951, and the 1961 constitution established a
consultative legislative council.
Independence was reached on 30 September 1966. Botswana
adopted its new name upon independence. Four decades of
uninterrupted civilian leadership, progressive social policies, and
significant capital investment have created one of the most dynamic
economies in Africa.
Mineral extraction, principally diamond mining, dominates economic
activity, though tourism is a growing sector due to the country’s
conservation practices and extensive nature preserves. Botswana
has one of the world’s highest known rates of HIV/AIDS infection,
but also one of Africa’s most progressive and comprehensive
programmes for dealing with the disease.
1.2 Population figures
2,098,018 (July 2012 est.)
1.3 Population growth rate
1.477% (2011 est.)
1.4 Age structures (2011 estimates)
Total percentage
Male
Female
0 – 14 years
33.9%
356,346
343,452
15 – 64 years
62.2%
649,931
634,998
65 years and
over
3.9%
32,542
48,129
Source: CIA World Factbook
1.5 Gender ratios (2011 estimates)
Total Population
1.02 male / female
Under 15 years
1.04 male / female
15 – 64 years
65 years and over
1.03 male/ female
0.67 male / female
Source: CIA World Factbook
1.6 Life expectancy (2011 estimates)
Total Population
55.74 years
Male
56.93 years
Female
54.51 years
Source: CIA World Factbook
1.7 Ethnic groups
Botswana’s main ethnic groups are Batswana, BaKalanga, Bushmen
or AbaThwa also known as Basarwa. Other tribes are Bayei,
Bambukushu, Basubia, Baherero and Bakgalagadi.
Other groups of ethnicities in Botswana include whites and Indians,
both groups being roughly equally small in number. Botswana’s
Indian population is made up of many Indian-Africans of several
generations, from Mozambique, Kenya, Tanzania, Mauritius, South
Africa, and so on, as well as first generation Indian immigrants. The
white population is native to Botswana or from other parts of Africa
including Zimbabwe and South Africa. The white population
speaks either English or Afrikaans and makes up roughly 3% of
the population.
Since 2000, because of deteriorating economic conditions in
Zimbabwe, the number of Zimbabweans in Botswana has risen into
the tens of thousands.
1.8Religions
An estimated 70 percent of the country’s citizens identify themselves
as Christians. Anglicans, Methodists, and the United Congregational
Church of Southern Africa make up the majority of Christians. There
are also congregations of Lutherans, Roman Catholics, Seventh-day
Adventists, Baptists, the Dutch Reformed Church, Mennonites,
Mormons, Jehovah’s Witnesses, and other Christian sects.
According to the 2001 census, the country’s Muslim community,
primarily of South Asian origin, numbers slightly more than 5,000.
The 2001 census also lists approximately 3,000 Hindus and 700
Baha’is. Approximately 20 percent of citizens espouse no religion.
Religious services are well attended in both rural and urban areas.
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
2
1.9Language
The official language of Botswana is English although Setswana is
widely spoken across the country. In Setswana prefixes are more
important than they are in many other languages. These prefixes
include “Bo”, which refers to the country, “Ba”, which refers to the
people, “Mo”, which is one person, and “Se” which is the language.
For example, the main tribe of Botswana is the Tswana people,
hence the name Botswana for its country. The people as a whole are
Batswana, one person is a Motswana, and the language they speak
is Setswana.
2Economy
1.10Education
Botswana has made great strides in educational development since
independence in 1966. At that time there were very few graduates
in the country and only a very small percentage of the population
attended secondary school. Botswana increased its adult literacy rate
from 69% in 1991 to 83% in 2008.
Through fiscal discipline and sound management, Botswana
transformed itself from one of the poorest countries in the world to a
middle-income country with a per capita GDP of US$16,300 in 2011.
Two major investment services rank Botswana as the best credit risk
in Africa. Diamond mining has fuelled much of the expansion and
currently accounts for more than one-third of GDP, 70-80% of export
earnings, and about half of the government’s revenues.
With the discovery of diamonds and the increase in government
revenue that this brought, there was a huge increase in educational
provision in the country. All students were guaranteed ten years
of basic education, leading to a Junior Certificate qualification.
Approximately half of the school population attends a further two
years of secondary schooling leading to the award of the Botswana
General Certificate of Secondary Education (BGCSE). Secondary
education in Botswana is neither free nor compulsory.
1.11Health
Healthcare in Botswana is delivered through a decentralised model
with primary healthcare being the pillar of the delivery system.
Botswana has an extensive network of health facilities (hospitals,
clinics, health posts, mobile stops) in the 27 health districts. In
addition to an extensive network of 101 clinics with beds, 171 clinics
without beds, 338 health posts and 844 mobile stops Primary
Health care (PHC) services in Botswana are integrated within overall
hospital services, being provided in the outpatient sections of all
levels of hospitals. It is through these structures that a complement
of preventive, promotive and rehabilitative health services as well as
treatment and care of common problems are provided.
Botswana has maintained one of the world’s highest economic
growth rates since independence in 1966. However, economic
growth was negative in 2009, with the industrial sector shrinking
by 30%, after the global crisis reduced demand for Botswana’s
diamonds. The economy has since recovered, with GDP growth in
2010 at 7.2% and estimated GDP growth in 2011 of 6.2%.
Botswana’s heavy reliance on a single luxury export was a critical
factor in the sharp economic contraction of 2009. Tourism, financial
services, subsistence farming, and cattle raising are other key
sectors. Although unemployment was 7.5% in 2007 according
to official reports, unofficial estimates place it closer to 40%. The
prevalence of HIV/AIDS is second highest in the world and threatens
Botswana’s impressive economic gains. An expected levelling
off in diamond mining production within the next two decades
overshadows long-term prospects.
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
3
2.1 Latest Economic indicators
2010
1 Qtr
Central government finance (P m)
Revenue & grants
Expenditure & net lending
Balance
Prices
Consumer prices (Sep 2006=100)
Consumer prices (% change, year on year)
Financial indicators
Exchange rate P:US$ (av)
Exchange rate P:US$ (end-period)
Bank rate (end-period; %)
Lending rate (av; %)
M1 (end-period; P m)
M1 (% change, year on year)
M2 (end-period; P m)
M2 (% change, year on year)
Stockmarket index (end-period; 1989=100)
Foreign trade (P m)
Exports fob
Diamonds
Imports fob
Trade balance
Foreign reserves (US$ m)
Reserves excl gold (end-period)
2 Qtr
2011
3 Qtr
4 Qtr
1 Qtr
2 Qtr
3 Qtr
4 Qtr
10,003
10,909
-906
3,803
8,353
-4,549
2,496
9,734
-7,239
11,325
9,137
2,187
14,005
11,077
2,929
9,717
8,703
1,014
31,629
38,301
-6,672
37,542
38,652
-1,109
132
6
136.4
7.5
138.9
6.9
140.2
7.3
142.8
8.2
147.5
8.1
150.5
8.4
152.8
9.1
6.8
6.79
10
11.5
7,546
-1.2
38,292
6.8
7,426
6.96
7.06
10
11.5
8,178
14
40,540
6
7,340
6.84
6.59
10
11.5
7,637
6.6
41,295
6.8
7,393
6.57
6.44
9.5
11.3
9,264
30.3
42,860
10.7
6,413
6.66
6.53
9.5
11
8,092
7.2
43,151
12.7
6,929
6.52
6.53
9.5
11
8,997
10
43,875
8.2
6,970
6.76
7.23
9.5
11
9,705
27.1
45,719
10.7
7,147
7.41
7.53
9.5
11
8,675
-6.4
44,763
4.4
6,971
7,865
5,168
-9,317
-1,451
7,403
4,934
-8,851
-1,449
8,236
5,439
-9,491
-1,255
8,545
6,166
-10,798
-2,253
9,378
7,151
-12,251
-2,873
10,720
8,084
-11,770
-1,050
11,048
8,911
-12,906
-1,858
8,848
6,307
-12,720
-3,872
8,324
7,851
8,407
7,885
8,374
8,578
8,301
n/a
2012
2013
4.6
4.2
8
5.8
5.8
11.3
2.7
6,687
-6,511
242
1.3
2,052
7.2
9.32
9.22
2014
7.1
10.2
9
6
6
11.5
2.6
7,642
-7,124
438
2.2
2,138
7.65
9.5
9.67
2015
7.2
8.6
8
6.1
6.2
11.5
2.5
8,648
-7,835
536
2.5
2,137
8.12
9.91
10.48
2016
6.9
8.5
8
6.3
6.4
11.8
2.4
9,273
-8,509
384
1.7
2,134
8.63
10.4
11.16
Sources: IMF, International Financial Statistics; Bank of Botswana, Botswana Financial Statistics; Central Statistics Office
2.2 Two-year forecast summary
(% unless otherwise indicated)
Real GDP growth
Industrial production growth
Gross fixed investment growth
Consumer price inflation (av)
Consumer price inflation (end-period)
Commercial bank prime rate (av)
Government balance (% of GDP)
Exports of goods fob (US$ m)
Imports of goods fob (US$ m)
Current-account balance (US$ m)
Current-account balance (% of GDP)
External debt (year-end; US$ m)
Exchange rate P:US$ (av)
Exchange rate P:¥100 (av)
Exchange rate P:€ (end-period)
2011
5.4
10.8
10.5
8.5
9
11
-3.3
6,031
-6,211
-477
-2.8
1,973
6.79
7.74
8.63
5
6.3
8
6.3
6
11.3
1.5
6,403
-6,315
361
2.1
2,009
6.69
8.39
9.19
Source: Economist Intelligence Unit
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
4
2.3 Annual trends
Read GDP growth (% change)
Main destination of exports, 2010 (share of total)
Consumer Price Inflation (av %)
Main origin of imports, 2010 (share of total)
Current Account Balance (% of GDP)
2.4 Natural resources
Numerous minerals are known to occur in significant quantities,
but with the exception of diamonds, copper and nickel, they are
mostly untapped. These are: salt, soda ash, potash, coal, iron
ore, manganese and silver. Botswana has the largest known coal
reserves in Africa, although they are of low quality.
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
5
3Government and Politics
3.1 Political structure
Official name
Republic of Botswana
Form of state
Unitary republic
Legal system
Botswana’s legal system is based on Roman-Dutch law; cases in rural
areas are heard by customary courts.
National legislature
National Assembly consisting of 57 members elected by universal
suffrage, the President, the Attorney-General and four members
nominated by the President; a 15-member House of Chiefs advises
on tribal matters.
National elections
The last legislative election was held in October 2009. The next
legislative election is due in October 2014.
Head of State
The Head of State is the President, chosen by the National Assembly.
National government
The President, his appointed Vice-President and Cabinet (reshuffled
in January 2007).
Main political parties
• Botswana Democratic Party (BDP; the ruling party)
• Botswana National Front (BNF)
• Botswana Congress Party (BCP)
• Botswana People’s Party (BPP)
• Botswana Movement for Democracy (BMD)
Key ministers
• Agriculture: Christiaan De Graaf
• Education and Skills Development: Pelonomi Venson-Moitoi
• Environment, Wildlife and Tourism: Kitso Mokaila
• Finance and Development Planning: Kenneth Matambo
• Foreign Affairs and International Co-operation:
Phandu Skelemani
• Health: John Seakgosing
• Infrastructure, Science and Technology: Johnnie Swartz
• Justice, Defence and Security: Dikgakgamatso Seretse
• Labour and Home Affairs: Edwin Batshu
• Lands and Housing: Lebonamang Mokalake
• Local Government: Peter Siele
• Minerals, Energy and Water Resources: Ponatshego Kedikilwe
• State President (Presidential Affairs and Public Administration):
Mokgweetsi Masisi
• Trade and Industry: Dorcas Makgato-Malesu
• Transport and Communications: Nonofo Molefi
• Youth, Sports and Culture: Shaw Kgathi
• Central Bank Governor: Linah Mohohlo
International organisation participation
• ACP
• AfDB
• AU
• FAO
• G-77
• IAEA
• IBRD
• ICAO
• ICRM
• IDA
• IFAD
• IFC
• IFRCS
• ILO
• IMF
• Interpol
• IOC
• IOM
• IPU
• ISO
• ITSO
• ITU
• ITUC
• MIGA
• NAM
• OPCW
• SACU
• SADC
• UN
• UNCTAD
• UNESCO
• UNIDO
• UNWTO
• UPU
• WCO
• WFTU
• WHO
• WIPO
• WMO
• WTO
4Transport and
Communications
Botswana has relatively good national infrastructure compared with
most Sub-Saharan African countries, although this is concentrated
on the eastern side of the country where most of the towns
are situated, and coverage of the rest of the country is sparse.
Another obstacle is the high cost of some services. Infrastructure
development is a priority of the government’s long-term economic
policy, and large portions of annual budgets are dedicated to such
projects. However, weak administrative capacity and limited regional
construction capacity are slowing the pace of implementation.
4.1Railways
The country’s main railway line runs for 640 km from Zimbabwe
to South Africa, via Francistown, Gaborone and Lobatse. There
are spurs to the mining town of Selebi-Phikwe and the mines at
Morupule and Sua Pan. Botswana Railways, a parastatal, operates
the railway. The line carries the country’s bulk exports such as
copper, nickel, beef, soda ash and salt. It was an important transit
route between Zambia, Zimbabwe and South Africa until, in 1999,
Zimbabwe insisted that all operators use its direct railway link with
South Africa. This has seriously affected the financial viability of the
freight business.
4.2Roads
Botswana’s road network is well developed, and tarred roads of
a good standard link all the major population centres and
neighbouring countries. Botswana has a road network of around
20,000 km; about 30% is tarred, mostly the part that runs through
the east of the country, linking it with South Africa, Zambia and
Zimbabwe. The Trans-Kalahari Highway, linking South Africa to
Namibia through Botswana, was completed in 1998, and connects
with the N4 Platinum Highway, a route that links with the N4 to
Maputo, Mozambique.
4.3 Air transport
Botswana has several airports and airfields, but air services are
restricted by low demand. There are daily flights between Gaborone
and Johannesburg (operated by Air Botswana and a subsidiary of
South African Airways, the respective national carriers), but direct
intercontinental flights are not available.
In 2004 Air Botswana began a direct service between Cape Town,
the South African tourist hub, and Maun, the tourism centre in
northern Botswana. There are also links with Namibia and Zimbabwe,
and some new routes have been introduced to support the tourism
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
6
industry. Plans to privatise Air Botswana have repeatedly fallen
through, but this remains a government priority. As well as Air
Botswana, there are several small private air operators, primarily
serving the needs of tourism in the north of the country.
4.4Telecommunications
Botswana is one of Africa’s wealthiest nations with a thriving
economy mainly based on diamond mining and tourism
which recovered quickly from a recession in 2009. Regulatory
reform has turned the country into one of the most liberalised
telecommunications markets in the region, including a serviceneutral licensing regime which takes into account the increasing
convergence of technologies and services.
Although at well over 100% Botswana has one of the highest
mobile market penetration rates in Africa, the average revenue per
user is also one of the highest on the continent. In a bid to generate
new revenue streams and secure market share, the three mobile
operators – Mascom Wireless (an affiliate of South Africa’s MTN),
Orange Botswana and BeMobile (a subsidiary of fixed-line incumbent
BTC) – have entered the underdeveloped broadband sector with
different strategies including 3G mobile, WiMAX and bundling with
fixed-line (ADSL) services. Here they are competing with a large
number of ISPs, some of which are rolling out their own wireless
access infrastructure.
A nationwide fibre backbone supports a wide range of services, and
the landlocked country’s access to international bandwidth is being
improved by a regional fibre backbone network and new submarine
fibre optic cables off the continent’s east and west coasts.
5Doing business in
Botswana
5.1 Overview of Foreign Investment Climate
Ranked number one in Africa on Transparency International’s anticorruption index, Botswana is a stable democratic country which
has historically enjoyed among the highest economic growth rates
in the world. Botswana’s ranking on the annual World Bank/IFC
Doing Business report was 52 out of 183 countries globally. Its score
compared favourably to all other African countries except Rwanda
(ranked 45), South Africa (ranked 35) and Mauritius (ranked 23).
In 2011, Moody’s credit rating agency upgraded Botswana’s
rating from “negative” to “stable,” and retained the A2 rating for
foreign and domestic bonds. The upgrade reverses Moody’s decision
in February 2010 to assign a negative outlook following
the deterioration of Botswana’s net asset position as a result of
the global economic slowdown.
Botswana enjoyed one of the fastest growth rates in per capita
income in the world between independence in 1966 and 2006. But
Botswana’s economy, particularly the mining sector, is susceptible
to global economic shocks. Consistent with global economic
patterns, Botswana’s growth slowed to 3% in 2008, expanding to
3.7% in 2009, 10.8% in 2010, and an estimated 8% in 2011. 2012
GDP is estimated to level off at 5.9%. By maintaining a sound fiscal
policy and low levels of foreign debt, Botswana will continue to
approach global economic downturns from a position of strength.
Foreign exchange reserves were estimated to be US$8.3 billion in
September 2011, representing a healthy 18 months’ cover of imports
of goods and services. Botswana’s per capita income of roughly
US$14,800 (IMF estimate) makes it a middle-income country.
Overall, Botswana’s good economic record has been built on the
foundation of using revenue generated from diamond mining to
fuel economic development through prudent fiscal policies. With
the prospect of somewhat lower revenues over the medium-term,
however, structural reforms to encourage greater entrepreneurship
and investment will be essential to future growth.
The Government of Botswana has made strong efforts to maintain
a sustainable budget by managing expenditures and diversifying
revenue sources. Its policy has been to keep total public expenditure
at no more than 40 percent of GDP, deficits at a maximum of 3
percent of GDP and development related expenditure at 30 percent
of the total budget. Despite these achievements, a 2010 IMF report
cautioned Botswana that its civil service is too large and is competing
with the private sector to attract highly skilled workers.
A more recent IMF report praised Botswana for the progress it has
made in better prioritizing government outlays and containing the
growth of the public budget. In April 2011, despite strong pressure
by striking public sector workers, the Government of Botswana did
not agree to workers’ demands for a 16% wage increase on the basis
that an increase of this magnitude would have worsened public debt
and suggested weak fiscal and budgetary discipline.
5.2 Investment support
Overall, the Botswana government has made good efforts to
attract foreign investors, though some regulatory barriers remain.
It has launched initiatives to promote economic activity and foreign
investment in specific areas, including the establishment of
“hubs” to promote economic growth through agriculture, innovation,
diamonds, education, health and transport. It has abolished all foreign
exchange controls and instituted low corporate tax rates (15% for
manufacturing enterprises). It has convened a government-wide
task force to improve scores in specific areas of the World Bank’s
Doing Business report. The government also makes grants available
to investors who partner with citizens and will extend credit to
investors presenting proposals that have undergone appropriate due
diligence. This typically involves, at minimum, the completion of a
feasibility study.
The Botswana Export Development and Investment Authority
(BEDIA) serve as the main point of contact for foreign investors and
have expressed eagerness for working with established businesses
seeking to expand their operations to Botswana. BEDIA will attempt
to ensure that investors – in particular, those seeking to establish
export-oriented manufacturing enterprises – obtain the clearances,
residence permits, work permits, factory space, and land they need
with minimal delays. After company start up, BEDIA continues to
provide services addressing any problems encountered.
Botswana seeks to diversify the economy away from diamonds
into goods such as pharmaceuticals, textiles, clothing, and leather
products, commodities such as coal, and services such as tourism,
financial products, business process outsourcing, and research.
Requests by investors for investor support from BEDIA and
other agencies will be evaluated based on the extent to which
the proposed project assists in the government’s diversification
efforts, contributes to the growth of priority sectors, and provides
employment and training to Botswana citizens. Foreign investors
are also encouraged to transfer technology to Botswana and skills to
Botswana citizens with a view to preparing them for promotion into
management positions.
5.3 Licensing requirements
Foreigners wishing to invest in Botswana are required to register
their enterprise under the Companies Act and are likely to be required
to obtain a license given current trends in the enforcement of the
Trade Act of 2008.
Under the Trade Act, a license is required to operate a variety of
businesses in Botswana. These include banking, non-bank financial
services, transportation, medical services, mining, energy provision,
and the sale of alcohol. The Government of Botswana’s justifies its
license requirements on public interest grounds and notes that its
requirements are consistent with international best practice.
Although recent amendments to the Trade Act have eliminated the
catch-all “miscellaneous” business license category, owners report
that some local authorities will insist that a business apply for a
license even though the business does not clearly fall into one of the
established categories of businesses requiring a license. The result
is that the owner is in essence forced to choose a category in which
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
7
to be licensed. In addition, some businesspeople have observed
that enforcement of licenses varies widely across local government
authorities. The Embassy continues to engage with the Government
of Botswana to highlight this and other licensing difficulties.
Botswana reserves some business sectors solely for citizen
participation including butcheries, general trading establishments,
gas stations, liquor stores, supermarkets (excluding chain stores)
bars (other than those related to hotels), certain types of restaurants,
boutiques, auctioneers, car washes, domestic cleaning services,
curio shops, fresh produce vendors, funeral homes, hairdressers,
various types of rental/hire services, Laundromats, specific types
of government construction projects under a certain dollar amount,
certain activities related to road and railway construction and
maintenance, and certain types of manufacturing activities including
the production of furniture for schools, welding, and bricklaying.
The Ministry of Trade and Industry, which administers the citizen
participation initiative, has taken an expansive interpretation of “chain
stores” to mean any store with more than one outlet and has allowed
the exemption to apply to supermarkets, simple specialty operations,
and general trading stores. Hence, large general merchandise
markets, restaurants, and the dominant grocery network – all of
which are owned by foreigners – operate without restriction. Foreign
investors are permitted to participate in all other sectors.
Foreign investors are given equal access to investment incentive
schemes (grants and loans) for medium and large projects provided
they partner with a citizen of Botswana. Foreign investors do not
have access to government loans and grants designed specifically
for citizen-owned contracting firms or for small enterprises, defined
as those involving investments of less than Pula 75,000 (roughly
US$10,710).
5.4 Privatisation efforts
The government is moving toward privatising a number of stateowned businesses. As part of this effort, it has established the
Public Enterprise Evaluation and Privatisation Agency (PEEPA).
PEEPA is developing policies which will impact the extent of foreign
participation in privatising entities. The government would like to use
privatisation to increase foreign direct investment in the country,
but there are significant concerns in government circles that the
political costs of privatisation are high, e.g., extensive job losses.
These concerns have created some controversy and led to delays
surrounding the privatisation effort.
Privatisation efforts initially focused on the national airline, Air
Botswana. After more than 11 years of effort and multiple attempts to
reach agreement with strategic partners, the airline has still not been
privatised. The planned privatisation of six other state organisations,
including the Botswana Telecommunications Corporation (BTC) and
the National Development Bank (NDB), is behind schedule. BTC’s
privatisation is expected to occur by mid-2012.
The ability of PEEPA to manage the privatisation of state-owned
enterprises is hampered by the fact that there is no privatisationimplementing legislation. As a result, the decision for privatising
particular parastatals remains with the relevant ministry or
department which has the discretion to advance privatisation at the
pace and with the vigour of their choosing.
5.5 Competition policy
Botswana has developed anti-trust legislation and policies to ensure
appropriate competition in the business environment. Under the
Competition Act, the newly-established Competition Authority is
now monitoring vertical and horizontal market agreements and
mergers and acquisitions. Laws prohibiting insider training and
securities fraud are still under development.
5.6 Conversion and transfer policies
There are no foreign exchange controls in Botswana and no
restrictions on capital outflows through financial institutions.
Commercial banks are required to ensure that their customers
complete basic forms indicating name, address, purpose and
other details prior to processing funds 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 government approval prior to the processing of a
transaction and does not delay capital transfers.
To encourage portfolio investment, develop the domestic capital
market, and diversify investment instruments, non-residents are
able to trade in and issue Botswana Pula-denominated bonds with
maturity periods of more than one year, provided such instruments
are listed on the Botswana Stock Exchange (BSE). Botswana’s
“Letlole Saving Certificate” (the equivalent of a U.S. Treasury bond)
can be purchased only by Botswana citizens. Foreigners can hold
shares in BSE-listed Botswana companies.
Botswana residents are permitted to invest overseas and borrow
offshore. Travellers 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 (USD1,330). There are no quantitative limits on
foreign currency access for current account transactions.
Foreign currency-denominated accounts are permitted in Botswana.
At present, commercial banks offer accounts denominated in U.S.
Dollars, British Pounds, Euros and 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 permits the issuance of
foreign currency denominated loans.
Upon disinvestment by a non-resident, the non-resident is
allowed immediate repatriation of all proceeds including profits,
rents, fees, etc.
There is no difficulty in obtaining foreign exchange. Shortages of
foreign exchange that would lead banks to block transactions are
highly unlikely.
5.7 Expropriation and compensation
The Constitution of Botswana prohibits the nationalization of private
property. The Government of Botswana has never pursued a policy of
forced nationalization and is highly unlikely to adopt such a policy.
5.8 Dispute settlement
The Constitution of Botswana provides for an independent judiciary.
Civil law is based on the Roman-Dutch system. The courts readily
enforce legal agreements related to commercial dealings. Foreign
and domestic businesspeople have equal access to the judicial
system. In general, Botswana courts will enforce decisions of a
foreign court found to have jurisdiction in a given case.
The laws of Botswana including Bills before Parliament are easily
searchable and accessible through the Botswana Attorney General’s
Office web site (www.laws.gov.bw). Note that it can take up to 24
months for a law, once passed, to appear on the web site.
Botswana’s commercial and bankruptcy laws are comprehensive.
Secured and unsecured creditors enjoy similar rights under
bankruptcy proceedings as they would in the United States.
Botswana is a member of the International Centre for the Settlement
of Investment Disputes (ICSID) and the Multilateral Investment
Guarantee Agency (MIGA), and therefore accepts binding
international arbitration of investment disputes.
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
8
5.9 Performance requirements and incentives
Performance requirements are not imposed as a condition for
establishing, maintaining, or expanding an investment in Botswana,
or for access to tax and investment incentives. Foreign investors
are encouraged, but not compelled, to establish joint ventures with
citizens or citizen-owned companies.
providing special tax relief and/or education and training grants of
different types and rates. The Minister must be satisfied that the
proposed project will be beneficial to Botswana’s economy. Any firm,
local or foreign, may apply for a Development Approval Order through
the Permanent Secretary for Finance and Development Planning.
Applications will be evaluated against the following criteria:
Foreign investors wishing to invest in Botswana are required to
register the company in accordance with the Companies Act and
comply with other applicable legislation. Investors are encouraged,
but not required, to purchase from local sources. The Government
does not require investors to locate in specific geographical areas,
use a specific percentage of local content, permit local equity
in projects, manufacture substitutes for imports, meet export
requirements or targets, or use national sources of financing.
Job creation for Botswana citizens
As a policy matter the government encourages foreign firms to hire
qualified Botswana nationals rather than expatriates, and the granting
of work permits to expatriates may be made contingent upon
establishment of demonstrable “localization” efforts. When such
a contingency is imposed, after the company’s start-up period the
government may require evidence that a citizen is being trained to
assume some of the duties being filled by an expatriate, particularly
at the middle-management level.
Many investors who rely on expatriate managerial and technical
expertise believe immigration is a major regulatory constraint. Some
have complained of unreasonable delays in the adjudication of work
permits, and others have said that the immigration authorities lack
the necessary skill and expertise to properly adjudicate applications
for individuals who possess a particular technical skill set.
Botswana offers foreign investors equal access to certain incentives
designed to promote export-oriented industries. Current incentives
include an exemption from sales tax when importing machinery
and equipment required in the production of goods for export, and a
drawback of import duties for purchasing raw materials to be used for
the production of goods destined for export.
The Botswana Export Credit Insurance and Guarantee Ltd. (BECI)
allows investors to purchase coverage against certain events and
losses such as the insolvency and inability of buyers to pay for
purchases, unanticipated import restrictions, or the blockage by the
buyer’s country of foreign exchange transfer.
• The company’s training plans for Botswana citizens
• The company’s plans to localize non-citizen positions
• Botswana citizen participation in company management
• Amount of equity held by Botswana citizens in the company
• The location of the proposed investment
• The project’s effect on stimulation of other economic activities
• The project’s effect on reducing local consumer prices
5.10Financing options
Two government organizations, the Botswana Development
Corporation (BDC) and the National Development Bank (NDB),
complement the commercial lending of domestic banks. The BDC’s
mandate is to assist local and foreign investors in the establishment
and development of commercially viable businesses in Botswana
in any sector except large-scale mining. The BDC offers equity
participation for investment initiatives, loan financing, and property
rental for residential, commercial and industrial properties to provide
investors and businesses with working capital.
The NDB offers competitive long-term loans and equity capital to
finance commercial business development. Financing is available
for new businesses in retail, services, tourism, industry, mining, real
estate, and agriculture including game farming. Both foreign and
domestic investors are eligible for NDB loans and equity participation
in investments. Loans can be as large as BWP 55 million (roughly
US$8,600,000).
Grants are available to the foreign investor who partners with a
Botswana citizen. A venture capital fund has been established under
the Citizen Entrepreneurial Development Agency (CEDA) to provide
equity capital to citizens and ventures between citizens and foreign
investors. Approximately US$29 million is available in the fund.
Botswana’s International Financial Services Centre (IFSC) aims to
develop Botswana into a hub for cross-border financial and business
services in the region. The government encourages foreign financial
service providers wishing to set up banks, insurance companies,
administration and holding companies, fund management
companies, business process outsourcing firms, and call centres
to use the IFSC. Foreign investors receiving IFSC certification are
guaranteed a maximum tax rate of 15 percent until 2020, exemption
from withholding tax in Botswana, access to Botswana’s expanding
double taxation treaty network, and exemption from capital gains tax.
The government has directed central government, local authorities,
and parastatal organizations to purchase all products and services
from locally-based manufacturers and service providers if the goods
and services are locally available, competitively priced, and meet
tender specifications in terms of quality standards as certified or
recognized by the Botswana Bureau of Standards. The Department
of Industrial Affairs under the Ministry of Trade and Industry
administers this programme.
5.11Right to private ownership
Other than the previously identified business sectors reserved for
citizen ownership, Botswana has no restrictions on investment
ownership, the sources of financing for investments, the marketing
of products, the sources of technology used by companies, or the
methods of training used by companies. Foreign and domestic
private entities may freely establish, acquire, and dispose of their
interests in business enterprises.
For Companies Act registration purposes, enterprises are classified
as follows:
5.12Protection of property rights
The Constitution of Botswana prohibits the nationalisation of
private property.
• Micro Enterprises —less than six employees including owner
and annual turnover of up to P60,000
There are three main categories of land in Botswana:
• Small Enterprises — less than 25 employees and annual turnover
of between P60,000 and P1,500,000
• Freehold
• Medium Enterprises — less than 100 employees and an annual
turnover of between P1,500,000 and P5,000,000
• Tribal land
• Large Enterprises —more than 100 employees and an annual
turnover of P5,000,000 or more
The Minister of Finance and Development Planning has the authority
to issue “Development Approval Orders” for specific projects,
• State land
Tribal and state land cannot be sold to foreigners. There are no
restrictions on the sale of freehold land, but only about 5% of land
in Botswana is freehold. In Gaborone, the number of freehold plots
is limited.
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
9
State land represents about 25% of land in Botswana. On application
to the Department of Lands, both foreign-owned and local
enterprises registered in Botswana may lease state land for industrial
or residential use. Commercial use leases are for 50 years and
residential leases are for 99 years. Waiting periods tend to be long
for leasehold applications, but subleases from current leaseholders
are available.
Tribal land represents 70% of land in Botswana. To obtain a lease
for tribal land, the investor must approach the relevant local Land
Board. Processes are unlikely to be streamlined or consistent across
Land Boards.
Since independence, the trend in Botswana has been to increase the
area of tribal land at the expense of both state and freehold land.
Landlord-tenant law in Botswana tends to be moderately
pro-landlord.
In addition to helping investors who meet its criteria obtain
appropriate land leaseholds; BEDIA has also built factory units for
lease to industrialists at affordable rental rates with the option to
purchase at market value.
5.13Transparency of the regulatory system
Bureaucratic procedures necessary to start and maintain a business
tend to be open, although somewhat slow.
The Public Procurement and Asset Disposal Board (PPADB) is
responsible for the award of all government tenders. Prospective
government contractors are required to register with the PPADB.
The PPADB maintains a process by which tender decisions can be
challenged, and a bidder can also challenge a tender procedure in the
courts. PPADB publishes its decisions concerning awarded tenders,
prequalification lists, and newly registered contractors.
The PPADB Act calls for preferential procurement of citizen-owned
contractors for “works, service and supplies,” as well as “specific,
disadvantaged women’s communities,” though it states that such
preferences must be time bound, phased in and out as necessary,
and consistent with the country’s external obligations and its
“market-oriented, macroeconomic framework.” When a procuring
entity wishes to reserve a tender for citizen-only participation, it is
required to publish a notice to that effect either in the bid document
or the pre-qualification notice.
Health and safety laws, embodied in the Factories Act of 1973,
provide basic protection for workers from unsafe working conditions.
Minimum working conditions required on work premises include
cleanliness of the premises, adequate ventilation and sanitation,
sufficient lighting and the provision of safety precautions. Health
inspectors and the Botswana Bureau of Standards carry out periodic
checks at both new and operating factories.
5.14Efficient capital markets and portfolio investment
The government encourages the establishment of new and
diverse financial institutions to support increased foreign and
domestic investment and to fill existing gaps where finance is not
commercially available.
Botswana’s central bank, the Bank of Botswana, acts as banker
and financial advisor to the government and is responsible for the
management of the country’s foreign exchange reserves, the
administration of monetary and exchange rate policies, and the
regulation and supervision of financial institutions in the country.
Monetary policy in Botswana is widely regarded as prudent. The IMF
reports that despite the strong recovery in 2010, inflation pressure
remains contained.
are allowed to make foreign currency-denominated loans, financial
leases, and other forms of financial support to their customers in
Botswana whether or not they have onshore accounts.
There are currently nine commercial banks operating in Botswana,
and no merchant banks.
The Botswana Stock Exchange (BSE) enjoyed impressive rates of
growth between 2000 and 2006. In 2010, still reeling from the effects
of the recession, the market capitalization of the domestic firms
listed on the exchange fell to its lowest level since 2006. However,
the 12 foreign companies listed on the exchange’s Foreign Company
index (of which six are mining-related operations) increased their
capitalization by 23% in 2010.
The Non-Bank Financial Institutions Regulatory Authority (NBFIRA)
started its operations in April 2008 and is responsible for regulating
all non-banking financial entities registered in Botswana including
those engaged in asset management, micro-lending, pension funds,
insurance, and collective undertakings. The regulations are designed
to extend know-your-customer practices to the non-bank financial
sector and deter money laundering and terrorist financing. NBFIRA
is also responsible for regulating the International Financial Services
Centre (IFSC). In 2011, the Government of Botswana launched the
Financial Intelligence Agency, an independent government body
responsible for the investigation of money laundering and terrorist
finance. The FIA will assist the Botswana Police Service, Directorate
on Corruption and Economic Crime, and Department of Public
Prosecution to identify and investigate money laundering offenses.
The Government has legitimized offshore capital investments and
allows foreign investors, individuals and corporate bodies, and
companies incorporated in Botswana to open foreign currency
accounts in specified currencies. The designated currencies are U.S.
Dollar, Pound Sterling, Euro, and the South African Rand. There are
no known practices by private firms to restrict foreign investment
participation or control in domestic enterprises. Private firms are not
permitted to adopt articles of incorporation or association which limit
or prohibit foreign investment, participation or control.
In general, Botswana exercises careful control over credit expansion,
the Pula exchange rate, interest rates, and foreign and domestic
borrowing. Banking legislation is in line with industry norms for
regulation, supervision, and payments.
5.15Competition from state-owned enterprises (SOEs)
State-owned enterprises (SOEs) are majority or hundred percent
owned by the Government. No law or regulation prohibits or
restricts private enterprises from competing with SOEs. Private and
government-owned enterprises are governed by the same business
registration and licensing laws.
The government has set up state-owned enterprises to compete
with the private sector when and where an opportunity arises with
the stated goal of assisting in the development of local small and
medium enterprises. The senior management of SOEs report to the
Permanent Secretary of the relevant ministry and the board seats of
the SOEs may be allocated to any executive from the government
and/or the private sector.
Botswana law requires SOEs to publish annual reports, and
depending on how they are constituted, subject themselves
to audit by professional accountants or the Auditor General. In
2011, Parliament also began to exercise oversight of the SOEs
compelling Presidents and Chairmen of the SOEs to appear before
a Parliamentary committee to provide reports and answer questions
regarding the performance of their firms.
Botswana banks may lend to non-resident controlled companies and
other non-resident owned business entities in Botswana without
specific approval from the Bank of Botswana. As a practical matter,
foreign investors usually enjoy better access to credit than local
firms due to the limited capital base of the local entrepreneur and
conservative lending policies by commercial banks. Commercial
lenders generally apply a debt to equity ratio of 4:1. Authorized
dealers and credit institutions licensed by the Bank of Botswana
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
10
The Bank of Botswana maintains a long-term sovereign wealth
fund known as the Pula Fund in addition to a regular foreign reserve
account providing basic import cover. This Pula Fund was established
under the Bank of Botswana Act and forms part of the country’s
foreign exchange reserves, which are primarily funded by diamond
revenues. The Pula Fund is wholly invested in foreign currency
denominated assets and is managed by the Bank of Botswana Board
with input from well known international financial management and
investment firms. All realized market and currency gains or losses are
reported in the Bank of Botswana’s income statement.
The 2000 Proceeds of Serious Crime Act expanded the DCEC’s
mandate to include money laundering. The 2009 Financial
Intelligence Act provides a comprehensive legal framework to
address money laundering and establishes a financial intelligence
agency (FIA). The FIA, to be placed under the Ministry of Finance
and Development Planning, will cooperate with various institutions
such as Directorate of Public Prosecutions (DPP), Botswana Police
Service, Bank of Botswana, the Non-Banking Financial Institutions
Regulatory Authority (NBFIRA), the DCEC, and foreign FIAs to
uncover and investigate suspicious financial transactions.
5.16Corporate social responsibility
Corporate Social Responsibility (CSR) is highly recognised and
embraced by government, foreign and local firms, and customers.
Major banks such as Standard Chartered and cell phone providers
such as Mascom have established CSR programmes and will
sponsor projects and support local non-profit concerns (e.g.,
Childline, SOS Children’s Village, etc.). However, the CSR ethos has
not taken hold in many smaller firms.
Botswana is a member of the Eastern and Southern Anti-Money
Laundering Group (ESAAMLG), a regional standards-setting body
for ensuring appropriate laws, policies and practices to fight money
laundering and the financing of terrorism.
5.17Political violence
There is no political violence in Botswana. The 2011 April-June public
sector strike saw some police deployed to respond to student
protesters, but with the exception of a few minor instances, the
demonstrations did not turn violent.
5.18Corruption
Botswana has a strong legislative regime to combat corruption. The
major corruption investigation body is the Directorate on Corruption
and Economic Crimes (DCEC). Overall, DCEC is regarded as an active
and effective organisation.
Corruption in Botswana occurs but most have noted that it has not
been an obstacle to investment. Botswana ranks 32nd out of 183
countries in Transparency International’s Corruption Perception
Index for 2011. The DCEC has embarked on an education campaign
to raise public awareness about the cost of corruption and is also
working with Government departments to reform their accountability
procedures. In 2011, DCEC and the Botswana Confederation of
Commerce, Industry and Manpower (BOCCIM) launched a business
code of ethics for Botswana firms; fourteen major Botswana
businesses have signed the Code.
In cases involving substantial misappropriation of money and land
by government personnel, the DCEC and Attorney General have
not been reluctant to investigate and prosecute officers at all levels.
Corruption or “cheating for valuable consideration” is punishable by
a prison term of up to 10 years, a fine of P500,000 (U $66,667), or
both. The government typically obtains 16-20 convictions per year for
corruption-related crimes. High level officials have been prosecuted.
The government bureaucracy is paid on time and is provided a living
wage. Investors with experience in other developing nations describe
the relative lack of obstruction or interference by law enforcement
or other government agents as among the country’s most important
assets.
Foreign investors’ complaints generally focus on the inefficiency
and/or unresponsiveness of mid-level and low-level bureaucrats in
government. Some have observed that nepotism in government as
well as the private sector is too often tolerated; this situation is not
aided by the small size of the population and the chronic shortage
of skilled workers. The government has introduced a Performance
Management System to improve the service and accountability
of government employees, but its effectiveness has not yet been
evaluated.
5.19Bilateral investment agreements
Botswana and the United States entered into an investment
guarantee treaty soon after independence. Botswana has bilateral
trade agreements governing the duty-free entry of goods with
Malawi and Zimbabwe. Botswana is also a member of the Southern
African Development Community (SADC) and the Southern African
Customs Union (SACU). Other members of SACU include South
Africa, Namibia, Swaziland and Lesotho. SACU has announced it is
planning to pursue free trade negotiations with China and India in
addition to its Trade and Investment Cooperation Agreement with
the U.S. Botswana has signed an interim Economic Partnership
Agreement with the EU as part of SADC. In addition, Botswana
participates in the Generalized System of Preferences, and is an
Africa Growth and Opportunity Act beneficiary country. It is important
to note, however, that none of these agreements are specifically
“investment” agreements.
Botswana’s trade regime is more open than that of an average
Sub-Saharan Africa country. Its tariff policy is governed by SACU,
which controls customs and excise duties on goods imported from
non-SACU countries and establishes transit rights for products
transported over Southern African territory. Botswana has
erected some non-tariff barriers to trade, including import permit
requirements for a variety of food products, seasonal trade bans on
selected agricultural goods, and a state monopoly on beef exports.
An ongoing USAID-funded program is working with the Government
of Botswana and SADC to reduce such barriers.
5.20OPIC and other investment insurance Programmes
The Overseas Private Investment Corporation (OPIC) makes
insurance available to U.S. investors in Botswana. In October 2008,
OPIC approved a US$250 million guarantee facility for the Botswana
diamond industry. The purpose of the guarantee was to develop a
robust lending market to Botswana’s emerging cutting and polishing
industry.
Botswana is a member of the Multilateral Investment Guarantee
Agency (MIGA). MIGA offers investors protection against
inconvertibility or transfer of currency, expropriation, breach of
contract, and war and civil disturbance.
The Botswana Pula has a crawling peg exchange rate and is tied to a
basket of currencies comprised of approximately two-thirds South
African Rand and one third Special Drawing Right (SDR is itself
a currency basket, comprised of the U.S. dollar, the Euro, British
pound, and Japanese yen). As a result of the composition of the Pula
basket, the exchange rate is heavily influenced by movements of the
South African Rand against the U.S. dollar.
The U.S. Embassy in Gaborone purchases local currency at the
official exchange rate provided.
5.21Labour
Botswana has high unemployment (estimated at 26.2 percent in
2008) and a severely constricted worker skills base. Employers can
expect to engage in significant training efforts depending on the
industry. Retention of workers and absenteeism can pose problems.
In addition, managers often cite productivity of the workforce as a
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entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
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11
point of frustration. The lack of trained local citizen professionals is
generally resolved by the use of expatriates.
The Employment Act of 1992 provides basic guidelines for
employment in Botswana. The legislation sets minimum wages,
length of the workweek, annual and maternity leave, hiring
and termination. Standards set by the Act are consistent with
international best practice as described by ILO model legislation and
guidelines.
Some have observed that Botswana workers, as a whole, are both
aware of their rights and not reluctant to take an employer to court if
they believe these rights have been violated. Considerable expense
and frustration can be avoided if an employer is careful to observe the
labour laws and only fire for cause and with sufficient proof. Before
a potential litigant goes to labour court, the parties must attempt
mediation through the Department of Labour. If mediation fails, the
parties go to one of eleven labour courts.
All Botswana citizens except those working in the Botswana Defence
Force (BDF), police, and prisons are permitted to participate in trade
unions. The largest unions are comprised of public sector workers.
Although workers have a right to strike, those engaged in certain
categories of “essential” services, including air traffic control,
electricity services, fire services, the Bank of Botswana, health
services, sewage services, diamond workers, veterinarians, and
teachers, are not permitted to strike. The last three categories were
added as essential services in the wake of the April-June 2011 public
sector strike, in which 90,000 public sector workers went on strike
and forced school and hospital shutdowns.
AON Botswana is the largest insurance brokerage firm in the country
with more than 100 employees. It currently commands about 60% of
the insurance market and provides brokerage and advisory services
in all insurance disciplines. It is a subsidiary of the AON Corporation,
headquartered in Chicago. AON has annual revenues of USD 7
million and its primary clients are the Government of Botswana and
Debswana (Government-De Beers joint venture).
Marsh Insurance is 95-percent owned by Marsh New York (of the
Marsh and McLennan Insurance Companies) and operates in
Gaborone.
Phillip Morris owns a percentage of SAB Miller Co., which owns 40
percent of Kgalagadi Breweries (KBL) (Pty) Limited and Botswana
Breweries (Pty) Limited (BBL). The combined businesses employ
more than 1,000 people directly and provide employment to a further
28,000 indirectly. Contributions to GDP and government revenue are
estimated to be between 3 percent and 5 percent respectively.
H.J. Heinz, Inc. owns 80 percent of Kgalagadi Soap Industries,
representing assets of well over US$5 million.
Covalent Energy of Virginia owns 25 percent of the Kalahari Gas
Corporation, which received OPIC funding for a natural gas drilling
project in mid-2004.
Lazare Kaplan Botswana is a wholly-owned subsidiary of New
York-based sight-holder and jewellery manufacturer Lazare Kaplan
International.
5.22Foreign-trade zones/free ports
Botswana currently has no domestic free trade zones or free ports.
Laurelton Diamonds, a subsidiary of U.S. luxury jewellery retailer
Tiffany & Co is a sight-holder involved in cutting and polishing
diamonds. In August 2011, Laurelton completed an additional
US$300 million diamond cutting and polishing factory in Gaborone.
5.23Foreign direct investment statistics
Foreign direct investment statistics trends show that FDI forms a
major portion of capital flows into Botswana followed by portfolio
investments, which, though small, have shown a considerable
increase since the establishment of the Botswana Stock Exchange.
The Gemological Institute of America, part of the U.S. non-profit
institute of gemological research of the same name, operates an
office in Botswana which offers training programmes for Botswana
citizens in diamond grading and grades diamonds for mining
companies.
Mining and finance remain the main contributing industries to
foreign direct investment in Botswana, with a representation of
nearly 80 percent. Europe dominates as the principal source of direct
investment (56 percent). South Africa is also a significant contributor
to foreign direct investment as a result of South Africa’s involvement
with the financial institutions in Botswana.
In September 2011, Hewlett-Packard opened operations in Botswana
and is providing computing and connectivity services. HP is working
with the Government of Botswana on e-government and data
solutions for health care.
The following paragraphs provide a description of the major /foreign
investors in Botswana.
Anglo-American Corporation (De Beers), has a 50 percent stake,
along with the Government of Botswana, in the country’s diamond
mining company Debswana.
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
12
5.24Step-by-step procedures for starting a business in Botswana
No. Procedure
Time
Cost
1.
Select and reserve company name
3 days
BWP 20
2.
Sign the declaration of compliance of statutory requirements
for incorporation before a commissioner for oaths
1 day
BWP 75
3.
Return the complete statutory return to the Registrar of
Companies about re-allotment, directors, auditors, company
secretary, and registered officers
1 day
BWP 300 by self, and a fee of BWP 2000 where registration
is done by agent
4.
Register the company with the Registrar of Companies at the
Ministry of Commerce and Industry
2 – 3 weeks
5.
Advertise the intention of applying for a license in the official
gazette
3 weeks
6.
Obtain an approval of the working condition after an
inspection of company premises
2 days (simultaneous
with procedure 6)
As part of the application procedure the firm’s premises will
be inspected by the health and environmental authorities
to ensure compliance with minimum standards. There is no
cost, as this procedure is done by the municipal authorities
as part of the application procedure for a trading license or
an industrial license.
7.
Obtain an industrial license from the Industrial Affairs
Department, Ministry of Commerce and Industry; or obtain a
trading license from the local authority
3 weeks
(simultaneous with
procedure 5)
BWP 100 for industrial license if applied by self; BWP 1,500
by agent; BWP 60 for trade license if applied by self, BWP
2,000 by an agent
8.
Register for Corporate Income Tax number with the
Botswana United Revenue Services and obtain the approval
from the Commissioner of Taxes for the appointment of a
public officer who is in charge of tax return
7 days
No charge by self, BWP1,500 by agent
9.
Register for VAT with Director of Customs & Excise
7 days
No charge by self, BWP1,500 by agent
10.
Register employees for the work injury insurance
1 day
BWP 360 (Registration of constitution)
BWP 80
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
No charge
13
6Country Risk Summary
(2012 – 2016)
The controversies surrounding the public-sector strike had
reinvigorated the opposition parties, whose hopes of benefiting from
worker support in future elections were boosted by union leaders’
formal support for a proposed electoral pact to contest the next
general election (or any by-elections that arise).
Sovereign Currency Banking Political Economic Country
risk
risk
sector
risk
structure risk
risk
risk
Sep-11
A
BBB
BBB
A
BB
BBB
(AAA=least risky, D=most risky)
6.1 Sovereign risk
Stable. Despite falling quarterly foreign-exchange reserves,
Botswana’s sovereign risk score recovers by one point this quarter
because of lower real interest rates. A strengthening current-account
surplus and stable revenue from the Southern African Customs
Union (SACU) will support the A rating in 2012.
6.2 Currency risk
Stable. The pula remains vulnerable to shifts in global sentiment,
owing to its link to the South African rand, but the crawling-peg
mechanism will help to reduce volatility. growing current-account
surplus will support the rating.
6.3 Banking sector risk
Stable. The rating is underpinned by strong regulation and fairly solid
capital and liquidity indicators.
6.4 Political risk
The President, Ian Khama, is expected to remain in office and to
tighten his grip on the ruling Botswana Democratic Party, as the
opposition remains divided and seemingly unable to negotiate an
electoral alliance for 2014.
6.5 Economic structure risk
The economy remains heavily dependent on diamond mining as a
source of growth, exports and fiscal revenue. The government will
attempt to diversify the economy further in the coming years, but
development of the non-mining private sector is constrained by high
labour costs, skill shortages and the small domestic market, among
other factors.
7Country Outlook for 2012
– 2016
7.1 Political stability
The Botswana Democratic Party (BDP) has responded vigorously,
if not always subtly, in the face of recent challenges to its
dominance, which could now be receding. Opposition parties had
been galvanised by the formation of the Botswana Movement for
Democracy (BMD), a splinter party that broke away from the ruling
BDP in April 2010, and the government’s tough approach in facing
down the unions during a two-month public-sector strike in mid-2011
hardened anti-government sentiment, especially in urban areas.
Most workers who were dismissed as a result of the dispute have
now been reinstated, but the government is persisting with its tough
line on industrial relations; a wage increase for civil servants was
agreed last year, but with several related court cases ongoing, further
flashpoints could arise.
Talks to formalise the alliance that collapsed in late December amid
acrimonious disagreement, in particular between the BMD and
Botswana Congress Party (BCP) over the allocation of parliamentary
constituencies, have now restarted, but with the conspicuous
absence of the BCP; the party’s presence is widely regarded as
essential for an opposition alliance to succeed, but it has explicitly
ruled out returning to the talks. The BMD and the Botswana National
Front (BNF) have formed a coalition in parliament, and Duma Boko,
the BNF president, is strongly in favour of persevering with the
multiparty negotiations. However, despite this current closeness, the
two parties are far from natural allies (the leader of the opposition,
Botsalo Ntuane of the BMD, insists on maintaining cordial relations
with the ruling party, infuriating veteran opposition activists) and the
BNF is seriously split between supporters of Mr. Boko and those
who favour an alliance with the BCP. Most of the party’s executive
committee have been suspended and/or resigned, with two MPs and
several councillors opting to leave the party; these include Mr Boko’s
erstwhile deputy, Isaac Mabiletsa, who has joined the BCP.
The BNF held a crucial special congress in early May 2011, which
would determine the future direction of the party. At the same
time, opposition co-operation in by-elections, on local councils and
in parliament, where Mr. Mabiletsa is already calling for the BCP to
be more assertive, is likely to deteriorate. In any case, whatever the
outcome it will be a tall order to overcome pubic disillusionment over
the state of opposition politics, from which the BDP is likely to be the
main beneficiary.
7.3 International relations
Botswana will maintain generally good international relations
over the forecast period, despite continued misgivings about
Mr. Khama’s leadership style. Although still largely disdainful of
regional organisations such as the Southern African Development
Community (SADC) and the African Union (AU), Mr. Khama
has been energetically cultivating bilateral relations with other
African countries, both in Southern Africa and further afield. The
government’s denouncement of human rights abuses now looks
more selective: it was reluctant to condemn recent political violence
in Malawi, but broke ranks with the AU in its early backing for the new
government in Libya. It also took a tough line on ongoing events in
Syria. Bilateral relations with South Africa can be problematic over
issues such as cross-border crime; Botswana’s retention of the death
penalty is a particularly sensitive issue.
7.4 Policy trends
The government will continue to pursue largely prudent economic
policies, although its ability to maintain macroeconomic stability
and fiscal discipline will be tested by an uncertain global economic
backdrop and the approach of the next general election, due in 2014.
It is expected that the government will maintain sound economic
management and improve the monitoring of public expenditure to
ensure longer-term sustainability. As part of this, the government
appears set to continue its policy of public-sector pay restraint,
despite the improving fiscal position.
7.2 Election watch
The next general election is scheduled to take place in October 2014.
As the BDP has comfortably retained its parliamentary majority in
the face of the threat from the BMD, there is little chance that it will
call a snap election, especially with the threat of further defections
receding (some defectors have already rejoined the ruling party).
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
14
The stalled privatisation programme has been re-launched, but there
is continuing scepticism about whether it will gain much momentum:
it was announced recently that the planned partial sell-off of the
Botswana Telecommunications Corporation has been delayed for
at least a year, until 2013. However, the government does now
seem to be starting to address concerns, including through greater
use of Internet-based platforms, but there are concerns that basic
measures to improve the business climate, such as streamlining the
submission of tax returns and licensing procedures, are yet to be
implemented. The model for the latter is the mining sector, where
a recent survey has confirmed that Botswana is among the most
attractive jurisdictions in the world. National Development Plan 10
(NDP10) will be entering its second half in 2013-16, by which time the
government should have achieved its fiscal consolidation objectives.
A mid-term review of NDP 10 is to be undertaken shortly and may
provide an opportunity for the start of some of the development
projects (such as road construction) that were put on hold earlier to
contain expenditure.
7.5 Economic growth
Despite new mines commencing operations, the production
of diamonds in Botswana is expected to rise only slightly in
2012-13, and the achievement of full capacity may now be delayed
beyond 2013. Debswana, a joint mining venture between the
government and a South African company, De Beers, has warned
that a combination of ebbing demand for rough diamonds and
technical constraints has limited the scope for increasing output in
the near term.
Expansion plans will be kept under close review, given the continuing
global economic uncertainties, although, with global supply limited
and demand for diamonds from emerging markets continuing to
grow, long-term industry fundamentals remain strong. A new copper
mine will be commissioned in 2012, and other developments are also
planned that could establish Botswana as a major copper producer
in the coming years; the prospects for mining uranium are also
promising. Coal-mining projects, including some for the production
of gas, are attracting investor interest as world energy prices remain
high. The development of substantial associated infrastructure,
including rail links, is essential for the successful exploitation of coal
reserves, and government plans for this to commence during 2012
appear to be slipping. However, the scope for the use of existing
rail links may allow some exports to commence. Growth from all
of these mining sources will be partly offset by the slowdown in
government capital spending and the weak global economy, reducing
overall growth to 4.2% in 2012 and 4.8% in 2013. However, both a
pick-up in the world economy and major new capital investments
will see economic growth pick up to 6.8% in 2014-15, as the country
attracts a range of support services (hotels, air services, business
support and financial services) and downstream manufacturing.
Gains from new diamond-related services will slow slightly in
2016, causing real GDP growth to hold at 6.9% in 2016. Despite
abundant wildlife resources, concerns over infrastructure and service
standards mean that Botswana will continue to struggle to realise
its potential as a tourist destination. The primary risk to the growth
outlook is falling global demand for diamonds.
7.6Inflation
Year-on-year consumer price inflation fell during the first quarter,
reaching 8% in March, down from 9.2% in December 2011. Some
further reduction can be expected in the short term, as a series of
fuel price increases in 2011 fall away, while the upward pressure
on food prices, which have the largest weight in the consumer
price index basket, has eased. Conversely, however, any sustained
increase in world oil prices could quickly intensify inflationary
pressures, while water tariffs have recently been increased and may
be followed by electricity prices.
Domestic inflation will ease in 2012 and 2013 to average 6.6% and
5.8% respectively, as government capital expenditure is reduced
and global commodity prices – especially for food – come down.
However, annual inflation is expecgted to remain outside the 3-6%
target range in 2014-16 as international oil prices trend upwards,
the government’s development spending increases and economic
activity remains buoyant.
7.7 Exchange rates
The pula’s value is determined by a basket of currencies dominated
by the South African rand, through a crawling-peg mechanism that
makes small adjustments based on expected inflation differentials
with trading partners. Although the rate of crawl is not made public,
it is currently set on a modest downward path. The average exchange
rate against the US dollar strengthened in 2011, owing to the
appreciation of the rand. However, the rand is expected to depreciate
steadily from an average of R7.9:US$1 in 2012 to R8.95:US$1 in 2016.
As a result, it is expected that the pula will lose ground against the
dollar, falling from an average of P7.20:US$1 in 2012 to P8.63:US$1
in 2016.
7.8 External sector
Despite some recent weakening, international demand for minerals
is expected to remain generally strong over the forecast period
(unless the global economy deteriorates by more than currently
expected). The resumption of beef exports following a ban on
sales to the EU has been delayed, but is still expected early in the
forecast period.
Although short-term prospects for diamond exports have
deteriorated, higher than expected revenue from the Southern
African Customs Union (SACU) means that a current-account surplus
of 4.2% of GDP is expected in 2012, up from 1.6% in 2011. Thereafter,
while part of the SACU revenue is a one-off payment, export growth
should resume and, despite strong growth in capital goods imports
for mining investments, the current-account surplus will continue to
improve over the forecast period on the back of faster global growth.
In 2016 rising import prices will see the trade surplus narrow, causing
the overall surplus to fall to 7.5% of GDP. However, any weakening
in either international demand or the large transfer payments from
SACU would constitute a threat to Botswana’s external position. The
SACU revenue-sharing formula is currently being renegotiated, but
with no progress reports forthcoming, it is unclear to what extent
South Africa is prepared to water down its earlier demands for a
much increased share.
AAppendix - sources of
information
• Economist Intelligence Unit
• CIA World Factbook
• Bloomberg
• World Bank
• Ministry of Health, Republic of Botswana
• US Ministry of State
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
15