2009 Investment Climate Statement - Botswana

2009 Investment Climate Statement
Bureau of Economic, Energy and Business Affairs
February 2009

Openness to Foreign Investment

The Government of Botswana is committed to creating an attractive climate for foreign investment. Credit ratings received from Moody’s and Standard & Poor’s for Botswana were the highest given to an African country, ranking it equally with other successfully developing economies like the Republic of Chile, Saudi Arabia, Korea and Estonia Botswana has a strong and well-managed minerals economy, coupled with a long record of political and macroeconomic stability. Botswana’s per capita income of roughly USD 6,742 as of 2007 makes it a middle-income developing country.

The Government and the private sector in Botswana increasingly acknowledge the need for significant foreign investment, which will require a privatization strategy of state-owned enterprises. While this policy is not without its political and ideological opponents, the Government is committed to maintaining Botswana's position as one of the developing world’s most competitive economies and to attracting serious foreign investors to enhance efficiencies, productivity and secure transfers of skills and technology. Efforts are now focusing on developing the country’s service sector through the International Financial Service Center (IFSC) and Botswana’s unique tourism potential, as well as making the agriculture sector, especially beef, more competitive, productive, and efficient.

Botswana continues to develop a regulatory framework favorable to investors. The Government abolished all foreign exchange controls in February 1999. It has undertaken largely successful efforts to combat crime, including corruption. The Government has instituted low corporate tax rates, the increasingly speedy processing of applications for business ventures, a stable macroeconomic environment, and a commitment to transparency. In 2006, the Ministry of Trade and Industry announced that it had taken measures to simplify and expedite the issuance of work and residence licenses, although evidence of arbitrary implementation and occasional politicization of the process appears to be on the rise. The Registrar of Companies has progressed in implementing its commitment to reduce the turnaround time to register a company from twelve weeks to ten working days. In addition, the Government provided assistance to investors through investment incentive schemes, including grants and tax relief.

The Botswana Export Development and Investment Authority (BEDIA) is an autonomous organization established in 1998 to promote investment in Botswana with a special emphasis on export-oriented manufacturing industries. BEDIA serves as the primary government contact point for both domestic and foreign investors. Through its One Stop Service Center, BEDIA provides services for investor needs and aftercare to both new and existing foreign and citizen-owned enterprises. The Center focuses on enabling investors in both the manufacturing and service sectors to secure all clearances and approvals as quickly as possible under one roof. BEDIA promotes the sectors through incoming and outgoing missions as well as through direct mailing campaigns in the targeted markets, such as the European Union, South Asia, and southern Africa. BEDIA is increasingly reaching out towards the United States as a source for foreign investment and is eager to work with established businesses seeking to expand their operations into Botswana.

In order to help position Botswana favorably in the face of increased global competition for FDI, BEDIA is in the process of developing a national FDI strategy including the drafting of a FDI Bill, which will articulate the country’s investment climate. BEDIA continues to support and give momentum to efforts towards attracting FDI and developing export markets including a branding exercise to create a comprehensive ‘Brand Botswana’ strategy for Botswana, which was launched in November 2007.

Trade liberalization and investment promotion remain key elements of Botswana’s trade policy framework and its development strategy. The Government’s main objectives are to promote export-led industrialization and to diversify the economy away from diamonds into non-traditional goods, such as textiles, clothing, leather products, glass products, information technology, pharmaceuticals, and tourism.

The foreign investment climate in Botswana calls for foreign investors to be law-abiding, identify with Botswana's national principles and objectives, assist in the diversification of the economy, and share Botswana's commitment to maintenance of a democratic, open, and non-racial society. Botswana has little tolerance for corruption.

All foreign investors wishing to invest in Botswana are required to register a company in Botswana in accordance with the Companies Act and comply with other applicable legislation, transfer technology to Botswana, and transfer skills to Batswana by promoting their involvement and participation in positions of supervisory, middle and senior management levels in the company in an effort to localize the companies within an agreed period. There are no ownership transference requirements. These initiatives are aimed at securing citizen involvement in the development of Botswana’s private sector.

The Government of Botswana is aware that for Botswana to be competitive in both the regional and global markets there is a need to continue to create a favorable environment for private sector investment and growth by both domestic businesses and foreign direct investors. The 2005 Competition Policy prevents and redresses anti-competitive practices and conduct by firms, encourages competition and the effective use of resources, promotes investment, and reduces prices. With assistance from the United Nations Development Program (UNDP) the Government now has a National Competition Policy in place and is drafting a Competition Bill. In addition, the new Companies Act will create an updated, simplified and clarified framework for incorporating companies.

While generally open to foreign participation in its economy, Botswana does reserve some sectors solely for citizen participation and has a number of citizen-empowerment programs that are closed to foreign investors. Most were imposed by Parliament out of a fear that other non-citizen African and South Asian residents were opening businesses in areas traditionally controlled by Batswana. The restrictions are not retroactive, and businesses in existence prior to the law's passage remain in the hands of their non-citizen owners. In addition, many foreign investors have continued to invest in certain areas, such as gas stations, through franchising to Botswana citizens.

The Ministry of Trade and Industry, which has responsibility for licensing businesses, issues licenses to foreigners to operate businesses related to these areas whenever there has been any ambiguity as to whether the licensing prohibition applied. At present, the law prohibits foreign participation in school furniture manufacturing, and the welding and bricklaying trades. The law limits the following trades or businesses to those ventures wholly controlled by Batswana:

  1. hawkers and vendors
  2. butchery and fresh produce
  3. general trading
  4. petrol filling station
  5. bottle stores (liquor stores)
  6. bars other than those related to hotel establishments
  7. chibuku (traditional beer) bar
  8. village type restaurant take-away including restaurant liquor license
  9. supermarkets, but excluding chain stores and franchise operations,
  10. simple specialty operations such as clothing boutique, footwear, etc.
  11. Government building projects
    • registration as building contractor
    • building projects up to P 150,000 (USD 18,750)
    • maintenance and minor building works of government properties
  12.  Road contracts and railway maintenance
    • fencing, reserve and draining, culvert construction, transport and plant hire, clearing and scrubbing bush, road marking, carting gravel, bridge painting, stock piling of material
  13. Industrial activities
    • school furniture, uniforms, ordinary cement and baked bricks, ordinary bread baking, sorghum milling, burglar bars
  14. Others

    • transportation of mail, purchase furniture by local authorities and government, procurement of uniforms, overalls and dust coats by government, local authorities and parastatals.

In February 2006 the Government imposed an indefinite suspension on the issuance of new licenses and transfer of licenses for importers/exporters, wholesalers, specialized wholesalers, and specialized dealers in an effort to curb the potential abuse of the specialty trading licenses for the operation of general dealerships, which are reserved for Batswana citizen companies.

The Ministry of Trade and Industry has taken an expansive interpretation of "chain stores" to mean any store with more than one outlet and has allowed the exemption to apply not only to supermarkets, but also to simple specialty operations and general trading stores. Hence, large general merchandise markets, restaurants, and the dominant grocery network, all owned by foreigners, operate without restriction. Foreign investors are allowed to participate in all other sectors. Business licenses are issued following a routine review of proposed commercial activities, which is carried out in a transparent and non-discriminatory manner. There are no stringent screening mechanisms for licensing that could cause an impediment to investment, limit competition, or protect domestic interests at the expense of foreign investment.

Foreign investors are given equal access to general investment incentive schemes for medium and large projects in most economic sectors. Foreign investors do not, however, have access to Botswana Government assistance loans and grants designed for citizen-owned contracting firms or for small enterprises, defined as those involving investments of less than Pula 75,000 (approx USD 9,375 ). Investment of foreign capital in job-creating industrial projects, particularly those that have an import substitution component or have export potential, is strongly encouraged.

The Government is continuing to reorganize and restructure some Ministries and Departments, with the aim of improving efficiency and effectiveness of service delivery, and is moving towards privatizing a number of parastatal businesses. Part of the reform development has required the Government to establish autonomous authorities or boards, working largely on commercial principles. One of these is the Public Enterprise Evaluation and Privatization Agency (PEEPA), established in 2000 to oversee the implementation of the Privatization Policy. PEEPA will ultimately decide the extent of foreign participation in the privatization process and determine the mechanics that will be used to promote citizen participation. The Government intends to use privatization as a tool to increase foreign direct and portfolio investment in the country, while on the other hand addressing the concerns that privatization will cost jobs and only reward wealthy foreign interests.

The Ministry of Finance, to which PEEPA reports, welcomes foreign participation in privatized companies, as, in addition to capital, foreign investors bring advanced technology, managerial expertise and useful market connections. The Ministry has also stated that local investors may be given preference in some instances; "restrictions may need to be imposed on foreign participation in certain companies for strategic or other reason that will be considered on a case-by-case basis."

The 2005 Privatization Master Plan provides the Government with a concrete basis for implementation of different privatization-related activities in a systematic manner. As part of the preparations for implementation of the Privatization Master Plan, PEEPA is carrying out extensive diagnostic reviews covering the performance of public enterprises. The privatization of national airline Air Botswana, which was Botswana’s first test at privatization, was not successful after many attempts and is now currently on hold. Future plans according to the Privatization Master Plan are to privatize Botswana Telecommunications (BTC) by 2009, and involve the private sector in the expansion plans of Botswana Vaccine Institute (BVI). The Government intends to proceed with the sale of its stake in the Botswana Building Society and has instructed PEEPA to proceed with the privatization of the National Development Bank.

Despite the well-intentioned Privatization Master Plan, privatization remains controversial in Botswana, as evidenced by the repeated failure to privatize Air Botswana. The main concerns are the potential job losses in the affected enterprises, and the reduction in services provided, especially to the poorer households. The other concern relates to the sale process, particularly in regard to who will be able to buy the privatized assets and how the proceeds will be used.

The ability of PEEPA to push through the privatization of state-owned enterprises is hampered also by its legislative restrictions. There is no privatization implementing legislation, meaning the decision for privatizing particular parastatals still rests with the Ministries in question; a situation that has led to some inertia in moving the privatization process forward.

Conversion and Transfer Policies Botswana has abolished exchange controls, which enhances Botswana’s competitive position as a regional investment destination. In addition, the abolition of exchange controls has allowed for further development of Botswana's financial markets through the creation of new portfolio investment options. This new change in policy has necessitated the development of government capacity to monitor data on capital flows so as to provide early warning signals of potentially destabilizing activity. Commercial banks are required to have investors complete basic forms indicating name, address, identity, purpose and details of the beneficiary prior to processing investors' transfer requests or loan applications. The Ministry of Finance monitors data collected on the forms for statistical information on capital flows, but the form does not require Botswana Government approval prior to the processing of a transaction and does not in any way delay capital transfers. Other government agencies also monitor large international capital inflows so that appropriate policies can be implemented to reduce any destabilizing effects on the economy.

There are no restrictions on converting or transferring funds associated with an investment into a freely convertible currency and at a legal clearing rate. Investors are allowed to remit funds through financial institutions. To encourage portfolio investment, develop 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 over one year, provided such instruments are listed on the Botswana Stock Exchange. Foreigners can hold shares in Botswana companies.

Residents are permitted to invest overseas and borrow offshore. Travelers are not restricted to the amount of currency they may carry on their person or in their baggage, but they are required to declare to customs at the port of departure any cash amount in excess of Pula 10,000 (USD 1,250.00). All quantitative limits on foreign currency access for current account transactions have been removed. Dual listings are permitted on the Botswana Stock Exchange. Botswana's "Letlole Saving Certificate" (the equivalent of a U.S. Treasury bond) can be purchased only by Botswana citizens.

The government permits the establishment of foreign currency-denominated accounts in Botswana. 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. Investment returns such as profits and dividends, debt service, capital gains, returns on intellectual property, royalties, franchise fees, and service fees can all be repatriated without limits. There is no difficulty in obtaining foreign exchange. Shortages of foreign exchange that would lead banks to block transactions are highly unlikely. As of November 2008 international reserves stood at approximately USD 8.24 billion an indication that Botswana will not experience foreign exchange difficulties in the foreseeable future, covering roughly two years of import liabilities. The Botswana Pula is, for all intents and purposes, freely convertible.

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 there is no reason to believe that it would consider expropriating actions.

Dispute Settlement

The Botswana constitution provides for a judiciary, which is independent of both the executive and legislative authorities. Civil law is based on Roman-Dutch law while criminal law is built on familiar tenets of the English legal system. The legal system is sufficient to conduct secure commercial dealings. Foreign and domestic parties have equal access to and standing under the judicial system. Botswana courts will, in general, accept and enforce decisions of a foreign court found to have jurisdiction in a given case. However, due to a caseload backlog, some U.S. companies facing legal challenges have expressed impatience with the resolution of disputes.

Botswana has written and consistently applied commercial and bankruptcy laws. Secured and unsecured creditors enjoy the same rights under bankruptcy proceedings as they would in the United States. Botswana is a member of the International Center for the Settlement of Investment Disputes (ICSID) and the Multilateral Investment Guarantee Agency (MIGA), and as such accepts binding international arbitration of investment disputes.

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. A unique incentive corporate tax at only 15 percent for manufacturing enterprises is also available. Foreign investors are encouraged but not compelled to establish joint ventures with citizens or citizen-owned companies. The choice of citizens or citizen owned companies is in the absolute discretion of the foreign investor.

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. Foreign exchange is available to all investors, domestic or foreign, regardless of export volumes. The Government does not require investors to locate in specific geographical areas, use a specific percentage of local content, allow local equity in projects, manufacture substitutes for imports, meet export requirements or targets, or use local sources of financing.

It is the official policy of the Government to encourage foreign firms to hire qualified Botswana nationals rather than expatriates, and the granting of work permits to expatriates can in some instances be made contingent upon establishment of demonstrable "localization" efforts. The Government has in the past recognized that the shortage of technical and managerial job skills among the general population necessitates the import of expatriate labor and has generally granted work permits for positions which cannot be filled by an appropriately trained Botswana citizen or for which the company requires job-specific training. After the start-up period, however, the Government has often required evidence that a citizen is being trained to assume some of the expatriate positions, particularly at the middle-management level, through the filing of an annual localization plan.

In 2006 the Industrial Development Act was updated to decentralize and simplify licensing procedures for manufacturing industries, among others, in order to speed up the issuance of licenses, as well as bring services closer to the public. The update also aligned the Industrial Development Act with the Trade Act of 2003 to provide consistency in the issuance of business licenses. The regulations for the Trade Act, which clarifies processes for citizens’ and non-citizens’ requirements, have also been implemented. These initiatives are designed to remove impediments to private sector development. Efforts are continuing to deal with the long-standing backlog of residence permit applications for investors. The use of a single application for both work and residence permits has reduced the processing time of applications for both resident and work permits, although delays still exist.

The government of Botswana offers foreign investors equal access to incentives designed to promote export-oriented industries. Current incentives include:

  • A duty drawback facility when purchasing raw materials to be used for the production of merchandise destined for export.
  • Exemption from sales tax when importing machinery and equipment required in the production of export merchandise.

In addition, the government-owned Botswana Export Credit Insurance and Guarantee Ltd. (BECI) allows investors to purchase coverage against the insolvency and inability of buyers to pay for purchases and political risks, such as losses caused by import restrictions, war, and, more commonly, the prevention of foreign exchange transfer for payment by the buyer's country.

A Venture Capital Fund has been established under the Citizen Entrepreneurial Development Agency (CEDA) to provide equity capital to citizens as well as ventures between citizens and foreign investors. The CEDA Venture Capital Fund invested its full committed capital of P200 million (USD 25 million) by December 2007. Transfer of technology is expected of foreign investors and investors are encouraged but not required to purchase from local sources. The Government does not require investors to locate in specific geographical areas, utilize a particular percentage of local content, allow local equity in projects, manufacture substitutes for imports, meet export requirements or targets, or use local sources of financing.

The CEDA Credit Development Scheme (CGS) in participation with local banks, which provide funds and appraise projects, provides:

  • An upper loan limit of P 2 million (USD 250,000) to support development of small and medium enterprises
  • A guarantee cover to participating banks of 75 percent of the net loss
  • A reduced maximum interest rate of prime plus 2 percentage points

Collateral or security required by the participating banks is subject to negotiation between lender and borrower.

Technical assistance is to be made in the form of training and mentoring to develop entrepreneurship among citizens. CEDA’s rejection rate remains very high due to a lack of a sufficient market for a proposed project to be viable, and inappropriate requests to refinance existing loans from other financiers for businesses in over-traded markets.

The Government has directed Central Government, Local Authorities and Parastatal organizations to purchase all their products 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 (BOBS) as well as other requirements. The department of Industrial Affairs under the Ministry of Trade and Industry is responsible for administering the program. The idea is to facilitate the development and stimulation of local entrepreneurship, capacity building and international competitiveness.

In order to register a firm with the Department of Industrial Affairs for the "Use of Locally Manufactured Goods and Services Program" must be registered with the Registrar of Companies in Botswana and possess a relevant license or a letter of waiver written by a competent authority. Both foreign and domestic owned firms operating in Botswana are equally eligible.

The registration of enterprises will be determined in terms of the number of employees and annual turnover, as defined by the Small Medium and Micro Enterprises (SMME) Policy in categorizing business enterprises as follows:

  1. Micro Enterprises – Less than 6 employees including owner and annual turnover of up to P 60 000
  2. Small Enterprises – Less than 25 employees and annual turnover of between P 60 001 and P 1 500 000
  3. Medium Enterprises- Less than 100 employees and an annual turnover of between P 1 500 001 and P 5 000 000
  4. Large Enterprises – More than 100 employees and an annual turnover of P 5 000 000

The Minister of Finance and Development Planning has the authority to issue Development Approval Orders for specific projects, providing 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 the Botswana economy and/or contribute to the economic advancement of Botswana citizens. Any firm may apply for a Development Approval Order to the Permanent Secretary for Finance and Development Planning. Applications will be evaluated against the following criteria:

  1. Job creation for Botswana citizens;
  2. The company's training plans for Botswana citizens;
  3. The company's plans to localize non-citizen positions;
  4. Botswana citizen participation in company management;
  5. Amount of equity held by Botswana citizens in the company;
  6. The location of the proposed investment;
  7. The project's effect on stimulation other economic activities; and
  8. The project's effect on reducing local consumer prices.

Domestic and foreign-owned firms may both apply for Development Approval Orders.

Right to Private Ownership and Establishment

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 interests in business enterprises. As previously discussed, there is a brief list of enterprises reserved for ownership by citizens and a minimum value for foreign investment in a number of industries, but these restrictions are not a meaningful impediment to serious foreign investment. Competitive equality is the standard applied to private enterprises in competition with public enterprises with respect to access to markets, credit, and other business operations. Indeed all-remaining parastatals have been commercialized, meaning they are expected to operate as commercial entities receiving no government subsidies or special treatment, with the exception of certain public utility corporations, which still enjoy legally protected monopoly status. Most of these parastatals, even those without legally protected monopoly status, are de facto monopolies.

Protection of Property Rights

The Constitution of Botswana prohibits the nationalization of private property. The Government of Botswana has never pursued a policy of forced nationalization, and there is no reason to believe that it would consider expropriating actions.

Transparency of Regulatory System

The Botswana government adheres to transparent policies and maintains effective laws to foster competition and establishes clear rules of the game. Bureaucratic procedures are streamlined and open, although somewhat slow, and not excessively overbearing compared to other African countries.

The Public Procurement and Asset Disposal Board (PPADB) is an independent parastatal responsible for the award of all government tenders. The tender process is open, and lobbying of the PPADB or its members is strictly prohibited. One of the key policy objectives of the PPADB is the enhancement of operational efficiency in the public procurement system. PPADB has established the Advisory Committee, Independent Complaints Review Committee and the Ministerial and District Tender Committees in accordance with its Act. The Advisory Committee advises the Ministry of Finance and Development Planning on any weaknesses in the operations of the board. The Independent Complaints Review Committee reviews the Board’s decisions subject to challenge by stakeholders (e.g. contractors and procuring entities) whilst the Ministerial and District Tender Committees ensure that speedy decisions are made. In effect since December 2003, PPADB publishes its decisions concerning awarded tenders, prequalification lists, and newly registered contractors.

Government procurement practices do, however, involve some preference schemes and reserve certain tenders for 100 percent citizen-owned companies. There is an ongoing public debate about government procurement practices, which many view as a give-away to foreign companies. The PPADB is explicitly charged with promoting citizen empowerment through the proactive implementation of reservation and preference schemes designed and introduced by the Government of Botswana from time to time to enhance citizen participation in economic activities resulting in increased employment and capacity building. However, the Board states that it considers these schemes within the context of its obligations under international trade treaties such as the World Trade Organization (WTO), and regional agreements under the Southern African Development Community (SADC) and the Southern African Customs Union (SACU).

The Government updated its labor legislation to comply with ILO standards in 2004. The existence of an industrial court further enhances and strengthens impartiality in labor disputes. The Employment Act of 1992 provides basic guidelines for employment in Botswana. This labor legislation sets minimum wages, length of the workweek, annual and maternity leave, hiring and termination.

Work permits regulate the employment of non-citizens in Botswana. Non-resident consultant and supervising engineers or directors of companies registered in Botswana, however, are exempt from obtaining work permits. Every private company is required to have at least one director resident in the country. Health and safety laws, embodied in the Factories Act of 1973, are designed to 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.

Efficient Capital Markets and Portfolio Investment The liberalization of the Botswana economy created the necessary environment for growth in the financial sector. The country continues to maintain sound and coordinated fiscal and monetary policies, which are reflected, in the careful control that has been exercised over credit expansion, the Pula exchange rate, interest rates, and foreign and domestic borrowing. Banking legislation is in line with the global industry’s norms for regulation, supervision and payments. The Botswana Government is encouraging the establishment of new and diverse financial institutions to support increased foreign and domestic investment and to fill the existing gaps where finance is not currently commercially available.

Botswana’s IFSC is tasked with developing a recognized financial services regional hub in an effort to diversify the economy and to manage the country’s real comparative advantages. Botswana has an attractive tax incentives package to encourage financial service providers to use the IFSC as a base for managing regional initiatives including a guaranteed maximum tax rate of 15 percent until 2020, exemption from withholding tax in Botswana, access to Botswana’s double taxation treaty network, and no capital gains tax. The IFSC plans to play an important role in regional expansion initiatives by providing a platform to facilitate cross-border financial services in an appropriate and conducive manner. For example, the Botswana Government is currently deliberating on re-insurance legislation that would permit international insurance companies to widen the scope of their operations within the IFSC to cover regional as well as domestic businesses.

The country’s policies facilitate the free flow of financial resources. Credit is available on market terms, and foreign investors have access to credit on the local market, although the high prime rate of 14.50 percent as of December 2007 is considered prohibitive to debt finance. 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. In fact, foreign investors generally enjoy much better access to credit than local firms due to the often-limited capital base of the local entrepreneur, conservative lending policies by commercial banks, and the variety of strengths (personnel, technological, and logistical) that the bigger foreign investors possess. Commercial lenders generally apply a debt to equity ratio of 4:1. Authorized dealers and credit institutions licensed by the Bank of Botswana 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.

The central bank - the Bank of Botswana (BOB) - has an impressive track record for managing both the commercial banking sector and the country's monetary policies. BOB maintains a safe, sound and stable financial system. There are eight commercial banks operating in Botswana as of December 2008. All have correspondent relationships with U.S. banks. In addition, the African Banking Corporation operates a financial services institution, specializing in structured trade finance, treasury operations and investment banking.

The total assets and liabilities of commercial banks grew by 24.1 percent in 2007 compared to the much larger expansion of 64.8 percent in 2006.

Two government financial parastatals, the Botswana Development Corporation (BDC) and the National Development Bank (NDB), complement domestic banks in terms of commercial and long-term lending. BDC is seeks to develop quality investment proposals with an emphasis on developing commercially viable investment and lending portfolios. BDC continues to identify manufacturing projects, and monitors and supervises the Corporation’s portfolio of companies engaged in a wide variety of manufacturing activities.

The NDB offers competitive long-term loans and equity capital to finance commercial business development. As a Development Financial Institution, NDB is viable and self-sufficient. NDB’s business is directed solely towards the business community in whatever capacity – whether they are small, medium, or large-scale enterprises and/ or projects. In 1998, NDB was the first bank in Africa to be certified under the ISO 9001 International standards. NDB total assets and increased by 18.9 percent in 2007 mainly due to the increase in loans and advances. Both foreign and domestic investors are equally eligible for NDB loans and equity participation in investments. NDB issued and listed BWP 100 million Bond in the Botswana Stock Exchange during the financial year 2007/08. Screening mechanisms have not discriminated against foreign-owned firms, with 27 percent of the Bank’s total loan value owned by non-citizens as of March 31, 2007.

The Botswana Stock Exchange (BSE) has been one of the best performing stock markets in the world over the past decade, and trading has been active. The foreign companies’ index rose by 23.8 percent in 2007. The number of foreign companies listed on the BSE decreased from 12 to 11 in 2007. Of the listed companies, seven were on the Venture Capital Board (VCB). All the VCB-listed companies were foreign mining-related operations.

The Government has legitimized offshore capital investments and allows foreign investors, individuals and corporate bodies, and Botswana incorporated companies to open foreign currency accounts in specified currencies. The designated currencies are US 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. There are no known laws or regulations specifically authorizing private firms to adopt articles of incorporation or association, which limit or prohibit foreign investment, participation or control.

Political Violence<

There is no political violence in Botswana.


The Government of Botswana is seriously concerned about the increasingly detrimental effects of the growing crime rates which were seen to be limiting the country’s development and affecting its social structures, depriving it of considerable revenue, and damaging the country’s reputation. Legislation to combat corruption and economic crime was put in place, and the Directorate on Corruption and Economic Crime (DCEC) was established in 1994. Passage of the Proceeds of Serious Crime Act in 2000 expanded the DCEC's mandate to include money laundering. Since its inception, DCEC has earned itself respect locally and among those engaged in anti-corruption work elsewhere in the world. In 2001 Botswana was the first SADC country to ratify the SADC Protocol Against Corruption. Prior to the signing of the Protocol, DCEC had been actively engaged in the formation of the Southern African Forum Against Corruption (SAFAC), the principal aims of which are to implement the protocol and facilitate training in anti-corruption disciplines.

Corruption in Botswana is perceived as present but has not yet been viewed as an obstacle to investment and penalties of such acts are applied proportionately. Botswana ranks 36 out of 180 countries in Transparency International Corruption Perception Index for 2008. 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.

A few cases of substantial misappropriation of money and land have been exposed in recent years by the press. Bribery is strictly illegal in Botswana although it appears to be on the rise at lower levels. Under the Botswana Corruption and Economic Act of 1994, any person who is guilty of corruption or cheating for valuable consideration shall, upon conviction, be liable to imprisonment for a term not exceeding 10 years or a fine not exceeding P 500,000 (US $ 62,500) or both.

The government bureaucracy is paid on time and is provided a living wage. Investors with experience in other developing nations describe the lack of obstruction or interference by government as among the country's most important assets. While there remains a high tolerance for conflict of interest in government/private sector interaction, foreign investor complaints generally focus on the reputed inefficiency and/or unresponsiveness of mid- to low-level bureaucrats in government. Because of the high tolerance in government for conflicts of interest, nepotism concerns are largely overlooked given the small size of the population and the chronic shortage of skilled labor in various sectors. The Government introduced the Performance Management System (PMS) in 2004 in an effort to improve service and accountability.

Bilateral Investment Agreements

Botswana and the United States entered into an investment guarantee treaty soon after the country's independence. Botswana has bilateral trade agreements governing the duty-free entry of goods with Malawi and Zimbabwe in southern Africa, in addition to membership, along with South Africa, Namibia, Swaziland and Lesotho, in the Southern African Customs Union (SACU). Botswana is a member of the Southern African Development Community (SADC). 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 signed an interim Economic Partnership Agreement (EPA) with the EU as part of SADC. In addition, Botswana participates in the Generalized System of Preferences, and is an AGOA beneficiary country. None of these agreements are specifically "investment" agreements.

OPIC and Other Investment Insurance Programs

OPIC insurance is available to U.S. investors in Botswana. In July 2004, OPIC signed a USD 8.5 million investment guarantee with the Kalahari Gas Corporation, owned in part by Covalent Energy Corporation of Arlington, VA, to finance equipment purchases and the drilling of coal bed methane (CBM) wells located approximately 500 meters underground in eastern Botswana. In October 2008 OPIC approved a USD$ 250 million guarantee facility for the Botswana diamond industry. The purpose of the facility was to develop a vibrant and 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 U.S. Embassy in Gaborone purchases local currency at the official exchange rate provided by the Department of State’s Financial Service Center. The annual estimated U.S. dollar value of local currency used by the U.S. Embassy in Botswana is US$15 million.

The pula has a crawling peg exchange rate and is tied to a basket of currencies comprising approximately two-thirds South African rand and one third Special Drawing Right (SDR is itself a currency basket, comprising the US 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 US dollar.


With high levels of unemployment (estimated at 17.6 percent in 2005/2006) and underemployment, Botswana suffers no shortage of potential workers. The skills base is still limited, however, and employers may have to engage in significant training efforts depending on the industry. Retention of workers and absenteeism can pose problems and is growing as HIV/AIDS affects the workforce on a broader basis. In addition, managers often cite productivity of the workforce as a point of frustration. The lack of trained local citizen professionals is generally resolved by the use of expatriates, although government officials maintain that local equivalent labor is available.

Organized labor represents only a small portion of the formal sector workforce in Botswana of 288,000 workers, concentrated in the mining and, to a lesser extent, banking sectors. Botswana law provides for the right of association, but most foreign investors will not encounter a unionized workforce in the near term. Only on very rare occasions have the established unions resorted to work stoppages.

Botswana law protects worker rights in a number of commonly defined areas, and, in the formal employment sector, standards for length of workweek (48 hour maximum), minimum wage, and prohibition of child labor is almost universally upheld. Government continues to build capacity and ensure implementation of fair practices, and good human and industrial relations. To achieve this, there will be a review of the Regulations for Industrial Class Employees and the Public Service Regulations to align them with new Employment Act, Trade Disputes Act, Trade Union and Employers Organization Act, and International Labor Organizations Conventions of which Botswana is a signatory.

Foreign-Trade Zones/Free Ports

Botswana currently has no domestic free trade zones or free ports.

Foreign 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 have shown a considerable increase since the establishment of the Botswana Stock Exchange in the 1990's. The following tables show the Levels of Foreign Investment in Botswana by Industry and Country as of 31 December 2006.

(Equity/Non-equity - P million as of 31 December 2006)

Foreign Direct Investment
Other Investment
Retail & Wholesale138212
Water Electricity and Energy0287
Business Services4190
Transport & Communication8778
Public Administration---2,143





(Equity/Non-equity - P million as of 31 December 2006)

Foreign Direct Investment
Other Investment
North America & Central1,179 103
(of which)
U.S.A. 416103
Europe3,133 3,559
(of which)
United Kingdom371764
Other Europe672,775
Asia Pacific60457
(of which)
South Africa2,1782,491
Middle East33153
Total 6,836 9,742

Average exchange rate USD/Pula 1:8
Source: Bank of Botswana 2007 Annual Report

Unlike in the past where foreign direct investment was focused mainly in mining, in 2006 foreign direct investment into the finance sector was slightly higher, due to investment in the insurance industry. Europe continues to dominate accounting for 45.8 percent as the main direct investment. Luxembourg contributes over three quarters of Europe’s direct investment. This is a reflection of the residence status of the major mining investors in Botswana. The 2007 preliminary estimates on international Investment position indicate Botswana foreign assets at P 90.5 billion (US$ 11.30 billion) an increase of about 15 from the previous year.

Major U.S./Foreign Investors

AON Botswana is 95 percent U.S. owned by the AON Corporation, which has its headquarters in Chicago, and it is 5 percent owned by AON Botswana staff. AON has annual revenues of over USD 7 million and its primary clients are the Government of Botswana and Debswana (Government-De Beers joint venture).

Phillip Morris owns a percentage of SAB Miller Co., which owns 40 percent of Kgalagadi Breweries (PTY) LTD. In 2004, South African Breweries (SAB) bought out the Miller Brewing Company, which owned the percentage of Kgalagadi. Annual revenue for Kgalagadi Breweries was roughly USD 170 million in 2003.

Marsh Insurance is 95 percent owned by Marsh New York of the Marsh and McLennan Companies and is 5 percent locally owned. Marsh has 27 employees and annual revenues were roughly USD 1 million in 2005.

H.J. Heinz, Inc. owns 80 percent of Kgalagadi Soap Industries, representing assets of well over USD 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.

Harness Manufacturing Botswana (HMB) has a special contractual agreement with the U.S. owned Delphi Corporation as an integrated supplier for Delphi. HMB produces only Delphi products and operates under the technical management of Delphi Europe. Annual revenues for HMB in 2003 were roughly USD 24 million.

Additional U.S. Distributors/Agents/Franchises operating in Botswana include: Kentucky Fried Chicken, ReMax Realtors, Colgate Palmolive, Grant Thornton Acumen, Deloitte and Touche, PricewaterhouseCoopers, KPMG, Ernst & Young, DHL, Federal Express, Avis, 3M, Barloworld, and Canon. The auditing firms (e.g. PricewaterhouseCoopers, etc.) are wholly owned by the local partners and receive management control and guidance from the U.S.

Among non-U.S. investors, by far the largest is the Anglo-American Corporation (De Beers), which has a 50 percent stake, along with the Government of Botswana, in the country's diamond mining company Debswana.

Web Resources
Overseas Private Investment Corporation: www.opic.gov

U.S. Export-Import Bank: www.exim.gov

U.S. Department of Commerce: www.doc.gov & www.export.gov & www.buyusa.com

U.S. Department of State: 2009-2017.state.gov

U.S. Trade and Development Agency: www.tda.gov

U.S. Small Business Administration: www.sba.gov

U.S. Department of Agriculture: www.usda.gov

Botswana Central Statistics Office: http://www.cso.gov.bw

Botswana Public Procurement and Asset Disposal Board: http://www.ppadb.co.bw/

Botswana Export Development and Investment Authority: www.bedia.co.bw

Botswana Development Corporation: www.bdc.bw

Botswana Telecommunications Corporation: www.btc.bw

Botswana Telecommunications Authority: http://www.bta.org.bw/

Directorate on Corruption and Economic Crime: http://www.gov.bw/government/directorate_on_corruption_and_economic_crime.html

Botswana Stock Exchange: http://www.bse.co.bw

Bank of Botswana: www.bob.bw

Citizen Entrepreneurial Development Agency: www.ceda.co.bw

Ministry of Agriculture: http://www.gov.bw/government/ministry_of_agriculture.html

Ministry of Trade and Industry: http://www.mti.gov.bw/

Ministry of Finance and Development Planning: http://www.finance.gov.bw/

Southern African Development Community: http://www.bedia.co.bw/%3ca href=http://www.sadc.int