2011 Investment Climated Statement - Botswana

2011 Investment Climate Statement
Bureau of Economic, Energy and Business Affairs
March 2011

Overview of Foreign Investment Climate

Botswana presents an open posture toward foreign investment. Botswana’s ranking on the annual World Bank/IFC Doing Business report was 52 out of 183 countries globally. Its score compared favorably to all other African countries except South Africa (ranked 34) and Mauritius (ranked 20).

In 2010, Moodys’ credit rating agency downgraded Botswana's rating from an "A" grade to an "A-" but also revised its overall outlook from "negative" to "stable". Botswana remains one of the best credit risks in Africa and is on par with many countries in central Europe, East Asia, and Latin America.

Botswana has enjoyed one of the fastest growth rates in per capita income in the world since independence, although it has slowed considerably due to the global economic downturn. Economic growth averaged 9% per year from 1967-2006, but slowed during 2007 and 2008 to only 3% before expanding to 3.7% in 2009 and 7.9% in 2010 (Bank of Botswana estimate). By maintaining a sound fiscal policy and low levels of foreign debt, Botswana approached the economic crisis from a position of strength. Foreign exchange reserves were estimated to be a healthy $8.4 billion in October 2010, representing approximately 19 months' cover of imports of goods and services. The IMF projects that real GDP growth will average about 6 percent over the medium term as diamond production gradually recovers to pre-crisis levels.

Overall, Botswana's impressive economic record has been built on the foundation of using revenue generated from diamond mining to fuel economic development through prudent fiscal policies. However, with the prospect of somewhat lower revenues over the medium-term, Botswana’s government will have to find ways to increase the value for money of public spending programs, and it is widely acknowledged that if growth is to be led by the private sector, structural reforms to encourage greater entrepreneurship and investment will be essential.

Botswana’s per capita income of roughly USD 14,800 (2010 IMF estimate) makes it a middle-income developing country. Transparency International ranked Botswana in 2010 as Africa’s least corrupt country and 33rd overall, ahead of many European and Asian countries. In the 2010 Economic Freedom of the World report, Botswana was ranked 28th overall and second highest in Africa. The Heritage Foundation’s 2010 Index of Economic Freedom ranked Botswana at 28th, making it second out of 46 countries in sub-Saharan Africa.

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. More efficient public spending at lower levels will be necessary to ensure fiscal sustainability as the country recovers from the recession.

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” for agriculture, innovation, diamonds, education, health and transport. It has abolished all foreign exchange controls and instituted low corporate tax rates (15% for manufacturing enterprises). In general, the country’s transport and telecommunications infrastructure is excellent, though internet access is still relatively expensive and slow. The government makes grants available to investors who partner with citizens and will extend credit to any investor meeting certain criteria.

The Botswana Export Development and Investment Authority (BEDIA) serves as the main point of contact for foreign investors. BEDIA will attempt to ensure that investors – in particular, those seeking to establish export-oriented manufacturing enterprises and interested in investing in selected services – obtain all 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. BEDIA would welcome investment from the United States and is eager to work with established businesses seeking to expand their operations into Botswana.

Botswana seeks to diversify the economy away from diamonds into goods such as pharmaceuticals, textiles, clothing, and leather products, as well as services such as tourism, financial products, business process outsourcing, and research. Requests for investor support from BEDIA and other agencies by investors will be viewed with an eye to the extent to which the proposed project assists in the government’s diversification efforts, contributes to the growth of a priority sectors showing high growth potential, 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.

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 Trade Act enforcement trends. Recently, Botswana’s performance on the “Starting a Business” indicator in the World Bank’s Doing Business 2011 report declined due to the fact that Botswana has been somewhat slow to streamline procedures required to start a business while other countries have bolstered their ranking by cutting red tape in this area. At 61 days, the time needed to start a business in Botswana is long by international standards. Observers note that this could be corrected by allowing fully on-line company registration and the legalization of electronic signatures, which the government is considering.

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. Botswana’s license requirements for these businesses are justified on public interest grounds and are consistent with international best practice.

On the other hand, Botswana’s trade license requirement under the Trade Act of 2008 has been criticized as being overly subjective, not based on identified public interest criteria, and used to raise revenues and enforce other laws. Unfortunately, through its “miscellaneous trade or business” category, the Trade Act effectively extends the license requirement to all businesses not already specifically covered by other law or regulation. Thus, a clothing store which obtained a license to sell clothes, which now seeks to sell a range of goods such as kitchen appliances, sweets, or airtime, can be fined for selling items outside the scope of its license.

The Trade Act also states that work and residence permits are required prior to the grant of a license, but immigration authorities have been known to refuse to issue such permits prior to a business license being issued, putting some investors in a “Catch 22”.

The government’s trade licensing regulatory scheme is currently under review.

Botswana also reserves some business sectors solely for citizen participation. The law limits engagement in certain trades or businesses to citizens of Botswana, 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. For a more detailed list of economic activities limited to citizens, please contact the U.S. Embassy in Gaborone.

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 USD 10,710).

The government is moving towards privatizing a number of state-owned businesses. As part of this effort, it has established the Public Enterprise Evaluation and Privatization Agency (PEEPA). PEEPA will ultimately set policies affecting the extent of foreign participation in privatizing entities. The government would like to use privatization to increase foreign direct investment in the country, though there are significant concerns in government circles that the political costs of privatization are high, e.g., extensive job losses. This accounts for the controversy and delay surrounding the privatization effort.

Privatization efforts initially focused on the national airline, Air Botswana. After more than 10 years of effort and multiple attempts to reach agreement with strategic partners, the airline has still not been privatized. The planned privatization of six other state organizations, including the Botswana Telecommunications Corporation (BTC) and the National Development Bank (NDB), is behind schedule. BTC’s privatization is an advanced stage.

The ability of PEEPA to manage the privatization of state-owned enterprises is hampered by the fact that there is no privatization implementing legislation. As a result the decision for privatizing particular parastatals remains with the relevant ministry or department which has the discretion to advance privatization at the pace and with the vigor of their choosing.

Botswana has developed anti-trust legislation and policies to ensure appropriate competition in the business environment. The law will be administered by the Competition Authority which is expected to begin operations in 2011. Botswana has also developed legislation to create a simplified and clarified legal framework for incorporation.

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 have investors complete basic forms indicating name, address, purpose and other details 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 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 over one year, provided such instruments are listed 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, however. Foreigners can hold shares in Botswana companies.

Botswana 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 1,430.00). There are no quantitative limits on foreign currency access for current account transactions.

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 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.

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.

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.

Botswana’s performance on the Enforcing Contracts indicator of the World Bank Doing Business index is mediocre (70 out of 183). In the past, U.S. litigants have complained that the time taken to obtain and enforce a judgment in a commercial dispute is unreasonably long. During the past two years, however, the judiciary has brought the average time to conclude civil cases from more than 20 months to well under 11 months, and the speed continues to improve.

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).

Botswana commercial and bankruptcy laws are comprehensive. Secured and unsecured creditors enjoy the similar 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. 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 belongs to 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. 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.

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 and labor authorities lack the necessary skill and expertise to properly adjudicate applications for individuals who possess a particular technical skill set. The U.S. Embassy is working with the Government of Botswana to resolve these issues. It is important to note that the investor who meets BEDIA’s criteria for assistance will receive official government support and expedited service in all matters related to compliance with regulation, including immigration.

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.

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 USD 28.6 million is available in the fund.

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 (BOBS). The Department of Industrial Affairs under the Ministry of Trade and Industry administers this program.

This presents a regulatory challenge for U.S. exporters because government, which accounts for 35 percent of GDP, is the major procuring entity in the country. In order for a foreign firm to qualify with the Department of Industrial Affairs as a “locally-based manufacturer or service provider” so as to be able to sell goods or services to the government of Botswana, the firm first must be registered with the Registrar of Companies and possess a relevant license or a waiver letter written by a “competent authority”. Foreign firms may qualify as locally-based provided they go through the registration procedure and obtain the appropriate license.

For Companies Act registration purposes, enterprises are classified as follows: Micro Enterprises – less than 6 employees including owner and annual turnover of up to P 60,000; Small Enterprises – less than 25 employees and annual turnover of between P 60,000 and P 1,500,000; Medium Enterprises- less than 100 employees and an annual turnover of between P 1,500,001 and P 5,000,000; Large Enterprises – more than 100 employees and an annual turnover of P5,000,000.

The Minister of Finance and Development Planning has the authority to issue “Development Approval Orders” for specific projects, 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 to the Permanent Secretary for Finance and Development Planning. Applications will be evaluated against the following criteria: job creation for Botswana citizens; 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 other economic activities; and the project's effect on reducing local consumer prices.

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 business in Botswana in any sector except large-scale mining. The BDC offers equity participation for investment initiatives, loan financing, premises letting for residential, commercial and industrial properties and invoice discounting 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 all retailing, services and tourism, all industrial, manufacturing and mining undertakings, real estate, and agricultural projects 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 USD 8,600,000).

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, funds managers, and those wishing to undertake business process outsourcing and call centers 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. To date, 35 financial services operations including some from the United States have used the IFSC.

Right to Private 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.

However, as previously discussed, certain enterprises are reserved for ownership by citizens, and the Trade Act of 2008 is currently being enforced in such a way that all businesses are required to obtain licenses whether or not a nexus exists to a legitimate public interest.

Protection of Property Rights

The Constitution of Botswana prohibits the nationalization of private property.

There are three main categories of land in Botswana: Freehold, state land, and tribal 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.

State land represents about 25% of land in Botswana. On application to the Department of Lands, a foreign-owned enterprise 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 possible.

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.

Unfortunately, Land allocation trends since independence establish that the policy 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 with the option to purchase at market value.

Transparency 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. The tender process is competitive and open, both as a matter of law, and in practice. 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 believing a given tender procedure was unfair can also seek a remedy in the courts. PPADB publishes its decisions concerning awarded tenders, prequalification lists, and newly registered contractors. Available government tenders and tender decisions can be found on PPADB’s web site.

Botswana has reserved certain tenders such as those involving information technology and construction for 100-percent citizen-owned companies, and has developed preference schemes in government procurement to promote citizen economic activity. 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.”

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.

Efficient 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. Inflation fell from a peak of 15 percent in late 2008 to an average of 6 percent by March 2010. As a consequence, monetary policy has been eased of late as inflation decelerated toward the upper end of the Bank of Botswana’s 3-6 percent objective range. Inflation increased to 7.8 percent in May 2010 because of higher VAT.

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 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.

As of December 2010, there were nine commercial banks operating in Botswana, and no merchant banks. 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 Botswana Stock Exchange (BSE) enjoyed spectacular 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. The Foreign Company Index, however, increased by 23% during 2010. The number of foreign companies listed in the exchange was unchanged at 11. Six of these are mining-related operations. The BSE is set to shift to automated trading in 2011.

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).

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 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. 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.

Competition from State-owned Enterprises

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 – primarily in the financial and utilities sectors – with a view to assist 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.

Botswana has a sovereign wealth fund which is listed as the Pula Fund. This long-term fund was established under the Central Bank of Botswana Act and forms part of the country’s foreign exchange reserves, which are partly funded by diamond revenues. The Pula Fund is wholly invested in foreign currency denominated assets. All realized market and currency gains or losses are recognized within the Bank’s income statement.

Corporate Social Responsibility

Corporate Social Responsibility (CSR) is highly recognized and embraced by government, foreign and local firms, and customers. Increasingly, businesses, NGOs and the Government are pulling together to promote business, social and environmental progress.

Political Violence

There is no political violence in Botswana.


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 an active and effective organization.

Corruption in Botswana occurs but most have noted that it has not been an obstacle to investment. Botswana ranks 33th out of 178 countries in Transparency International’s Corruption Perception Index for 2010. 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 2009 a total of 1,926 reports of corruption were received by DCEC of which 671 were investigated and 44 prosecuted.

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. Still, common bribery appears to be on the rise, especially at lower levels, in both government and the private sector. Corruption or “cheating for valuable consideration” is punishable by a prison term of up to 10 years, a fine of (USD 71,430), or both.

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.

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. 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.

Bilateral 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 in southern Africa. 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 (EPA) 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 the 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.

OPIC and Other Investment Insurance Programs

The Overseas Private Investment Corporation (OPIC) makes insurance available to U.S. investors in Botswana. In October 2008, OPIC approved a USD 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, comprising 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 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.


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, and the high rate of 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.

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.

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 labor laws and only fire for cause and with sufficient proof. Before a potential litigant goes to labor court, the parties must attempt mediation through the Department of Labor. If mediation fails, the parties go to one of eleven labor courts.

All Botswana citizens except those working in the BDF, police, and prisons are permitted to participate in trade unions. In general, however, labor unions in Botswana are not active, and are concentrated in the mining sector. The 2004 Trade Disputes Act is seen by the unions as favoring employers and requires submitting grievances to a complex procedure which, it is claimed, invariably results in strike action being declared illegal.

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.

The following tables show the Levels of Foreign Investment in Botswana by Industry and Country. The figures are from the Bank of Botswana 2009 Annual Report, the latest available at the time of printing.

Level of Foreign Direct Investment in Botswana by Industry (millions of Pula)


Foreign Direct Investment

Other Investment










Retail & Wholesale



Water, Electricity and Energy



Business Services



Transport and Communication









Public Administration









Level of Foreign Direct Investment in Botswana by Country


Foreign Direct Investment

Other Investment

North and Central America



(of which) U.S.






(of which) U.K.



(of which) Netherlands



(of which) Luxembourg



(of which) other Europe



Asia Pacific






(of which) South Africa



Middle East









Average exchange rate USD/Pula 1:7

Mining and finance remain the main contributing industries to foreign direct investment in Botswana, with a representation of 90 percent. Europe continues to dominate as the principal source of direct investment as it accounted for 54 percent, with Luxembourg, which is a corporate residence of a major mining company, contributes about 43 percent of Europe’s direct investment. South Africa is also a significant contributor to foreign direct investment, indicating South Africa’s involvement with the financial institutions in Botswana.

The following paragraphs provide a description of the major U.S./foreign investors in Botswana.

AON Botswana is the largest insurance brokerage firm in the country. 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).

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.

Marsh Insurance established in 1994 is 95 percent owned by Marsh New York of the Marsh and McLennan Companies and is 5 percent locally owned.

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.

Lazare Kaplan Botswana is a wholly-owned subsidiary of New York based sightholder and jewelry manufacturer Lazare Kaplan International.

Laurelton (Rand Diamond Botswana), a subsidiary of U.S. luxury jewelry retailer Tiffany & Co is a sightholder involved in cutting and polishing diamonds. In October 2010, Laurelton broke ground on an additional $300 million diamond cutting and polishing factory.

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 programs for Botswana citizens in diamond grading and grades diamonds for mining companies.

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

Bank of Botswana: http://www.bankofbotswana.bw

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

Ministry of Agriculture: http://www.moa.gov.bw

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.sadc.int

Overseas Private Investment Corporation: http://www.opic.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: http://www.bedia.co.bw

Botswana Development Corporation: http://www.bdc.bw

Botswana Telecommunications Corporation: http://www.btc.bw

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

Directorate on Corruption and Economic Crime: http://www.gov.bw/en/Ministries--Authorities/Ministries/State-President/Department-of-Corruption-and-Economic-Crime-DCEC

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