One of Africa’s most stable democracies, since 1966, Botswana has enjoyed peaceful elections and the country is now governed by the fourth president, Seretse Khama Ian Khama, who like all his predecessors assumed power peacefully and democratically. Botswana is Africa’s model exemplar of peace, law and order.
The country is now emerging as a world-class hub for financial and business investments into Africa. A combination of the spread of democracy, economic liberalisation, privatisation, infrastructure development, and the growth of consumer services and financial services all positioning Botswana as a stable and economically sound investment destination.
Although its economy has been anchored on resource endowments, notably diamonds, the country is celebrated as a developmental success story on the continent.
Botswana has established an enabling environment for capital and business to reinforce its strategic focus to diversify the economy into value-adding sectors that will serve a fast-emerging regional market. As a result, it is the fourth most competitive economy in Africa, and one of the easiest African countries to undertake business on the continent.
On the basis of these solid foundations, Botswana now intends to become a world-class hub for cross-border financial and business services into Africa and globally. As one of the most affluent economies in Southern Africa with a robust growth outlook, Botswana’s wealthy population offers a considerable market for financial services such as banking and insurance, relative to most other regional economies.
Botswana’s international financial services centre (IFSC) established in 2003 also provides a supportive regulatory framework for regional and international banks, international firms, insurance companies and investment funds as a helpful platform to penetrate new markets or consolidate their position in sub-Saharan Africa’s (SSA) fast-growing markets.
In addition, Botswana has the third best Network Readiness Index overall score in Southern Africa. The country thus has the third highest propensity in the region to exploit the opportunities offered by ICT. Whilst Botswana’s well-educated labour force also has a high adult literacy rate of 88.5 percent and the majority of Batswana have a superb command of the English language, and the second highest skill-set in Southern Africa, with 18 percent of the workforce employed in knowledge-intensive industries.
Opportunities in the Business & Financial Services Sector
Despite Botswana’s comparatively limited market size, its central location and attractive sector-specific investment incentives present numerous opportunities for investors seeking to penetrate the business and financial services industry.
At the beginning of 2015, Botswana’s total banking assets represented approximately 50 percent of the country’s GDP. With a banking sector that is more developed and has a higher penetration than most other African countries. A life insurance sector is substantially larger than the non-life sector. That is also expected to grow faster than the non-life sector over the next five years and is one of the largest and most developed insurance markets in SSA.
Key Opportunities in the Sector
- Financial services: Botswana’s relatively wealthy population requires numerous financial services, including investment services, accounting services, tax advisory and banking.
- Life insurance: Botswana’s life insurance sector is larger and growing more rapidly than the non-life sector.
- Business Process Outsourcing: Botswana’s complementary time zone, global connectivity and skilled workforce provide an attractive location for BPO and shared services centres.
- Botswana has Double Taxation Avoidance (DTA) treaties with key African states, major investor nations and international financial centres. 13 active treaties and another 12 that are awaiting ratification or are under negotiation provide investors with ready access to an expanding network.
- Holding Companies: IFSC-accredited intermediary holding companies receive several incentives, making it more cost-effective and efficient to invest in neighbouring countries such as South Africa, Mozambique and Zimbabwe.
Botswana’s Value Proposition in the Financial Services Industry
One of Botswana’s strongest value propositions is its location, being ideally located to provide cross-border business and financial services to holding companies, institutions and corporate clients.
With a time zone of GMT+2, Botswana is also an attractive location for business and financial services, especially those geared towards European, African and Middle Eastern markets. Whilst the time difference with the US also allows for the timely completion and processing of data mining and cleaning and salary processing. Botswana is thus strategically positioned as a BPO centre, for Africa and even globally.
With direct air links to Nairobi and Johannesburg, Botswana is also well connected. Johannesburg is Africa’s largest air hub with daily flights to 81 different cities whilst Nairobi offers daily flights to 57 cities, ensuring global connectivity for Botswana.
The Botswana Innovation Hub (BIH) is also expanding the Science and Technology Park in Gaborone. Which will serve as a cluster for local and global business and financial services firms, R&D activity, research institutions, universities and advanced training institutes.
The Science and Technology Park will provide state-of-the-art facilities, international connectivity and a government-owned data centre. It is envisioned as a place where technological innovation and entrepreneurship will be encouraged. By providing access to a range of technology transfer and commercialization services through the Technology Entrepreneurship Programme and the Innovation Fund run by BIH.
Robust Investment Incentives
Botswana offers many incentives for investors, including:
- No foreign exchange controls; remittance and full repatriation of profits and dividends
- No restrictions on business ownership
- Duty-free import of machinery and equipment for manufacturing
- Customs duty exemption on raw materials for goods going outside of SACU
- A liberal tax regime: 22 percent corporate and 25 percent personal tax, with 15 percent corporate tax for manufacturing and IFSC-registered companies (with the lowest taxes in the SADC region)
- Negotiable tax holiday (up to 10 years maximum)
- Deductible training rebate of 200 percent
- Bilateral Investment Treaty (BIT) provides for non-discriminatory treatment of foreign investors
Specific Investment Incentives of Botswana International Financial Services Centre (BIFSC)
- Accredited companies pay tax rate of 15 percent on profits from approved operations.
- No withholding tax on dividends, interest, royalties and management fees. Specified Collective Investment Undertakings (CIUs) managed by IFSC companies are tax exempt
- VAT and Capital Gains Tax exemptions IFSC accredited companies may denominate capital in any of the internationally recognised currencies, such as the Euro, Pound Sterling or Dollar, mitigating against exchange rate risk. Commercial banks are also subject to a low reserve requirement of only 5 percent of customer deposits.
- Beyond incentives and as one of the most business-friendly and stable countries in the region, Botswana provides investors with a conducive and welcoming operating environment.
- A high degree of safety and security, and a strong focus on the rule of law, gives Botswana an edge over its regional peers.
Botswana Investment & Trade Centre (BITC)
- Aims to develop Botswana as a world-class hub for cross-border financial and business services within Africa and the region
- Botswana IFSC supports knowledge-intensive business services, working with government to develop policy conducive to the success of the BPO and IFSC sector
- Fosters innovation and sophistication in business and financial services
- Facilitates a competitive business and investment climate to promote and attract investment into Botswana
- Assists potential investors with setting up and doing business in the country
- Makes recommendations for competitive changes to legislation and the national investment framework
- Provides updated, timely information on Botswana’s business climate and regulatory regime
Botswana Innovation Hub (BIH)
- Assists Botswana in transitioning into a knowledge-based country with a productive and innovation-driven economy
- Developing Botswana’s first science and technology park
- Positions Botswana as an attractive location for knowledge-intensive, technology-driven firms
- Promotes interaction between local and international innovation-driven companies