Policies Towards Foreign Direct Investment

The GOB publicly emphasizes the importance of attracting foreign direct investment (FDI). It is currently drafting an investment facilitation law, as recommended by the 2014 Organization for Economic Cooperation and Development (OECD) investment review. United Nations Conference on Trade and Development (UNCTAD) is providing technical assistance in support of the legislation. The GOB has launched initiatives to promote economic activity and foreign investment in specific areas, including the establishment of hubs to promote economic growth in the agriculture, diamond, education, health and transportation sectors. Additional investment opportunities in Botswana include large water, electricity, transportation, and telecommunication infrastructure. Economists have also noted Botswana’s considerable potential in the mining, mineral processing, energy, cattle, tourism, and financial services sectors. BITC, the GOB’s investment and trade promotion authority, assists foreign investors with projects that will diversify Botswana’s economy away from diamond mining, create employment, and transfer skills to Botswana citizens.

Limits on Foreign Control and Right to Private Ownership and Establishment

Botswana’s 2003 Trade Act reserves licenses for 35 sectors for citizens, including butcheries, general trading establishments, gas stations, liquor stores, supermarkets (excludes chain stores), bars (other than those associated with hotels), certain types of restaurants, boutiques, auctioneers, car washes, domestic cleaning services, curio shops, fresh produce vendors, funeral homes, hairdressers, various types of rental/hire services, laundromats, specific types of government construction projects under a certain dollar amount, certain activities related to road and railway construction and maintenance, and certain types of manufacturing activities including the production of furniture for schools, welding, and bricklaying. The law allows foreigners to participate in these sectors as minority joint venture partners in medium-sized businesses. Foreigners can hold the majority share if they obtain written approval from the trade minister.

The Ministry of Investment, Trade and Industry (MITI), which administers the citizen participation initiative, has taken an expansive interpretation of the term chain stores, so that it encompasses any store with more than one outlet. This broad interpretation has resulted in the need to apply exemptions to certain supermarkets, simple specialty operations, and general trading stores. These exceptions were generally granted prior to 2015 and many large general merchandise markets, restaurants, and grocery networks are owned by foreigners as a result. Since 2015, the GOB has denied some exception requests, but reports they have approved some based on localization agreements directly negotiated between the ministry and the applying company. These agreements reportedly include commitments to purchase supplies locally and capacity building for local workers and industry.

Other Investment Policy Reviews

In December of 2014, the OECD released an Investment Policy Review on Botswana: http://www.oecd-ilibrary.org/finance-and-investment/oecd-investment-policy-reviews-botswana-2014_9789264203365-en.

Botswana has been a World Trade Organization (WTO) member since 1995. As a member of the Southern African Customs Union, the WTO last conducted a trade policy review in 2009: https://www.wto.org/english/tratop_e/tpr_e/tp322_e.htm.

Business Facilitation

To operate a business in Botswana, business owners need to register a company with the GOB’s CIPA. The registration forms can be downloaded online from the CIPA website:http://www.cipa.co.bw/forms-fees?qt-display_cipa_forms=2. According to CIPA the company registration process takes about 14 days, and it takes approximately 48 days to complete additional required registrations such as tax registrations, opening bank accounts, and obtaining necessary licenses and permits. The World Bank ranked Botswana 153 out of 190 for ease of starting a business. CIPA announced in April 2018 that in conjunction with a New Zealand company, a new online registration system will be put in place to cut down company registration from 14 days to one.

BITC, the GOB’s investment promotion agency, was designed to serve as a one-stop shop to assist investors to set up a business and find a location for operation. BITC’s ability to streamline procedures varies based on GOB entity and bureaucratic requirements. Its website is: www.bitc.co.bw. BITC’s criteria for support for investment projects is whether the project will diversify the economy away from dependence on diamond mining, and whether it will create jobs for and transfer skills to Botswana citizens.

Botswana has a number of incentives and preferences for both citizen-owned and locally-based companies. Foreign-owned companies can benefit from local procurement preferences, which are usually required for government tenders. MITI instituted a program in 2015 to give locally-based small companies a 15 percent preferential price margin in GOB procurement, with mid-sized companies receiving a 10 percent margin, and large companies a 5 percent margin. Under this policy, MITI defines large companies as having less than BWP 5 million in annual turnover reflected in their financial statements, medium companies with BWP 5,000,001 to BWP 19,999,999 in turnover, and large companies with BWP 20 million or more. The directive applies to 27 categories of goods and services ranging from textiles, chemicals, and food, in addition to a broad range consultancy services.

For Companies Act registration purposes, enterprises are classified as follows: Micro Enterprises — less than six employees including owner and annual turnover of up to BWP 60,000; Small Enterprises — less than 25 employees and annual revenue between BWP 60,000 and BWP 1,500,000; Medium Enterprises — less than 100 employees and an annual revenue between BWP 1,500,000 and BWP 5,000,000; Large Enterprises —more than 100 employees and an annual revenue between BWP 5,000,000 or more. This classification is used for the purposes of permitting foreigner participation as minority shareholders in medium-sized enterprises in the 35 business sectors reserved for citizens.

Outward Investment

The GOB neither promotes nor restricts outward investment.

The U.S. and the Southern Africa Customs Union (SACU), which includes Botswana, signed a Trade, Investment, and Development Cooperative Agreement (TIDCA) in 2008. The TIDCA establishes a forum for consultative discussions, cooperative work, and possible agreements on a wide range of trade issues with a special focus on customs and trade facilitation, technical barriers to trade, sanitary and phytosanitary (SPS) measures, and trade and investment promotion.

SACU has Free Trade Agreements with Iceland, Liechtenstein, Norway, Switzerland, and the European Free Trade Association. The preferential trade agreement between SACU countries and MERCOSUR (Argentina, Brazil, Paraguay and Uruguay) was signed by MERCOSUR and SACU States in December 2008 and April 2009 respectively. The PTA establishes fixed preference margins as a first step toward the creation of a free trade area between SACU and MERCOSUR. Botswana has ratified the agreement and is awaiting remaining member states to complete ratification for the agreement to be implemented.

For more information on SACU’s tariff regime, see the WTO document: http://www.wto.org/english/tratop_e/tpr_e/s222-00_e.doc.

Botswana is also a member of the Southern African Development Community (SADC), and is currently implementing the SADC Protocol on Trade. For more information about SADC, visit: www.sadc.int.

On June 10 2016, Botswana signed an Economic Partnership Agreement (EPA) with the European Union as part of SADC EPA Group. The EPA guarantees access to the EU market without any duties or quotas for Botswana, and gives asymmetric access to the SADC EPA Group.

Botswana has a trade agreement with Zimbabwe, which provides duty-free access for goods that meet the 25 percent local content requirement.

Bilateral Taxation Treaties

Botswana has not signed a double taxation treaty with the United States. However, it has double taxation agreements with Barbados, Mozambique, India, Namibia, South Africa, the United Kingdom, Sweden, Mauritius, Zimbabwe, France, Lesotho, Swaziland, and the Seychelles. In 2016, the GOB began introducing electronic tax filing as part of its business reform roadmap. On February 6, 2017, the GOB announced it would review its taxation system to improve and simplify it.

Transparency of the Regulatory System

Bureaucratic procedures necessary to start and maintain a business tend to be open, though slow, and regulatory procedures can be cumbersome to navigate. Foreign investor complaints generally focus on the inefficiency and/or unresponsiveness of mid-level and low-level bureaucrats in government. The government has introduced a Performance Management System to improve the service and accountability of government employees. Unfair business practices or conduct can be reported to the Competition Authority, which seeks to level the playing field for all business operators and foster a conducive environment for business. Bills in Botswana, including investment laws, pass through a public consultation process and are made available for public comment. Bills are also debated in Parliament whose sessions are open to the public.

The Companies Act of 2004 requires all companies registered in Botswana to prepare annual Financial Statements on the basis of generally accepted accounting principles. It further requires that every public company including non-exempt private companies, prepare their Financial Statement in accordance with the International Financial Reporting Standards.

The Public Procurement and Asset Disposal Board (PPADB) oversees all government tenders. Prospective government contractors are required to register with the PPADB. The PPADB maintains a process by which tender decisions can be challenged, and a bidder can also challenge a tender procedure in the courts. The PPADB publishes its decisions concerning awarded tenders, prequalification lists, and newly registered contractors.

The PPADB Act calls for preferential procurement of citizen-owned contractors for works, service and supplies, as well as specific, disadvantaged women’s communities, though it states that such preferences must be time-bound, phased in and out as necessary, and consistent with the country’s external obligations and its “market-oriented, macroeconomic framework.” When a procuring entity wishes to reserve a tender for citizen-only participation, it is required to publish a notice to that effect either in the bid document or the pre-qualification notice.

Health and safety laws, embodied in the Factories Act of 1973, provide basic protection for workers from unsafe working conditions. Minimum working conditions required on work premises include cleanliness of the premises, adequate ventilation and sanitation, sufficient lighting and the provision of safety precautions. Health inspectors and the Botswana Bureau of Standards carry out periodic checks at both new and operating factories.

International Regulatory Considerations

Botswana is a member of SACU and SADC. Neither have authority over member state national regulatory systems. Botswana is a member of the WTO and notifies all draft technical regulations to the WTO’s Technical Barriers to Trade (TBT) Committee on Technical Barriers to Trade.

Legal System and Judicial Independence

The local Constitution provides for an independent judiciary system. The legal system of Botswana is based on Roman-Dutch law as influenced by English common law. This type of system cohabits with legislation, judicial decisions, and local customary law. The courts enforce commercial contracts, and the judicial system is widely regarded as being fair, though high profile cases challenging the Executive’s role in judicial appointments, and the suspension of four high court judges in September 2015 (suspension lifted in March 2017) have generated speculation judicial independence has eroded. Both foreign and domestic investors have equal access to the judicial system. Botswana does not have a dedicated commercial court. The Industrial Court set up by the Trade Dispute Act of 2004 primarily addresses labor matters.

The GOB is planning to create a corps of commercially specialized judges within the civil court system. Under the new system, commercial cases will be overseen by these commercial judges in order to expedite handling and ensure relevant expertise.

Some U.S. litigants have reported that the time taken to obtain and enforce a judgment in a commercial dispute is unreasonably long. The turnaround time for civil cases is approximately two years. In an effort to create more efficient adjudications, the government has established land tribunal, industrial, small claims and corruption courts. During the past several years, some dockets have improved, but progress has been uneven.

Local laws are accessible through the Botswana Attorney General’s Office website: www.laws.gov.bw. It can take up to 24 months for a law, once passed, to appear on the website.

Laws and Regulations on Foreign Direct Investment

Under Botswana's Company Act, foreigners who wish to operate a business are required to register as well as obtain the relevant licenses and permits as prescribed by the Trade Act of 2008.

Licenses are required for a wide spectrum of businesses, including banking, non-bank financial services, transportation, medical services, mining, energy provision, and alcohol sales. Although amendments to the Trade Act have eliminated the catch-all miscellaneous business license category, investors have reported on local authorities insisting a business apply for a license even when it does not fall within the established categories. In addition, some businesses have observed the enforcement of licenses, as well as the time taken for inspections to comply with licensing requirements, varies widely across local government authorities.

Competition and Anti-Trust Laws

Botswana has developed anti-trust legislation and policies to ensure appropriate competition in the business environment. Under the Competition Act, the Competition Authority is now monitoring mergers and acquisitions. During the year 2016/2017 the Authority dealt with a number of cases to address the non-competitive business conduct and these included bid rigging cases. The Competition Authority is empowered to reject mergers when they are deemed not to be in the public’s best interest. It has interpreted this ability to mean that it can prohibit mergers when the end result is the concentration of a majority of shares in the hands of foreign investors.

Expropriation and Compensation

Section 8 of the country's Constitution prohibits the nationalization of private property. The GOB has never pursued a policy of forced nationalization and is highly unlikely to adopt one. The Acquisition of Property Act provides a process for any expropriation, including parameters to determine market value and receive compensation. The 2007 Amendment to the Electricity Supply Act allows the GOB to revoke an Independent Power Producer’s license and confiscate the operations with compensation for public interest purposes.

Dispute Settlement

ICSID Convention and New York Convention

It has ratified the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). It is also a member state to the International Centre for the Settlement of Investment Disputes (ICSID convention), and the Multilateral Investment Guarantee Agency (MIGA).

Investor-State Dispute Settlement

There are no known investment disputes involving U.S. persons. Botswana accepts international arbitration to settle investment disputes. Judgments by foreign courts recognized by the GOB are enforceable under the local courts where the appropriate bilateral agreements between the countries exist.

International Commercial Arbitration and Foreign Courts

There are no known complaints about transparency or discrimination by local courts in Botswana.

Bankruptcy Regulations

Botswana’s commercial and bankruptcy laws are comprehensive. Secured and unsecured creditors enjoy similar rights under bankruptcy proceedings to those in the United States.

Investment Incentives

Botswana has several mechanisms in place to attract FDI. The BITC provides assistance to local and foreign investors. BITC is responsible for promoting FDI, investor aftercare, and the promotion of locally-manufactured goods in export markets. It assists investors with company registration, land acquisition, factory shells, utility connections, and work and residence permits for essential staff. Requests by investors for investor support from BITC and other agencies are evaluated based on the extent to which the proposed project assists in the government’s diversification efforts, contributes to the growth of priority sectors, and provides employment and training to Botswana citizens. The government also makes grants available to investors who partner with citizens and will extend credit to investors presenting proposals that have undergone appropriate due diligence and that have completed a feasibility study. Foreign investors are encouraged to transfer technology to Botswana and skills to Botswana citizens with a view to preparing them for promotion into management positions.

Botswana offers a relatively low tax rate of 22 percent on corporate taxable income and 7.5 percent withholding tax on all dividends distributed. The MITI can grant manufacturing companies the reduced level of 15 percent taxable income. Companies can pay the reduced rate of 15 percent of profit with accreditation from the Innovation Hub or the International Financial Services Centre on approved operations.

The Minister of Finance and Economic Development has the authority to issue development approval orders, which are used for specific projects that include providing tax holiday and education and training grants. The Minister must be satisfied that the proposed project will be beneficial to Botswana’s economy. Any firm, local or foreign, may apply for a Development Approval Order through the Permanent Secretary at the finance ministry. 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 the stimulation of other economic activities; and the project's effect on reducing local consumer prices. The MITI also offers rebates on imported materials for manufactures that produce products for export.

In 2017, Parliament approved and implemented a special incentive packet for Selibe-Phikwe geared to promote economic growth and diversification. Some of the incentives include reduced corporate tax of 5 percent for the first 5 years and 10 percent thereafter (versus the 22 percent national tax rate), zero customs duty on imported raw materials, rebates for customs duty and value added tax for any exports outside the SACU, and a minimum of 50 years on land leases (instead of the standard lease of 25 years).

Foreign Trade Zones/Free Ports/Trade Facilitation

Parliament established a new parastatal organization, the Special Economic Zones Authority, with the mandate to develop and operate Special Economic Zones around the country. Five areas have been earmarked though not yet fully operational. In 2015, Parliament approved a Special Economic Zones (SEZ) law to streamline investment in sector-targeted geographic areas in the country including two Gaborone area SEZs (multi-use, diamond processing, and financial services); two Selibe-Phikwe SEZs (mineral processing and horticulture); and additional SEZs in Lobatse (beef, leather, biogas); Palapye (energy); Pandamatenga (agriculture); and Francistown (mining and logistics). The Special Economic Zones Act is available for sale in hard copy at the GOB bookshop and BITC is acting as the interim SEZ secretariat. The Botswana Unified Revenue Services has also introduced an electronic Customs Management System to replace the Automated System for Customs Data. This will pave the way for the National Single Window, an electronic trade platform that makes trading more secure and efficient.

Performance and Data Localization Requirements

Performance requirements are not imposed as a condition for establishing, maintaining or expanding an investment in Botswana. Foreign investors are encouraged, but not compelled, to establish joint ventures with citizens or citizen-owned companies.

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 GOB 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 for private-sector investments. However, GOB entities, including BITC, use the criteria of diversifying the economy, creating employment, and transferring skills to Botswana citizens in determining whether to provide assistance to foreign investors.

As a matter of policy, the GOB encourages foreign firms to hire qualified Botswana nationals rather than expatriates. The granting of work permits foreign workers may be made contingent upon establishment of demonstrable localization efforts. The government may additionally require evidence that a local is being trained to assume duties currently being fulfilled by foreign worker, specially focused at the middle-management level. The GOB offers incentives to companies that train local employees, including the deduction of 200 percent of training expenses when training is carried out by an accredited institution.

Foreign and local business managers noted increasing difficulty obtaining work permits for foreign skilled workers and managers in 2016. They assess this, combined with local skills deficits, and constrained labor productivity, to be the foremost business constraints in Botswana. In 2012, Botswana implemented a Points Based System to evaluate work permits, in response to complaints that immigration authorities lacked the necessary expertise to properly evaluate applications for individuals with certain skill sets. This resulted in complaints the system was too stringent. Foreign expatriates report inconsistent procedures and requirements for work permits. BITC reports the investors they support have high approval rates and are afforded priority in the permitting process and some U.S. investors have resolved immigration challenges with BITC support. MITI has instituted a work permits appeal process in an effort to encourage investment and address the work permit challenge.

Select grants are available to foreign investors who partner with Botswana citizens. The Citizen Entrepreneurial Development Agency has established a venture capital fund to provide equity to citizens, and ventures between citizens and foreign investors. The majority of Botswana government loans and grants are designed specifically for citizen-owned contracting firms or for small enterprises and are therefore not available to foreign investors.

The government, the largest procuring entity in the country, has directed central government, local authorities and state-owned enterprises (SOEs) 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. Local preferences arise from numerous sources. In 2015, MITI instituted a program to give locally-based small companies a 15 percent preferential price margin in GOB procurement, with medium-sized companies receiving a 10 percent margin, and large companies a 5 percent margin. The directive applies to 27 categories of goods and services ranging from textiles, chemicals, and food, in addition to a broad range consultancy services. In 2014, the GOB and the Chamber of Mines created a committee to oversee the purchasing of mining supplies with a 10 percent preference towards those produced locally. The 2012 Citizen Economic Empowerment Policy also emphasized the preference for local companies and the GOB’s Public Procurement and Asset Disposal Board (PPADB) registers citizen-owned companies for preference purposes.

In order for a foreign firm to qualify with the Department of Industrial Affairs as a locally-based manufacturer or service provider 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 waiver letter. Few of these procedures can be completed online and in practice companies see the need to hire an agent on the ground to handle registrations. Tenders are generally designed based on the products available in the local market and with locally-based companies in mind. In addition, many tenders require local registration as a prerequisite for bids and the GOB frequently breaks up large scale projects into a series of tenders. All of these factors make it difficult to compete for tenders from outside Botswana.

Real Property

Property rights are enforced in Botswana. Botswana is ranked 81 out of 190 by the World Bank in the Registering Property category. 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 percent of land in Botswana is freehold. In the capital city of Gaborone, the number of freehold plots is limited.

State land represents about 25 percent of land in Botswana. On application to the Department of Lands, both foreign-owned and local enterprises registered in Botswana may lease state land for industrial or residential use. Commercial use leases are for 50 years and residential leases are for 99 years. Waiting periods tend to be long for leasehold applications, but subleases from current leaseholders are available. In 2014, the GOB changed its implementing regulation to allow companies with less than five employees to operate in residential areas if their operations do not pose a health or safety risk to residents.

Tribal land represents 70 percent of land in Botswana. To obtain a lease for tribal land, the investor must approach the relevant local Land Board. Processes are unlikely to be streamlined or consistent across Land Boards.

Since independence, the trend in Botswana has been to increase the area of tribal land at the expense of both state and freehold land. Landlord-tenant law in Botswana tends to be moderately pro-landlord.

In addition to helping investors who meet its criteria obtain appropriate land leaseholds, BITC has also built factory units for lease to industrialists with the option to purchase at market value.

Intellectual Property Rights

Botswana’s legal Intellectual Property Rights (IPR) structure is adequate, although some improvements are needed. The key challenge facing the GOB is effective implementation. CIPA was established in 2014 in order to strengthen Botswana’s IPR regime, and has established improved interagency cooperation and implementation as a priority. IPR infringement does occur in Botswana, primarily through the sale of counterfeit items in low-end sales outlets. In 2017, CIPA cooperated with the Botswana Police to seize 12,923 counterfeit CDs and DVDs valued over USD 107,000 (Source: CIPA). The U.S government is continuing working with the GOB to modernize and improve enforcement of IPR.

IPR are protected under the Industrial Property Act of 2010, which provides protections on patents, trademarks, utility designs, handicrafts, traditional knowledge and geographic indicators. The 2000 Copyright & Neighboring Rights Act also protects art and literary works, and the 1975 Registration of Business Names Act oversees corporate name and registration procedures. Other IPR-related Laws include the Competition Act, the Value Added Tax Act, the Botswana Penal Code, the Customs and Excise Duty Act, the Monuments and Relics Act, the Broadcasting Act, and the Societies Act.

Botswana is a signatory to the Beijing Treaty on Audiovisual Performances, the Hague Agreement Concerning the International Deposit of Industrial Designs, the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks, the Convention establishing the World Intellectual Property Organization (WIPO), the WIPO Copyright Treaty, the WIPO Performances and Phonograms Treaty, the Patent Cooperation Treaty, the Berne Convention for the Protection of Literary and Artistic Works, and the Paris Convention for the Protection of Industrial Property.

Intellectual Property is registered through CIPA. This Authority comprises of three offices: the Companies and Business Office, the Industrial Property Office and the Copyright Office. For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at: http://www.wipo.int/directory/en/.

Resources for Rights Holders

Goitseone Montsho
Economic/Commercial Specialist
MontshoG@state.gov
+267 373-2431

Local lawyers’ list: https://bw.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/attorneys/.

Capital Markets and Portfolio Investment

The government encourages foreign portfolio investment, although there are limits on foreign ownership in certain sectors. It also embraces 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. There are nine commercial banks, a merchant bank, an offshore bank, a statutory deposit-taking institution, and a credit union operating in Botswana. All have corresponding relationships with U.S. banks. Additional financial institutions include various pension funds, insurance companies, microfinance institutions, stock brokerage companies, asset management companies, statutory finance institutions, collective investment undertakings, and statutory funds. Historically, commercial banks have accounted for 92 percent of total deposits and 98 percent of total loans in Botswana (Source: Bank of Botswana). A large portion of the population does not participate in the formal banking sector.

Money and Banking System

The 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 and the government has successfully managed to maintain a sensible exchange rate and a stable inflation rate, generally within the target of 3 to 6 percent.

Banks may lend to non-resident controlled companies without seeking approval from the Bank of Botswana. Foreign investors usually enjoy better access to credit than local firms do. In July 2014, USAID’s Development Credit Authority, in collaboration with the Barclays Bank of Botswana, implemented a program to allow small- and medium-sized enterprises (SME) to access up to USD 15 million in loans in an effort to diversify the current economy.

As of the end of 2017, there were 24 companies on the Domestic Board and 11 companies on the Foreign Equities Board. In addition, four exchange traded funds were listed on the exchange. The total market capitalization for listed companies as of 2016 was USD 43.74 billion though one company constitutes the majority of that figure, Anglo-American Plc, which has a market capitalization of some USD 35.9 billion (Source: Botswana Stock Exchange). The BSE is still highly illiquid compared to larger African markets and is dominated by mining companies which adds to index volatility. Laws prohibiting insider trading and securities fraud are still under development.

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 the U.S. Dollar, Pound Sterling, Euro and 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 largely in line with industry norms for regulation, supervision, and payments, and its anti-money laundering and combating the financing of terrorism regime is improving (see section two).

The Non-Bank Financial Institutions Regulatory Authority (NBFIRA) was established in 2008 and provides regulatory oversight for the non-banking sector. It extends know-your-customer practices to non-bank financial institutions, and is intended to help deter money laundering and terrorist financing. NBFIRA is also responsible for regulating the International Financial Services Centre, a hub charged with promoting the financial services industry in Botswana.

Foreign Exchange and Remittances

There are no foreign exchange controls in Botswana or restrictions on capital outflows through financial institutions. Commercial banks are required to ensure customers complete basic forms indicating name, address, purpose, and other details prior to processing funds transfer requests or loan applications. The finance ministry 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 domestic capital markets, and diversify investment instruments, non-residents are able to trade in and issue Botswana Pula-denominated bonds with maturity periods of more than one year, provided such instruments are listed on the Botswana Stock Exchange (BSE). Botswana's Letlole Saving Certificate (equivalent to a U.S. Treasury bond) can be purchased only by Botswana citizens. Foreigners can hold shares in BSE-listed Botswana companies.

Travelers are not restricted to the amount of currency they may carry, but they are required to declare to customs at the port of departure any cash amount in excess of BWP 10,000 (USD 1,200). There are no quantitative limits on foreign currency access for current account transactions.

Bank accounts denominated in foreign currency are allowed in Botswana. Commercial banks offer accounts denominated in U.S. Dollars, British Pounds, Euros and South African Rand. Businesses and other bodies incorporated or registered domestically may open 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, and fees.

The Botswana Pula has a crawling peg exchange rate and is tied to a basket of currencies comprised of the South African Rand, whose weighting has been adjusted from 50 percent to 45 percent in January 2017, with the IMF’s Special Drawing Rights (consisting of the U.S. dollar, the Euro, British pound, Japanese yen, and the newly added Chinese Renminbi) comprising the remaining 55 percent. The upward rate of crawl was also reduced from 0.38 percent to 0.26 percent (Source: Bank of Botswana). Under the regular five year review of the composition of the SDR, the IMF added the Chinese Renminbi to the pool. The Pula continues to be heavily influenced by movements of the South African Rand against the U.S. Dollar. There is no difficulty in obtaining foreign exchange. Shortages of foreign exchange that would lead banks to block transactions are highly unlikely.

Remittance Policies

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment.

Sovereign Wealth Funds

The Bank of Botswana maintains a long-term sovereign wealth fund, known as the Pula Fund, in addition to a regular foreign reserve account providing basic import cover. The Pula Fund, with an estimated value of some USD 5.06 billion as of 2016, was established under the Bank of Botswana Act and forms part of the country’s foreign exchange reserves, which are primarily funded by diamond revenues (Source: Bank of Botswana). The Pula Fund is wholly invested in foreign currency -denominated assets and is managed by the Bank of Botswana Board with input from recognized international financial management and investment firms. All realized market and currency gains or losses are reported in the Bank of Botswana’s income statement. Botswana is among the founding members of the International Forum of Sovereign Wealth Fund and was one of the architects of the Santiago Principles in 2008. More information is available at: http://www.bankofbotswana.bw/assets/uploaded/BOTSWANA%20PULA%20FUND%20-%20SANTIAGO%20PRINCIPLES%20(2).pdf.

SOEs, known as “parastatals,” are majority or 100 percent owned by the government. There is a published list of SOEs at the GOB portal (www.gov.bw) with profiles of financial and development SOEs. Some SOEs are state-sanctioned monopolies, including the Botswana Meat Commission, the Water Utilities Corporation, Botswana Railways, and the Botswana Power Corporation.

Private and government-owned enterprises are governed by the same business registration and licensing laws. No law or regulation prohibits or restricts private enterprises from competing with SOEs. Botswana law requires SOEs to publish annual reports and, depending on how they are constituted, SOEs are audited by private sector accountants or the Auditor General. GOB ministries together with their respective SOEs are compelled on an annual basis to appear before Parliamentary Public Accounts committee to provide reports and answer questions regarding their performance. Some SOEs are not performing well and have been embroiled in scandals involving alleged fraud and mismanagement.

Botswana is not party to the Government Procurement Agreement within the framework of the WTO.

Privatization Program

The GOB has committed to privatization on paper. It stood up a task force in 1997 to privatize all of its SOEs and formed a Public Enterprises Evaluation and Privatization Agency (PEEPA) to oversee this process. Implementation of its privatization commitments has been limited to the January 2016 sale offer of 49 percent of the stock of the state-owned Botswana Telecommunications Corporation to Botswana citizens only. In February 2017, the GOB issued an Expressions of Interest for the privatization of its national airline, but no further action has been taken. Conversely, the GOB has created new SOEs such as the Okavango Diamond Company, the Mineral Development Company, and Botswana Oil Limited in recent years. In 2012, the GOB created the Mineral Development Company in order to oversee their mineral industry holdings.

Responsible Business Conduct (RBC) is recognized and embraced by the government, some foreign and local firms, and customers, although Botswana is not an adherent of the OECD’s RBC Guidelines for Multinational Enterprises and has not specified its definition of RBC. Large companies in the mining, communications technology, food supply, and financial services sectors have established RBC programs, sponsor projects, and support local nonprofit concerns. However, the ethos has not taken hold in many smaller firms. The U.S. Embassy worked with the local chamber of commerce, Business Botswana, on the issue of corporate social responsibility (CSR) and ethical compliance to help enlist companies to sign onto a Corporate Code of Conduct that covers, among other things, conflicts of interest, bribery, political interference, political party funding, procurement and bidding and issues surrounding residence and work permits. To date more than 300 firms have signed the Code of Conduct.

The Companies Act also sets out the expectations of business conduct and governance for directors and shareholders for both private and public companies. Botswana is not a member of the Extractive Industries Transparency Initiative. Mineral contracts and licenses are governed under the Botswana’s Mines and Minerals Act and associated regulations. Botswana’s laws and procedures for awarding mining contracts are fairly well developed. Mining licenses are required to undergo a public comment period before they are awarded, and that rule is followed.

Botswana has a reputation for a relative lack of corruption and a willingness to prosecute corrupt officials. Transparency International ranks Botswana as the least corrupt country in Africa (34th worldwide). 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. Nevertheless, private sector representatives now note rising corruption levels in government tender procurements.

The major corruption investigation body is the Directorate on Corruption and Economic Crimes (DCEC). Anecdotal reports on the DCEC’s effectiveness vary. 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.

Corruption is punishable by a prison term of up to 10 years, a fine of USD 50,000 or both. High level officials have been prosecuted. Allegations that the Director of Intelligence and Security Services escaped corruption charges because of his personal connections have circulated widely in Botswana media since 2014. The Directorate of Public Prosecutions applied for a withdrawal of corruption charges against former Minister of Investment, Trade and Industry Vincent Seretse in March 2015 citing the grounds that key witnesses were unavailable. The charges stemmed from alleged tender manipulation in 2008 when he was CEO of SOE Botswana Telecommunication Company.

The 2000 Proceeds of Serious Crime Act expanded the DCEC's mandate to include combatting 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, which operates under the Ministry of Finance and Development Planning, cooperates with various institutions, such as Directorate of Public Prosecutions, Botswana Police Service, Bank of Botswana, the 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, a regional standards-setting body for ensuring appropriate laws, policies and practices to fight money laundering and the financing of terrorism.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Botswana is not a party to the OECD Anti-bribery Convention but is a party to the 2005 UN Anticorruption Convention.

Resources to Report Corruption

Contacts for agencies responsible for combating corruption:

Mr. Victor Paledi
Director
Directorate on Corruption and Economic Crime
Madirelo Extension 6, Gaborone, Botswana
+267 3914002/+267 3604200
dcec@gov.bw

Ms. Bridget John
Executive Director
Public Procurement & Asset Disposal Board
Private Bag 0058, Gaborone, Botswana
+267 3602000
webmaster@ppadb.co.bw

Mr. Abraham Sethibe
Director
Financial Intelligence Agency
Private Bag 0190, Gaborone, Botswana
+267 3998400
asethibe@gov.bw

Contact the Minister of the relevant Ministry for a particular tender and provide a copy of the complaint to the Public Procurement & Asset Disposal Board (PPADB) Executive Director.

The threat of political violence is considered low in Botswana. Public demonstrations are rare and seldom turn violent. The most recent large-scale strike, which involved public sector employees, occurred in April to June 2011 and was not violent. In September 2015, roughly 200 people participated in a peaceful march organized by an opposition political party to protest water shortages in the capital. In August 2016, police forcefully dispersed a small demonstration protesting unemployment outside the National Assembly. In February and March 2017, some student-led protests occurred at tertiary institutions necessitating police deployment, but were not overtly political. There were multiple reports of police brutality, including the use of rubber whips and rubber bullets. Another peaceful march against corruption was held on March 28, 2018. This followed allegations of embezzlement of the National Petroleum Levy Funds by a company that was bestowed with the management of the funds together with some government officials.

Botswana has high unemployment rate and a constricted worker skills base. Recent statistics released in 2017 have shown a decline of unemployment rate from 20 percent to 17.6 percent, although the actual rate is suspected to be over 20 percent taking into consideration the closure of several mines where more than 5000 people lost their jobs (Source: Statistics Botswana). Employers can expect to engage in significant training efforts, depending on the industry. Retention of workers and absenteeism can pose problems. In addition, managers often cite workforce productivity as a point of frustration. The lack of trained local citizen professionals is generally resolved by the use of expatriates if they can secure work permits. There is minimal labor strife in Botswana. In 2015, there were a handful of small and peaceful strikes, the most notable of these was by a portion of Botswana Unified Revenue Service (BURS) officials, but as with most unions across sectors, only a portion of BURS officials were unionized, allowing the GOB to maintain customs operations.

The Employment Act provides basic guidelines for employment in Botswana. The legislation sets requirements for a minimum wage, length of the workweek, annual and maternity leave, hiring and termination. Standards set by the Act are consistent with international best practice as described by ILO model legislation and guidelines.

Employment-related litigation occurs and is both an example of trust in the court system and a cost to doing business in Botswana. Considerable expense and frustration can be avoided if an employer observes the provisions of the Employment Act, relevant labor regulations and prudence in advance of potential litigation. Before a potential litigant goes to one of eleven labor courts, the parties must attempt mediation through the Department of Labor. Court cases over severance terms for employees laid off due to fluctuating market conditions are also common. Section 25 of the Employment Act allows employers to terminate contracts for the purpose of reducing the size of his work force, known as redundancy, using the first-in-last-out principle. This method of terminating contracts is separate from firing for serious misconduct as specified by Section 26 of the act. The GOB has social safety net programs in place to assist the unemployed and destitute.

Collective bargaining is common in government and the private sector and the Labor Commissioner can grant collective bargaining authority upon request. The largest unions are comprised of public sector workers.

In August 2016, Parliament passed a Trade Disputes Act with a list of services deemed “essential” and barred from striking that exceeds international labor standards. The Botswana Federation of Public Sector Unions, representing approximately 76,000 public sector employees, filed a case in the Gaborone High Court against the GOB in December 2016 challenging the Act; the case is still ongoing. The ILO referred Botswana to the Committee of Application Standards during the 2017 International Labor Conference in 2017.

The Overseas Private Investment Corporation (OPIC) makes insurance available for projects in Botswana. In June 2016, OPIC signed a USD 125 million loan guarantee with Barclays Bank Botswana which represents the first tranche of the approved USD 250 million guarantee facility for the diamond industry. The purpose of the guarantee was to develop a robust lending market to Botswana’s emerging cutting and polishing industry. In 2015, OPIC hosted a finance workshop in Gaborone and corporations in Botswana benefit from OPIC financing.

Botswana is a member of the MIGA. MIGA offers investor protections against inconvertibility or transfer of currency, expropriation, breach of contract, and war and civil disturbance.

The Botswana Export Credit Insurance and Guarantee Ltd. 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.

Table 2:Key Macroeconomic Data, U.S. FDI in Host Country/Economy