Download Investment Guide - Botswana

Investment Guide - Botswana
The information contained in this report is of a general nature and is not intended to address the circumstances of any particular individual
or entity. While the information is accurate as at date hereof, there can be no guarantee that the information is accurate as of the date it
is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional
advice after a thorough examination of the particular situation.
TABLE OF CONTENTS
General Overview__________________________________________________________________________________4
Political Overview___________________________________________________________________________________5
Economic Overview_________________________________________________________________________________5
Regulatory Environment_____________________________________________________________________________5
Bilateral and Multilateral Treaties______________________________________________________________________6
Investment Promotion_______________________________________________________________________________6
Institutions Governing Investment Promotion
6
Investment Incentives
6
Tax_______________________________________________________________________________________________7
Income Tax
7
Withholding Tax
7
Capital Gains Tax
7
Other Tax
7
Transfer Pricing and Thin Capitalisation
8
Stamp and Transfer Duty
8
Accounting Principles_______________________________________________________________________________8
Industrial Relations_________________________________________________________________________________8
Expropriation______________________________________________________________________________________9
Corruption________________________________________________________________________________________9
Competition and Consumer Protection________________________________________________________________9
Legal Forms of Incorporation in Botswana______________________________________________________________9
Industry Sectors____________________________________________________________________________________10
Agriculture10
Banking and Financial Services
11
Energy11
Manufacturing11
Mining11
Telecommunications11
Water12
Intellectual Property_________________________________________________________________________________12
Dispute Settlement_________________________________________________________________________________12
Investment Guide 2015 - Botswana
General Overview
4
Capital City:
Gaborone
Currency: Botswana Pula (BWP)
Languages: English and Setswana
Government: Parliamentary Republic
President: Lieutenant General Seretse Khama Ian Khama
Population: 2.039million (2014 estimate)
GDP:
US$14.78billion (2013 estimate)
Timezone: GMT + 2
Investment Guide 2015 - Botswana
Political Overview
Botswana is considered to be one of Africa’s most stable countries and the continent’s longest continuing multi-party
democracy. The governing party has governed since the country gained independence in 1966. The President is both the
head of state and the head of government. The next elections are due in October 2019. According to the 2014 Mo Ibrahim
Index of African Governance, Botswana’s Government was ranked 3rd in the continent, and it is considered one of the top
five African nations in terms of ‘safety and rule of law’, ‘human development’ and ‘sustainable economic opportunity’.
Economic Overview
Since independence, Botswana has consistently been one of the world’s best-performing economies. Botswana has
transformed itself, from a chronically poor country to a dynamic economy, encouraging private enterprise. In addition
to political stability, sound management and fiscal discipline, the diamond industry has been responsible for much of
Botswana’s economic expansion. Diamond mining currently accounts for one third of GDP and over 70% of export earnings.
Efforts are being made to diversify the economy and consumer services, real estate, financial services and tourism are all
regarded as important emerging sectors.
Regulatory Environment
Botswana is open to foreign investment and trade, with a straight-forward and transparent regulatory environment
promoting competitiveness and flexibility. In the 2014 Index of Economic Freedom, Botswana is ranked as the 27th freest
economy in the world, and the 2nd freest out of 46 countries in sub-Saharan Africa. It ranks well above regional and world
averages. Several attempts have been made to diversify the economy away from diamond production and attract foreign
investment. These include the introduction of competitive corporate tax rate of 22% (tax rates remain among the lowest
in Southern Africa) and the streamlining of the application process for business ventures. Botswana’s independent judiciary
provides strong protection of rights. Foreign exchange controls were abolished in 1999, allowing the repatriation of profits
and direct investment from Botswana without restriction.
5
Investment Guide 2015 - Botswana
Bilateral and Multilateral Treaties
Botswana is a member of the World Trade Organisation, the African Caribbean Pacific-European Union Partnership
Agreement, the Southern African Global Competitiveness Hub, the Southern African Customs Union (SACU) and the
Southern African Development Community (SADC). Botswana is also a member state of the Multi lateral Investment
Guarantee Agency formed by the World Bank Group whose mission is to promote direct foreign investment into developing
countries to help support economic growth, reduce poverty and improve lives.
Botswana has concluded double taxation agreements with Barbados, China, France, India, Mauritius, Mozambique,
Namibia, Russia, Seychelles, South Africa, Swaziland, Sweden, United Kingdom, Zambia and Zimbabwe. Double taxation
agreements with Belgium, Luxembourg, Malawi and Tanzania are awaiting ratification.
Investment Promotion
Institutions Governing Investment Promotion
The Botswana Investment and Trade Centre (BITC), is an autonomous organization, mandated by an Act of Parliament
to encourage, promote and facilitate the establishment of export-orientated enterprises, work with the Government to
ensure that the country has a conducive investment climate and recommend certification of international financial services
centre companies. BITC also assists investors to secure licences, work and resident permits, visas, utility connections and
infrastructural facilities such as land and factory space in the shortest time possible. After company startup, BITC continues
to provide services addressing any problems encountered. The granting of investor support from BITC is based on whether
the proposed project is in line with the Government’s diversification plans, contributes to the growth of a priority sector
showing high growth potential, and provides employment and training opportunities to Botswana citizens. Investment may
be made by way of proprietorship, partnership, branch (external company) or company incorporated in Botswana.
Trading activities require licensing. The type of licence is industry specific and issued in terms of industry specific legislation.
Investment is also assisted through the following:
•
•
•
National Development Bank
Citizen Entrepreneurial Development Agency
Botswana Development Corporation (BDC)
Investment Incentives
Notable investment incentives include an incentive for the manufacturing industry in the form of a grant, at a reduced rate
of 15% in terms of a Manufacturing Order issued by the Minister. Application can be made for a tax agreement between
the Government (acting through the Minister of Finance) and a taxable company, with a project which promotes the
economic development of the country. The agreement may provide for the exemption of any dividend, interest, royalty,
management or consultancy fee paid by the company to a non-resident, and relief from any duty, responsibility or liability
under the Income Tax Act. Such agreement requires the approval of Parliament for its effect.
6
Investment Guide 2015 - Botswana
Companies certified by the Minister on recommendation of BITC, as international financial services centre companies not
doing business in local currency in Botswana have the following additional incentives:
• A corporate tax rate of 15%;
• Exemption from withholding taxes in Botswana;
• Exemption from tax on dividends received from foreign source where the company holds 25% or more of the equity;
• Exemption from capital gains tax in Botswana;
• Credits for withholding taxes levied elsewhere; and
• Access to Botswana’s Double Taxation Treaty network.
Tax
Income Tax
Botswana’s tax regime is based on “source”– resident and non-residents are liable to tax on income sourced, or, deemed
sourced in Botswana. A company is tax resident if it is incorporated, or, managed in Botswana. Corporate income tax of
22% is payable by a resident company and 30% by a non-resident company on Botswana source income. Foreign source
dividends, interest and business profits of foreign source are taxable when remitted to Botswana. Branches of foreign
companies are taxable in Botswana on income which has its source or is deemed to be sourced, in Botswana at the rate of
30%.
Withholding Tax
All dividends paid by a resident company to a resident, or, non-resident are subject to a withholding tax of 7.5% on the
gross amount paid. Such tax is a final tax on dividend in the hand of the recipient. Interest paid to a non-resident is subject
to a 15% withholding tax while interest paid to residents is subject to a 10% (on excess of BWP1, 950 per quarter)
tax. Such tax on interest in the hands of the non-resident recipient is a final tax. There is withholding tax on royalties,
management, consultancy, technical and administration fees payable to non-residents at the rate of 15%. The values of
withholding tax maybe reduced in terms of a Double Taxation Avoidance Agreement, if any, between Botswana and the
country of tax residence, of the recipient.
Capital Gains Tax
The proceeds of disposal of capital assets form part of the gross income of a taxpayer, for tax purposes. In the case of
moveable assets, 75% of the disposal proceeds of the sale, minus the expenses of the sale, the cost of acquisition and
expenses incurred in the acquisition, accrue to gross income. The disposal of shares listed on the stock exchange, which
have been held in excess of one year, are exempt from tax. In the case of immovable assets, 100% of the gain, equal to
the disposal proceeds, less the cost of the sale, the cost of improvements, if any, which improvements are indexed from the
date of improvement to present, cost of acquisition and expenses incurred when the asset was purchased indexed from the
date these were incurred to the present, accrues to gross income.
Other Tax
Property Tax is charged on developed land, although tax holidays may be granted for new buildings and those located in
specified development areas.
7
Investment Guide 2015 - Botswana
Customs and Excise Duty is payable at the rate of 10% of the value of taxable goods and services supplied in or imported
into Botswana.
Value Added Tax is charged on all taxable activities in Botswana at the rate of 12%. Exports and the supply of certain
specified goods and services are zero rated.
Withholding Tax (or PAYE) is deductible from the earnings of the employee by the employer, for which the employer is
required to be registered for, with the Botswana Unified Revenue Service. An employee’s earnings include accrued salary,
wages, leave pay, commission and bonus pay.
Withholding Tax of 3% is chargeable on payments in respect of a construction contract.
Transfer Pricing and Thin Capitalisation
There are no transfer pricing rules or thin capitalisation requirements (except with respect to mining companies).
Stamp and Transfer Duty
There is no Stamp Duty or Capital Duty on the purchase, issuance or sale of securities. Transfer duty is levied on the transfer
of immovable property at a rate of 5% on property, other than transfers of agricultural land to non-citizens, which is levied
at a rate of 30% and which requires the approval of the Minister of Lands and Housing.
Transfer duty is deemed input Value Added Tax and deductible from output Value Added Tax.
Accounting Principles
Botswana applies International Accounting Standards and International Financing Reporting Standards.
Industrial Relations
Botswana’s employment regulations are relatively flexible. The Employment Act [CAP. 47:01] provides basic guidelines
for employment in Botswana. The legislation sets industry specific minimum wages, length of work weeks, annual and
maternity leave, hiring and termination. Furthermore, the country adheres to International Labour Organisation conventions
protecting worker rights, the Industrial Relations Division of the Ministry of Labour and Home Affairs is responsible for
ensuring compliance with these conventions.
Work and resident permits are required for expatriates seeking employment in Botswana. Work permits are generally
granted only when local citizens do not possess the necessary industry specific expertise. The granting of such permits to
expatriates may be made contingent upon establishment of demonstrable “localisation” efforts. The work and residence
permits of senior executive expatriates companies within the international financial services centre are fast tracked.
8
Investment Guide 2015 - Botswana
Expropriation
The Constitution prohibits the expropriation/nationalisation of private property without compensation and the independent
judiciary provides strong protection of property rights.
Corruption
Administrative corruption is low. The 2014 Corruption Perception Index compiled by Transparency International, ranked
Botswana 31st out of 174 countries. Botswana has specific anti-corruption legislation, a dedicated enforcement unit the
Directorate on Corruption and Economic Crimes (DCEC) and significant criminal penalties for acts of corruption. Overall,
DCEC is regarded as an active and effective organisation.
Competition and Consumer Protection
Competition is regulated in terms of the Competition Act, [CAP46:09] which governs inter alia mergers and acquisitions,
market inquiries which may be conducted by the competition authorities, prohibited practices such as horizontal and
vertical trade agreements, price fixing, market allocation, bid rigging, restraints on production or supply, collusion and
abuse of dominance. The Consumer Protection Act, [CAP42:07] provides for the protection of consumers by means of
investigation, prohibition and control of unfair business practices.
Legal Forms of Incorporation in Botswana
The principal business entities are public or private companies with liability limited by shares, or, public, or, private companies
limited by guarantee, close company and external company. The Registrar of Companies and Intellectual Property, part of
the Ministry of Trade and Industry, is responsible for company incorporation, registration of business names and protection
of intellectual property rights.
A private company cannot have more than 25 shareholders and must have a minimum of one shareholder (if limited by
shares), and one director, must be ordinarily resident in Botswana. There is no restriction on the number of shareholders in
a public company but there is a requirement for a minimum of 2 directors to be ordinarily resident in Botswana. Audited
financial statements must be prepared within five months and seven months of the year end, for a public and private
company, respectively, and filed with the Registrar of Companies. A qualified company secretary must be appointed.
The World Bank Group rates Botswana 74th out of 189 economies in terms of the ease of doing business. The table below
provides a summary of the procedures and the indicative timelines and cost for setting up a trading company.
9
Investment Guide 2015 - Botswana
Procedure
Time to complete
Cost to complete
(BWP - Botswana Pula)
1
Select and reserve company name
10 days
BWP 20
2
Sign the declaration of compliance of statutory
requirements for incorporation before a
commissioner of oaths
1 day
BWP 75
3
Return the complete statutory return to
the Registrar of Companies in respect of
re-allotment, directors, auditors, company
secretary, and registered officers
1 day
BWP 2000 where registration is done
by an agent
4
Register the company with the Registrar of
2-3 weeks
Companies at the Ministry of Trade and Industry
5
Complete application forms for Trade licence
6
Obtain an approval of the working conditions
after an inspection of company premises. As
part of the licence application process the
company’s premises will be inspected by the
health and environmental authorities to ensure
compliance with minimum standards
2 days
No charge as this procedure is done
by the municipal authorities (called
Councils)
7
Advertise the intention of applying for a license
in the official gazette
3 weeks
BWP 80
8
Obtain trade licence from the, Ministry of Trade
and Industry; or obtain a trading license from
the Council
4 weeks
Fees for licences are dependent on
type of trade licence required
9
Register for Income Tax and VAT with the
Botswana United Revenue Services, (BURS)
and obtain the approval from the BURS for the
appointment of a public officer who is in charge
of tax return
10 days
No charge
10
Register employees for work injury insurance
7 days
No charge
BWP 360 (registration of constitution)
Industry Sectors
Agriculture
Agriculture meets only a small portion of food needs and contributes a very small amount of GDP (1.9%). However, despite
its low significance to GDP, agriculture remains an important part of the economy as a large portion of the population lives
in rural areas and is dependent on subsistence crop and livestock farming.
10
Investment Guide 2015 - Botswana
Banking and Financial Services
Botswana’s competitive banking system is one of Africa’s most advanced and it contributes to 7.4% of the GDP. The
commercial banks in Botswana are small by international standards. Currently, there are eleven commercial banks, namely,
African Banking Corporation of Botswana Limited (trading as “Banc ABC”), Bank Gaborone Limited, Bank of Baroda
(Botswana) Limited, Bank of India (Botswana) Limited, Barclays Bank of Botswana Limited, Capital Bank Limited, First
National Bank of Botswana Limited, Kingdom Bank Africa Limited, Stanbic Bank Botswana Limited, Standard Chartered
Bank Botswana Limited and State Bank of India (Botswana) Limited.
The Government is involved in banking through state-owned financial institutions such as the NDB, Botswana Building
Society, Botswana Savings Bank, addressing the main needs of citizens. In addition, the International Services Centre
was set up in 2003 to establish and develop the country as a centre for cross border financial and business services into
Africa, and aimed at increasing Botswana’s status as a financial hub. The majority of financial services are in the areas of
international banking, funds administration, corporate treasury management, captive insurance operations, venture and
private equity investment and investment holding companies. In addition, credit is allocated on market terms, although
the Government also provides subsidised loans. Global standards in the transparency of financial policies and banking
supervision are generally adhered to in Botswana.
Energy
The state-owned power company, Botswana Power Corporation, imports approximately 75% of the country’s energy needs
from South Africa. Expansion of Botswana’s single power station, Morupule Power Station, is currently ongoing and aimed
at reducing Botswana’s dependence on power from South Africa.
Manufacturing
The manufacturing sector accounts for an estimated 4.2% of GDP. As most of Botswana’s exports are in unprocessed form,
the Government has sought to encourage the establishment of processing and manufacturing companies and has setup
agencies such as BITC to encourage the export of goods manufactured within the country. The BDC promotes industrial
development through project identification, joint venture partnerships and site developments for small manufacturers.
Mining
Diamond mining accounts for approximately one-third of Botswana’s GDP and approximately 70% of its export earnings
and 34.7% of the country’s GDP. However, the industry is capital intensive and accounts for less than 5% of private sector
employment. Mining activities, although not as extensive, are also conducted in respect of coal, copper, gold, nickel and
soda ash. Coal-bed methane gas has been discovered in the north-eastern part of the country; however, development of
these gas fields has been slow.
Telecommunications
The Department of Telecommunications was established to develop and implement infrastructure development strategies
for the telecommunications. A major role is to develop the national fibre backbone infrastructure and establish international
connectivity with the rest of the world through projects such as the West Africa Festoon Fibre System and the East Africa
Sea Cable System.
11
Investment Guide 2015 - Botswana
Water
The Water Utilities Corporation, a corporate body wholly owned by the Government, was established in terms of the Water
Utilities Act with a mandate to provide potable water and waste water resources country wide and for developing the
nation’s water resources.
Botswana does not have a formal policy framework for Trans-boundary natural resource management. However, the
country has shown its commitment to promote equitable and beneficial use of international watercourses; Botswana has
ratified the Revised Protocol on Share Water courses in the SADC and the International United Nations Convention on the
Non-navigational Uses of International Watercourses (SADC2003).
Intellectual Property
Botswana is a member of the World Intellectual Property Organisation and party to the Berne and Paris conventions,
the Hague Agreement, the Madrid Protocol, Patent Cooperation Treaty and the African Regional Intellectual Property
Organisation. Protection of intellectual property rights in Botswana has improved significantly. Botswana is ranked 31st out
of 97 countries in the 2014 International Property Rights Index, second only to South Africa among sub-Saharan Africa
countries. The Registrar of Companies and Intellectual Property, is responsible for the protection of intellectual property
rights.
Dispute Settlement
The Botswana legal system is largely based on Roman-Dutch law. The Constitution provides for an independent judiciary
and the legal system is sufficient to enforce secure commercial dealings. During the past two years, the judiciary has brought
down the average time to conclude civil cases from more than 20 months to fewer than 11 months and improvements
continue to be made. Furthermore, residents and non-residents have equal access to the judicial system.
Botswana is also a member of the International Centre for the Settlement of Investment Disputes and the Multilateral
Investment Guarantee Agency. It consequently accepts binding international arbitration of investment disputes. As a
member of the New York Convention (Convention on the Recognition of Foreign Arbitral Awards), Botswana recognises
and enforces foreign arbitral awards given in countries which are signatories to the Convention.
12
Collins Newman & Co.
A: Dinatla Court, Plot 4863
P:
P.O. Box 882, Gaborone, Botswana
T:
+267 395 2702
F:
+267 391 4230
E:[email protected]
ALN Head Office
A: Apollo Centre, 2nd floor, Wing A, Ring Road Parklands.
P:
P.O. Box 200-00606, Sarit Centre, Nairobi, Kenya
T:
+254 20 364 0000, +254 703 032 000
E:[email protected]
W:www.africalegalnetwork.com