Botswana: Investing

FDI in Figures

According to UNCTAD's World Investment Report 2021, FDI inflows into Botswana declined from $94 million in 2019 to $80 million in 2020, as a result of the global economic crisis triggered by the Covid-19 pandemic.The total stock of FDI in Botswana reached USD 5.4 billion in 2020. The mining sector attracts most of the FDI. However, investments in the services industry (insurance and banking) have been growing in recent years. FDI primarily comes from the Southern African Customs Union (SACU), the European Free Trade Association (EFTA), Canada and Zimbabwe.

The Government of Botswana is seeking to diversify its economy and secure more FDIs. The government encourages new investments and joint ventures, and has put measures in place to increase investment in the agriculture, diamond, education, health and transportation sectors. Furthermore, to assist foreign investors, the government has created the Botswana Investment and Trade Centre (BITC). The country’s strengths lie in its low levels of corruption (the lowest in Africa), its good economic governance, its liberal tax system and its stable democracy. Botswana has also received positive reviews from various international rating agencies. However, high production costs, a lack of skilled labour and the country’s landlocked position are significant obstacles for potential investors. The country was ranked 87th worldwide, for the ease of doing business, in the World Bank's last Doing Business Report, which was released in 2020. This represent a slight decline from the previous edition, when the country was ranked 86th. Still, this rank puts Botswana ahead of many of its neighbours. Leading economists in the country have reported that the significant financial reserves generated by the diamond industry have resulted in a lack of interest from international investors led to believe that the country does not need an inflow of foreign capital.

What to consider if you invest in Botswana

Strong Points

The strong points of the Botswana economy include:

• Botswana is among the most stable and transparent countries in Africa
• Investors have preferential access to the Southern African Development Community’s (SADC) entire marketplace – over 292 million people (Duty-free access to South Africa, Namibia, Lesotho and Swaziland)
• Investors have access to double taxation avoidance agreements with South Africa, United Kingdom, Sweden, France, Mauritius, Namibia, Zimbabwe and Russia.
• The government does not impose foreign exchange controls, which guarantees free repatriation of profits, dividends and capital
• Educated workforce; 82% are literate and most speak English

Weak Points

The main challenges for foreign investors include:

• Infrastructural issues (power outages, shortages of water supply, slow Internet, limited logistics network)
• Important utilities and services remain under State ownership and are not open to private investment - foreign or national.
• Equal treatment to foreign investors is not guaranteed by law
• Foreign investors have no access to financial incentive schemes – such as the Credit Guarantee Scheme and a loan fund for citizen contractors

Government Measures to Motivate or Restrict FDI

The Government of Botswana grants the following measures to facilitate foreign investment:

• Manufacturing companies (including foreign) are subject to a reduced tax rate of 15% (instead of 22%) – subject to approval.
• Foreign companies granted with Development Approval Order can benefit from a tax holiday for a period of 5 to 10 years.
• Companies accredited as an International Financial Services Centre (IFSC) are subject to a reduced tax rate of 15% and are exempt from withholding tax and capital gains tax
• Companies accredited by the Innovation Hub are subject to a reduced tax rate of 15%
• Foreign companies are exempt from tax on dividends received from foreign source where the company holds 25% or more of the equity

Procedures Relative to Foreign Investment

Freedom of Establishment

Foreign investors usually receive equal treatment; however, this is not guaranteed by law, as there is no legal provision on the matter. There are also additional restrictions in favour of local investors:

• 30% of government construction contracts is reserved for citizens
• Agricultural lands cannot be to transferred to non-citizens without ministerial approval. Companies that are majority foreign-owned are also considered as non-citizens
• Financial incentive schemes – such as the Credit Guarantee Scheme and a loan fund for citizen contractors - are not open to foreign investors.

Acquisition of Holdings

Foreign investors can fully own companies, purchase existing local companies or establish joint-ventures. However, foreign ownership is limited in small-scale businesses that are reserved to citizens (including butcheries, general trading establishments, gas stations, liquor stores, supermarkets): foreigners can participate as minority joint venture partners in medium-sized businesses. They can hold the majority share if they obtain written approval from the trade minister.

Obligation to Declare

Foreign investors must register with the Companies and Intellectual Property Authority (CIPA). The company registration process takes around 14 days; however, foreign investors should allow 48 days to complete additional required registrations such as tax registrations, opening bank accounts, and obtaining necessary licenses and permits.

Competent Organisation For the Declaration

Ministry of Investment, Trade and Industry

Requests For Specific Authorisations

Foreign direct investment (FDI) is not permitted in small-scale businesses in retail trade services and manufacturing in order to protect local entrepreneurs. Furthermore, important utilities and services remain under State ownership and are not open to private investment - foreign or national. There are no restrictions in growing sectors such as mining, tourism, financial services and most mid- and large-scale manufacturing. However, trade and non-financial services, manufacturing and tourism all require a licence.

Investment Opportunities

Investment Aid Agency

Botswana Investment and Trade Centre

Tenders, Projects and Public Procurement

Global Tenders, Government Tender Notices from Botswana
African Development Bank Group, Tenders in Botswana
Online Tenders, Tenders in Botswana
Central District Council Botswana, Tenders in the Central District (Botswana)

Other Useful Resources

Botswana National Development Bank
Botswana Development Corporation
Citizen Entrepreneurial Development Agency

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