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FY 1999: Botswana |
CHAPTER VII - INVESTMENT CLIMATE STATEMENT Ranked as the third most competitive among 23 African nations by the World Economic forum and Harvard University and cited by the 1998 investment in African mining conference as a low investment risk for mining, Botswana enjoys respect and well-merited confidence for its investment potential. The New York Times reported in June, 1998, that a study released by the World Bank identified Botswana as having enjoyed the greatest economic growth of any country in the world during the 31 years from 1966 - 97. Its annual growth rate of 9.2% exceeded that of # 2 South Korea (7.3%) and # 3 China (6.7%). Although hampered by being a landlocked country with a small population of 1.5 million, Botswana has nevertheless posted impressive economic growth and offers political and economic stability unmatched in southern Africa. The government continues to emphasize the need for more Foreign Direct Investment, (FDI), to achieve full growth potential of the economy, and actively supports FDI. The government provides foreign investors with equal access to general incentive schemes in a number of economic sectors limiting the few preferences given to domestic capital. Investment of foreign capital in job-creating industrial projects, particularly in import substitution and exports is strongly encouraged. Parliament passed a bill establishing an independent statutory body, the Botswana Export Development and Investment Authority, (BEDIA), in November 1997, to effectively promote investment and the export of goods manufactured in Botswana. BEDIA will assist foreign investors obtain pre-investment support services such as land, buildings, work and residence permits, licenses, grants and other regulatory authorizations required, as well as resolve investors' problems which may be encountered while operating in Botswana. The list of sectors reserved for domestic investment and production is unimposing: school furniture manufacture, welding, and bricklaying among the trades, and the operation of restaurants, bars, liquor stores, filling stations and small groceries in the service/retail sector. Franchises and wholly owned subsidiaries of foreign chains including large general merchandise marts, restaurants and the dominant grocery network, operate without restriction. Foreign investors are allowed to participate in all other sectors and no distinction is made between foreign and domestic investors. Foreign firms are accorded national treatment and there are no formal or non-formal polices that are discriminatory to foreign owned firms. There are no stringent screening mechanisms that could cause an impediment to investment, limit competition, or protect domestic interests at the expense of foreign investment. Towards the end of 1997, a high-level task force was established to prepare a draft white paper on a privatization policy, which will be presented to the government in the course of 1998. An Industrial Development Policy', released by the government of Botswana early this year, indicates that an appropriate institutional structure to support a privatization initiative in Botswana will be developed to improve the scope for the development of entrepreneurship in Botswana and to improve the efficiency of government. Whereas promoting efficiency and growth is the ultimate objective, the government would also like to ensure that when privatization occurs or strategic partnerships are formed, new opportunities are created for citizen businesses. Foreign investors are allowed to participate in the country's privatization programs from the stage at which companies are advertised. The government's interest in promoting efficiency and competition has led to completed and planned sales of government equity in profit-making enterprises. Limited domestic capital means that foreign investors will be welcomed in most instances, although nationals may be given exclusive first rights to purchase. There is a wide range of functions and services within the public sector, which could be provided to government or to parastatals by the private sector businesses. Conversion And Transfer Policies The government is still working towards complete abolition of exchange controls. Botswana continued to open up an already liberal foreign exchange regime in early 1998. This move is expected to enhance Botswana's competitive position for investment flows destined for the region and meet the challenges of globalization. As of February 1998, non-residents can trade in and issue Pula- denominated bonds, provided such instruments are listed on the Botswana Stock Exchange and are long term. They can also hold larger stakes in Botswana companies. Residents are permitted to invest significantly more overseas and borrow offshore. Travelers are now allowed to carry on their person or baggage, an equivalent of Pula 10,000 ($2,500) in foreign currency. Any amount in excess of this amount should be declared to the customs and excise officials at the port of departure. All quantitative limits on foreign currency access for current account transactions; both for businesses incorporated locally and for permanent residents of the country have been removed. Businesses and other incorporated bodies registered under the laws of Botswana are allowed a consolidated annual allowance up to a maximum of Pula 30 million ($7.5 million) for direct investment outside the country. The limit was formerly Pula 10 million ($2.5million). Exchange control approval was also granted for unrestricted non-resident participation in the Pula 50 million ($12.5 million) bond issued by the Botswana Development Corporation. A news release from the bank of Botswana in February this year says participation in any bond issued by non-residents will not be restricted by exchange controls. This is a move to encourage inward portfolio investments deemed beneficial to Botswana, development of domestic capital markets, diversification of investment instruments, as well as increasing the potential demand for domestic bonds. The government permits the establishment of foreign currency denominated accounts in Botswana (in U.S. dollars, British pound, German marks or 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 authorizes the issuance of foreign currency denominated loans. An amendment to increase the limits on balances kept in the foreign currency accounts held by these businesses from Pula 1 million to Pula 10 million ($2,500 and $2.5 million respectively) was made in 1997. Upon disinvestment by a non-resident, the person is allowed immediate repatriation of proceeds of up to Pula 100 million ($25 million), and if the money exceeds that amount, the excess may be required to be repatriated in tranches over a period not exceeding three years. This measure is intended to attract foreign investment and to allay fears such investors may have about their money if they wished to disinvest and repatriate proceeds. Investment returns such as profits and dividends, royalties, franchise fees and service fees can all be repatriated without any quantum limit. There is no difficulty in obtaining foreign exchange. Although amounts exceeding Pula 1 million require referral to the Bank of Botswana, it is highly unlikely that such a severe shortage of foreign exchange could occur as to lead the bank to block transactions. With international reserves of approximately $5.7 billion, Botswana will not experience foreign exchange difficulties in the foreseeable future. The Botswana Pula is, for all intents and purposes, freely convertible. Expropriation And Compensation The constitution of Botswana prohibits nationalization of private property. The government of Botswana has never pursued a policy of forced nationalization, and we have no reason to believe that it would consider expropriatory actions. Dispute Settlement The Botswana constitution allows for a judiciary which is independent of both the executive and legislative powers. Civil law is based on Roman-Dutch law while criminal law is built on familiar tenets of the English legal system. The legal system is sufficient to the conduct of secure commercial dealings. Secured and unsecured creditors enjoy the same rights under bankruptcy proceedings as they would in the United Sates, and foreign and domestic parties have equal recourse to the judicial system. A proven judicial and legal structure is in place. Botswana is a member of the International Center for the Settlement of Investment Disputes (ICSID) and the Multilateral Investment Guarantee agency (MIGA).[end of document]
Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title17, United States Code.