1. Openness To, and Restrictions Upon, Foreign Investment
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 .
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.
The GOB neither promotes nor restricts outward investment.
2. Bilateral Investment Agreements and Taxation Treaties
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.
3. Legal Regime
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: http://www.elaws.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.
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.
Botswana’s commercial and bankruptcy laws are comprehensive. Secured and unsecured creditors enjoy similar rights under bankruptcy proceedings to those in the United States.