1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The GoB publicly emphasizes the importance of attracting (FDI) and drafted an investment facilitation law recommended by the 2014 Organisation for Economic Co-operation and Development (OECD) Investment Review. The draft was completed in 2016 with technical assistance from UNCTAD but was never enacted. The GoB plans to revise the draft in 2020 before presenting it to Parliament. The GoB has launched initiatives to promote economic activity and foreign investment in specific areas, such as the establishment of a diamond hub which has brought more value-added businesses (i.e., cutting and polishing), into the country. Additional investment opportunities in Botswana include large water, electricity, transportation, and telecommunication infrastructure projects. Economists have also noted Botswana’s considerable potential in the mining, mineral processing, cattle, tourism, and financial services sectors. BITC assists foreign investors with projects intended to diversify export revenue, create employment, and transfer skills to Botswana citizens. The High Level Consultative Council (HLCC), chaired by the president, and an Exporter Roundtable organized by BITC and Botswana’s Exporters and Manufacturers Association (BEMA), are mechanisms employed by the GoB to maintain a focus on a healthy businesses environment for FDI.
Limits on Foreign Control and Right to Private Ownership and Establishment
Botswana’s 2003 Trade Act reserves licenses in 35 sectors for citizens, including butcheries, general trading establishments, gas stations, liquor stores, supermarkets (excluding 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. BITC conducts due diligence on companies that are looking to invest in the country and the Directorate of Intelligence Services (DIS) handles background checks for national security.
Other Investment Policy Reviews
According to CIPA, the company registration process can be completed in a day and is integrated with BURS which allows for a fast-tracked tax registration in 30 days. Additional work is required to open bank accounts and obtain necessary licenses and permits. The World Bank ranked Botswana 159 out of 190 in the ease of starting a business category.
BITC ( ), the GoB’s investment promotion agency, was designed to serve as a one-stop shop to assist investors in setting up a business and finding a location for operation. BITC’s ability to streamline procedures varies based on GoB entity and bureaucratic requirements. The organization’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, Batswana citizens. BITC also hosts the Botswana Trade Portal ( ) that is designed to ease trade across borders. It is a single point of contact for all information relating to import and export to and from Botswana, and represents a number of ministries and parastatals.
Botswana has several 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 five percent margin. Under this policy, MITI defines small companies as having less than five million pula in annual revenue reflected in their financial statements, medium companies with 5,000,001 to 19,999,999 pula in revenue, and large companies with 20 million pula or more. The directive applies to 27 categories of goods and services ranging from textiles, chemicals, and food, in addition to a broad range of 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 60,000 pula; Small Enterprises – less than 25 employees and annual revenue between 60,000 and 1,500,000 pula; Medium Enterprises – less than 100 employees and annual revenue between 1,500,000 and 5,000,000 pula; Large Enterprises – more than 100 employees and annual revenue of 5,000,000 pula or more. This classification system permits 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.
12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs
The DFC has a presence in Botswana through its previous Overseas Private Investment Corporation (OPIC) and the Development Credit Authority (DCA) programs. OPIC has a USD 250 million loan guarantee facility for the local diamond industry, and two separate SME loan facilities with local financial institutions. DCA also has a loan facility in place which targets SMEs.
Botswana is a member of MIGA, which offers investors protection against inconvertibility, or transfer of currency, expropriation, breach of contract, and war and civil disturbance.
The Export Credit Insurance & Guarantee Company (Botswana) Pty. 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.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
According to the Bank of Botswana, investment in Botswana totaled 80.5 billion Pula in 2017, of which 28.9 billion Pula were non-FDI investments. Africa (36 percent) and Europe (56 percent) accounted for most of the 51.64 billion Pula influx of FDI. Within these regions, South Africa and the United Kingdom were the predominant players, accounting for 10.6 and 26.3 billion Pula respectively. Little data on FDI sources is available for countries and regions with limited investments in Botswana. Mining accounted for 35.1 percent of Foreign Investment inflows in 2017.
|Direct Investment from/in Counterpart Economy Data|
|From Top Five Sources/to Top Five Destinations (US Dollars, Millions)|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||Amount||100%||Total Outward||Amount||100%|
|North & Central America||16.02||3%|
|Other 3.5 0.1%|
|IMF Coordinated Direct Investment Survey data are not available for Botswana. 2018 estimates for Botswana’s net international investments declined by 11.1 percent from 70.9 billion Pula in 2017 to 63 billion Pula in 2018. On the assets side, direct investments, portfolio investments, and foreign exchange reserves decreased by 6.9 percent, 13.1 percent, and 3.1 percent respectively. Portfolio investment decreased due to the decline in equity and debt securities invested abroad.|