1. Overview
- Generally investments do not discriminate;
- Foreign and domestic investors are treated the same;
- The major goals of incentives are employment creation, development of the manufacturing sector, citizen empowerment, small business development;
- The non-tax incentives are under both the Ministry of Finance and Development Planning and Ministry of Trade, Wildlife and Tourism.
2. Investment Policy
Botswana has always maintained an open market economic policy. Since its independence in 1966, Botswana has been open to foreign direct investment (FDI), and has constantly improved its FDI framework. The discovery of diamonds (copper, nickel and soda ash deposits) in the late 1960s made Botswana more attractive to foreign investors. There were large inflows of FDI in the 1970s. In the 1990s Botswana’s share of FDI inflows fell due to competition for investors in the region. The manufacturing industry contributed less than 4% of the country’s FDI and therefore needed a boost; hence the introduction of the Manufacturing Development Approval Order in 1995. Under the scheme, companies that are approved to be manufacturing are tasked at a rate of 15%, which is a 5% basic company tax rate and 10% additional company tax rate.
3. General Incentives
- Citizen Enterpreneual Development Agency (CEDA). This is an independent agency under the Ministry of Finance and Development Planning. It gives loans to any viable businesses of Botswana citizens. Loans of P500 – P1500 are charged interest rate of 5%. Between P1500 and P2 million the interest rate is 7.5%.
They are currently working on guidelines of establishing a joint venture capital fund, under which joint venture between citizens and non-citizens can be financed.
- Citizen Enterpreneur Assistance Equity Fund (CEMAEF):
established to intervene and empower citizen investors in the property market in the country;
purchases shares in certain investments facing loan foreclosure for future disposal to qualifying citizens or wholly citizen-owned companies; where management is satisfied that the investment is financially viable and adequately managed; including proper keeping of records; and
managed by the Botswana Development Corporation which is a commercial arm of the government.
- Botswana Export Development and Investment Authority (BEDIA) - this was established to:
promote investment into the country;
promote exports of Botswana manufactured products;
construct factory buildings which will be leased out to investors in Botswana.
Price Preference for local
The 2.5% price preference is accorded to building works/construction, electrical and mechanical by 100% citizen owned companies over foreign companies. Where there are no 100% citizen owned, the preference is given to companies with some shareholding by citizens. The price preference has a limit of P300,000.
Incentives for local manufacturers.
On tendering, 30% of government budget is reserved for local manufacturers.
4. Free Trade Zones
Botswana has no free trade zones
Tax Agreements
In general, the Minister can enter into an agreement with any person
5. Export Incentives
Botswana has no incentives that are specifically geared towards promotion of exports, other than the rebate promotions. Under these provisions, companies are allowed to source raw materials outside the SACU region and to export their product to non-SACU member countries. To qualify, a company should import and export within a period of 12 months
6. Financial Assistance
Botswana used to grant financial assistance under the Financial Assistance Policy (FAP) both local and foreign investors, but it was being abused, so it has since been discontinued
7. Regional Incentives
None
8. Industrial Financing
None
9. Development Programmes and Incentives for Specific Industries
The Manufacturing Industry is taxed at the tax rate of 15%
10. Tax
10.1. Rates
In general Botswana tax rates are low, which is an incentive to enhance the development of the private sector, as they would have more funds to re-invest.
Development Approval Orders (S51)
The Minister may, where he is satisfied that a proposed project would be beneficial to the development of the economy of Botswana or to the economic advancement of its citizens he may issue as development approval order in respect of the business.
International Financial Services Centre Companies are tasked at 15% of their world wide income are not subject to withholding tax distribution:
- Interest, commercial royalty or management consultancy fees and dividend by an IFSC or CIU to a non resident are exempt from withholding tax.
- Any company that is approved to be carrying on manufacturing business is also taxed at the rate of 15% including the Botswana Meat Commission, which is responsible for beef export in the country.
- Gains from the disposal of any shares or debentures of a public company are exempt from taxation.
- To cushion companies whose business is capital intensive, 100% of the mining capital intensive, 100% of the mining capital expenditure made in the year in which such expenditure was incurred is allowed as a deduction from the assessable income of the business with unlimited carry forward of losses.
- To encourage companies to train their employees, companies are allowed a deduction of 200% of their training expenditure in determining their taxable income.
- As traditionally Botswana was a predominantly country, there are general incentives geared towards the development of the farming industry.
- The Act also allows the Minister under S.53 to enter into a tax agreement with any person who may be liable to tax in order to relief the person from any duty, responsibility and liability under any provisions of this Act.
10.2. Deferral Period
10.3. Tax Holiday
10.4. Depreciation
- Botswana does not have any depreciation incentive other than an initial 25% of allowance granted on erection or purchase of any new industrial buildings or any improvements other than repairs to any industrial buildings or any improvements other than repairs to any industrial buildings. The allowance is granted if the building is used solely for the purposes of such business carried on by the person, and in the case of new building at the time it was first used, while in the case of improvement, when they were first concluded.
- With regard to farming, any works of a capital nature that is incurred in the development of farming business is claimable in the year in which that expenditure is incurred with unlimited carry forward of losses.
- Mining capital expenditure is claimable in the year in which such expenditure is incurred with Unlimited carry forward of losses.
10.5. Other