Botswana: Africa's Gateway for Business and Finance

Nestled at the heart of the Southern African Development Community (SADC), a region encompassing more than 250m people, Botswana has carved out a reputation as one of Africa's most secure and investor-friendly economies. Good governance and a zero-tolerance approach to corruption underpin its success.

Since independence in 1966, Botswana has been one of Africa's most stable democracies. Four presidents have assumed office through peaceful, democratic transitions—a rarity on the continent. The country stands as an exemplar of political stability, adherence to the rule of law and orderly governance.

Yet Botswana aspires to be more than a model democracy. It is positioning itself as a world-class hub for financial and business investment into Africa. The spread of liberal democracy, economic liberalisation, privatisation, infrastructure development and growth in consumer and financial services have all strengthened its credentials as an investment destination. Though its economy remains anchored by resource endowments—particularly diamonds—Botswana is celebrated as a developmental success story.

Diversification and competitiveness

The government has worked to create an enabling environment for capital, with a strategic focus on diversifying the economy into value-adding sectors that can serve the fast-emerging regional market. As a result, Botswana ranks as the fourth most competitive economy in Africa and one of the easiest places on the continent to do business.

Building on these foundations, Botswana aims to become a world-class hub for cross-border financial and business services. As one of Southern Africa's most affluent economies, with a robust growth outlook, its wealthy population offers considerable demand for banking, insurance and other financial services.

The International Financial Services Centre (IFSC), established in 2003, provides a supportive regulatory framework for regional and international banks, insurance companies and investment funds seeking to penetrate or consolidate their position in sub-Saharan Africa's fast-growing markets.

Botswana also boasts the third-best Network Readiness Index score in Southern Africa, indicating high propensity to exploit opportunities offered by information and communications technology. Its well-educated workforce has an adult literacy rate of 88.5%, with the majority of citizens possessing excellent command of English and the second-highest skill-set in the region. Some 18% of the workforce is employed in knowledge-intensive industries.

Opportunities in financial services

Despite its comparatively limited domestic market, Botswana's central location and attractive sector-specific investment incentives present numerous opportunities for investors seeking entry into the business and financial services industry.

At the beginning of 2015, total banking assets represented approximately 50% of GDP. The banking sector is more developed and penetrated than in most other African countries. The life insurance sector is substantially larger than non-life insurance and is expected to grow faster over the next five years, making it one of the largest and most developed insurance markets in sub-Saharan Africa.

Key opportunities include:

Financial services: Botswana's relatively wealthy population requires investment services, accounting, tax advisory and sophisticated banking products.

Life insurance: The life insurance sector is larger and growing more rapidly than non-life insurance, presenting attractive opportunities for expansion.

Business process outsourcing: Botswana's complementary time zone (GMT+2), global connectivity and skilled workforce provide an attractive location for BPO and shared services centres. The time zone facilitates interaction with European, African and Middle Eastern markets, whilst the time difference with America allows for timely completion of data processing and salary administration.

Tax treaties: Botswana has Double Taxation Avoidance (DTA) treaties with key African states, major investor nations and international financial centres. Thirteen active treaties and another twelve awaiting ratification or under negotiation provide investors with ready access to an expanding network.

Holding companies: IFSC-accredited intermediary holding companies receive several incentives, making it more cost-effective and efficient to invest in neighbouring countries such as South Africa, Mozambique and Zimbabwe.

Connectivity and infrastructure

With direct air links to Nairobi and Johannesburg—Africa's largest air hub, with daily flights to 81 cities—Botswana enjoys excellent global connectivity. The Botswana Innovation Hub (BIH) is expanding the Science and Technology Park in Gaborone, which will serve as a cluster for local and global business and financial services firms, R&D activity, research institutions and training institutes. The park will provide state-of-the-art facilities, international connectivity and a government-owned data centre, designed to encourage technological innovation and entrepreneurship.

Investment incentives

Botswana offers generous incentives for investors: no foreign exchange controls, with full repatriation of profits and dividends permitted; no restrictions on business ownership; duty-free import of machinery and equipment for manufacturing; customs duty exemption on raw materials for goods destined outside the Southern African Customs Union (SACU); and a liberal tax regime with 22% corporate tax and 25% personal tax (falling to 15% for manufacturing and IFSC-registered companies—the lowest in SADC). A negotiable tax holiday of up to ten years is available, alongside a 200% deductible training rebate. Bilateral Investment Treaties provide for non-discriminatory treatment of foreign investors.

The Botswana International Financial Services Centre offers additional incentives: accredited companies pay 15% tax on profits from approved operations; no withholding tax on dividends, interest, royalties and management fees; VAT and capital gains tax exemptions; and the ability to denominate capital in major international currencies, mitigating exchange-rate risk. Commercial banks face a low reserve requirement of just 5% of customer deposits.

Institutional support

The Botswana Investment and Trade Centre (BITC) aims to develop the country as a world-class hub for cross-border financial and business services. It works with government to develop policy conducive to the BPO and IFSC sectors, assists potential investors with establishing operations, makes recommendations for legislative improvements, and provides timely information on the business climate and regulatory regime.

The Botswana Innovation Hub assists in the transition to a knowledge-based economy, develops the country's first science and technology park, and promotes interaction between local and international innovation-driven companies.

Beyond incentives and institutions, Botswana's appeal lies in its fundamentals: political stability, the rule of law, and a welcoming environment for business. In a region often marked by turbulence, these attributes give it a decided edge.