1998 SOUTHERN AFRICA ECONOMIC ... - National Treasury

B O T S WA N A
and serv i c e s .
I N V E S T M E N T C L I M A T E
I nvestment Incentive s
At the end of 1997 Botswana introduced a number of new
m e a s u res to attract fo reign inve s t m e n t . This includes
simplification of application pro c e d u res to obtain re s i d e n c e
p e r m i t s ,including the introduction of a three-month visitors’
p e r m i t ,a l l owing pro s p e c t i ve investors to develop their plans
while in the country, and a five - year residence permit
obtainable by actual inve s t o r s .
The Financial Assistance Policy (FA P ) :
The objective of the policy is to assist businesses engaged in
i m p o rt substitution, e x p o rt pro m o t i o n ,e m p l oyment cre a t i o n ,
selected “linking” services and tourism. Applications are
c o n s i d e red on a case-by-case basis. Large-scale mining and beef
p roduction operations are, h oweve r, not considered for this
type of assistance. The value of the grants is diffe rentiated in
a c c o rdance with the size of the business. T h ree separate grants
for medium or large scale projects are av a i l a b l e :
– C apital grant: This is intended to support the purchase of
f i xed assets (plant and machinery ) . If the project is 100
p e rcent citizen ow n e d ,BWP 1,500 (USD 420) is granted fo r
each job cre a t e d .If the project is owned by non-citizens or is
a joint ve n t u re, the amount is BWP 1,000 (USD295) per job
c re a t e d .
– Training grant: This part i a l ly covers 50 percent off-the-job
training costs incurred over the first five years of the pro j e c t ,
including the costs of tuition, b o a rd and lodging, t r ave l ,
materials and wages. The value of the grant is tied to
i m p rovements in pro d u c t i v i t y.
– Unskilled labour grant:This is a partial reimbursement of the
wages paid to unskilled employees over the first five years of
the pro j e c t . 50 percent of wages paid during the first two
years are re i m b u r s e d ,declining to 20 percent in the fifth ye a r.
Applicants should allow for a waiting period of about thre e
m o n t h s . FAP grants are tax-fre e.
E x p o rt Incentive s
P roduction for the export market is encouraged, with the
fo l l owing export incentives in place:
– Duty drawback facility in the pro c u rement of raw materials
needed for the production of exportable merc h a n d i s e.
– No surcharge (sales tax) on the importation of machinery
and equipment re q u i red in the production for export s .
– A Bureau of Standards has been established to help facilitate
e x p o rters obtaining quality and standards certificates and also
the receiving of advice on maintaining high quality.
– The Botswana Export Credit Guarantee Company has been
established with assistance from the Botswana Deve l o p m e n t
Corporation to add ress the pre- and post-shipment cre d i t
p roblems faced by export e r s .
– G overnment maintains stable competitive real exchange and
wage rates in order to enable manu f a c t u re r s / e x p o rters to be
c o m p e t i t i ve in the international marke t s .
– “Buy Botswana” is a gove r n m e n t - d r i ven campaign to enhance
the competitiveness of manu f a c t u rers and exporters so as to
i n c rease the share of the domestic market of their pro d u c t s
Ta x a t i o n
C o m p a ny taxation
– 15 percent for manufacturing companies and 25 percent fo r
n o n - m a nufacturing companies. C apital gain is included in the
definition of taxable income.
– A l l owances on capital (100 percent of cost), plant and
m a c h i n e ry (10-25 perc e n t ) , and buildings (25 percent for a
n ew building, and a further BWP5,000 for prov i d i n g
accommodation for employe e s ) .
– An employer can claim a deduction of 200 percent of the cost
of training of employe e s , if the training is ap p roved by the
C o m m i s s i o n e r.
– Withholding tax: 15 percent on dividends paid to re s i d e n t s
and non-re s i d e n t s ,and 15 percent on interest paid to nonresidents
only.
– C o m m e rcial royalties and management and consultancy fe e s :
15 percent tax to non-re s i d e n t s .
– The top marginal rate for resident and non-re s i d e n t
individuals is 25 perc e n t .The top rate is applicable for income
g reater than BWP 60,000.
– C apital gains and benefits are taxe d ,and a capital transfer tax
is also lev i e d .
– B o t swana has double taxation agreements with the United
K i n g d o m ,South A f r i c a ,S we d e n ,and Mauritius.
Sales tax
– A general sales tax of 10 percent is imposed, with some
p roducts being exe m p t .
– Some items (such as alcoholic beverages) are taxed at a
higher rate.
I nvestment Promotion A ge n c i e s
The Trade and Investment Promotion Agency (TIPA) was
established in 1984 under the auspices of the Ministry of
C o m m e rce and Industry. T I PA encourages potential inve s t o r s
t h rough the dissemination of information and the provision of
a d v i c e,and organises and participates in various trade affairs and
i nvestment missions, p roduces promotional material and liaises
with potential inve s t o r s .
T I PA is curre n t ly undergoing a rationalisation pro c e s s , w h i c h
should culminate in the formation of a parastatal to be called the
B o t swana Export Development and Investment A u t h o r i t y. T h e
n ew organisation will be fully autonomous and will be
responsible for export and investment pro m o t i o n ,and will also
act as a one-stop-centre for pre-and post-investor serv i c e.
Other inve s t m e n t - s u p p o rt institutions include the Botsw a n a
D evelopment Corporation whose prime focus is, inter alia, t h e
p reparation of project feasibility studies, p rovision of long-term
loans and equity participation.The Botswana Confederation of
C o m m e rc e, I n d u s t ry and Manpower provides advisory serv i c e s
to its members in addition to re p resenting the interests of
e m p l oyees pertaining to industrial and commercial issues.
I nvestment Code
T h e re is no legislation in Botswana that deals specifically with
i nve s t m e n t . Regulations governing investment are contained,
among others, in the Companies A c t , the Factories A c t , t h e
E m p l oyment Act and the Income Tax A c t .
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