The Africa Investor praises Botswana, calling it "the gem of Southern Africa"

A profile on one of Africa’s shining examples of good governance by the Botswana Export Development and Investment Authority

August 2005

Brief history and location

Gaining independence in 1966 and subsequently discovering diamonds in the Kalahari Desert meant a true transformation for what was once one of the poorest countries
in the world. Good governance and wise use of revenues generated by the diamond industry made Botswana the politically stable and economically sound country it is today. Some of the factors that have contributed to Botswana's reputation of being Africa's most competitive
investment hub are its excellent infrastructure, well educated (and English speaking) labour force, attractive tax system, lack of foreign exchange controls and access to many markets through various trade agreements.

Botswana, centrally located in Southern Africa, is bordered by Namibia, Zambia and Angola to the north and west, Zimbabwe to the east and South Africa to the south. Its government, based in the capital Gaborone, is a parliamentary republic founded on multiparty democracy, the current president being His Excellency Mr Festus Mogae.

Diamond mining the largest industry

In addition to its diamond mines, Botswana has extensive coal reserves, and potash, copper and nickel are also mined. There has been a recent discovery of major natural gas deposits, the exploitation of which is currently being investigated. A liberalisation process of the mining industry is currently in full swing and investment opportunities are aplenty.

Diamonds contribute to about a third of the GDP. The Government of Botswana, recognising the dominant role that the mineral sector plays in the economy, is proactively seeking ways to diversify the economy and to encourage public-private partnerships. Botswana's growing manufacturing sector has already attracted investment in truck assembly, automotive components, electronic/electrical products, textiles and leather goods. The service industry
boasts a well developed financial sector (spearheaded by the International Financial Services Centre), a well connected telecoms industry, and tourism is thriving.

The government has identified a number of sectors for further development, and investment promotion is focused on, but not limited to, the following industries: ICT, tourism, financial services, garments and textiles, the establishment of a modern tannery, diamond cutting and polishing, jewellery and the manufacture of glass.

In order to diversify and boost Botswana's economy, the Government set up the Botswana Export Development and Investment Authority (BEDIA) in 1997. BEDIA is an autonomous private sector led organisation, its main objective being the facilitation of the establishment of export-oriented enterprises and selected services, which will result in economic growth and the creation of sustained employment opportunities. BEDIA acts as the first point of contact for potential investors, offering them assistance throughout the decision making process and beyond. The Authority provides information for research purposes, organises fact finding missions, provides factory shells, and assists in the clearing of work-permits and other formalities. The professional service BEDIA provides to investors has earned it the reputation of 'the friend of the investor'.

Botswana is signatory to a number of trade agreements, allowing its manufactured products to enter a number of markets duty and/or quota free. This situation makes Botswana a perfect springboard for export activities: The Cotonou Agreement provides duty and quota
free access to the European Union.

The Southern African Customs Union (SACU), allows duty free access of goods and services to South Africa, Namibia, Lesotho and Swaziland. The Africa Growth and Opportunity Act offers new opportunities for duty free and quota free access to the US market The Southern African Development Community (SADC) Trade Protocol allows preferential access to 14 Southern African countries, with a total of 200 million consumers

A global perspective

Putting Botswana in a global economic perspective, it has come out on top among African economies, according to the World Economic Forum's 2003-2004 Global Competitiveness Report. Apart from being the most competitive African country, Botswana was also placed ahead of a number of European, Asian and Latin American countries. It furthermore received top ranking for good governance in Africa, according to the World Economic Forum's Public Institutions Index. The Index quantifies such variables as the perceived degree of corruption and the rule of contracts and law, as revealed in responses to a survey of national business leaders on the quality of the business environment of the countries in which they operate. The annual worldwide corruption perception study carried out by Transparency International consistently ranks Botswana among the world's least corrupt societies.

Some of the key factors that make up Botswana's exceptionally conducive and unique investment climate are:

The most politically stable country on the African continent.
Stable macro-economic environmental and economic growth.
Corporate tax -15% for manufacturing.
Zero per cent corporate tax through Development Approval Order.
The most transparent country in the African continent according to Transparency International. There is zero tolerance for corruption
An educated English speaking labour force, which is readily trainable.
No foreign exchange controls hence free repatriation of profits, dividends and capital
Low personal income tax, the highest bracket being only 25%
Industrial relations are good and trade unions are not militant
Duty free and quota free access to the EU market through the Cotonou Agreement.
Duty free access to South Africa, Namibia, Lesotho and Swaziland according to SACU
The Africa Growth and Opportunity Act of USA offers new opportunities for duty free and quota free access to the US market.
The SADC Trade Protocol allows preferential access to the markets of 14 Southern African countries