Africa is emerging as an attractive investment destination and a key market for goods and services. Southern Africa in particular changed significantly in the last decade, as debt levels fell, the number of democratic and politically stable countries increased, and strong measures were taken to crackdown on corruption.
A competitive business environment
Through successive national development plans, Botswana has endeavored to enhance the competitiveness of its business environment with attractive domestic and foreign direct investment initiatives aimed toward stimulating investment and expanding the country’s industrial base. The investment strategy also aims to liberalize the economy to strengthen the functioning of markets and promote the emergence of a dynamic private sector for the country to participate competitively in regional and international markets.
Within the framework of the national investment strategy, the Botswana International Financial Services Center (IFSC) was created whose mandate is to determine and develop the country as a world-class center, taking advantage of the increasing emphasis placed thereon. in trade between developing countries (South-South) and supply a good range of monetary and business services to its clients in other countries. The IFSC focuses on international companies, international funds, banks and insurance companies, outsourcing processes, and telecentres.
Botswana is within the middle of 15 member countries of the Southern African Development Community (SADC) that gives cost-effective access for businesses to neighboring countries, including South Africa. Botswana’s tax rates are rock bottom in southern Africa.
A multinational corporation accredited by the IFSC to try to do business across borders is subject to a 15% tax and exempt from tax on dividends, interest, management fees, and license fees it pays to residents abroad. IFSC-accredited companies also are exempt from capital gains tax and VAT is zero percent.
Botswana is aggressively expanding its Double Taxation Treaties (DTT) to extend its appeal. Any IFSC-accredited company that pays taxes during a jurisdiction with which Botswana has not yet concluded a DTT will enjoy a decrease of up to fifteen of the entire purchased that idea .
International benchmark legislation is at a complicated stage to position Botswana as a number one host jurisdiction for contemporary business structures like trusts, limited partnerships, indebtedness companies, and captive companies.
The IFSC assesses applicants and should provide them with certain internationally competitive tax incentives to enable them to expand their business footprint across Africa.
IFSC-accredited multinationals (many with regional operations and a few across the continent) include:
- ABN Amro relocating its regional diamond industry financing operations from South Africa.
- Banc ABC, African bank, a pacesetter in commercial banking
- African Alliance International, a fund management company and
- Vantage Mezzanine Fund, a mezzanine financing company that invests in opportunities throughout Africa.
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Island View with operations worth US $. 60 million during a shopping mall, an office park, and a conference house in Dar es Salaam, Tanzania, financed by capital from Botswana company registration and other international sources.
Letshego may be a well-established pan-African company listed on the Botswana stock market and offers microcredits there, also as Mozambique, Namibia, Swaziland, Tanzania, Uganda, and Zambia.
Bourse Africa will operate in commodities and derivative exchanges to initially commercialize corn, cocoa, gold, and petroleum produced in Africa. a rise in trade between African countries, also as between Africa and international markets (at more remunerative prices), is predicted, stimulated by the introduction of price discovery.
The need to seek out capital to finance regional operations and inadequate regional regulatory frameworks still hinder the expansion of cross-border trade.
Africa’s infrastructure development will still be a key investment opportunity, as will other sectors like telecommunications and, especially , the mobile sector. the increase of the African bourgeoisie will broaden the buyer base and supply for growing demand and market opportunities in infrastructure development.
The small size of most regional economies and bureaucratic obstacles to trade will slow growth within the short term. it’s hoped that more micro-level initiatives, like the IFSC, will stimulate governments to accelerate the creation of true access to regional markets for trade goods and services. during this regard, we hope to ascertain more African multinationals grow that use IFSC’s services to multiply their growth possibilities.