While it was credited for its political stability and low tax rates, Botswana has been warned to attend to serious impediments to doing business, among them limited access to credit, poor contract enforceability and cumbersome bureaucratic procedures. These stumbling blocks increase market entry costs and have repeatedly dented the country’s international business ranking as a preferred trade and investment destination.
Overall, Botswana scored 55.7 points in the Trade and Investment Risks Index, placing it fourth in the region after Seychelles and 65th in the world. The index, which is conducted every ten years, hails Botswana as a relatively open country for economic activity due to its market-oriented economy and stable political situation. It further goes on to highlight other benefits for investing in Botswana, among them a relatively open economy, attractive tax regulations and incentives for foreign investment.
“Botswana offers generous financial incentives for foreign investors in the shape of tax breaks, low tax rates (corporate tax is 22%), and opportunities for public-private partnerships,” reads the report. “In addition, prudent financial planning has limited government debt and boosted investment in infrastructure. But reliance on imports and exports for growth increases the country’s exposure to exogenous shocks.”
On the upside, growth figures are expected to be positive in the medium term due to increased domestic and foreign demand. However, low bank branch penetration rates inhibit participation in the debt market which reduces the demand for expensive items and imports. The capital market also provides limited liquidity for investors, thereby increasing the difficulty in raising capital. Overall, Botswana’s financial institutions suffer from issues of scale rather than structural underdevelopment, and are expected to improve with growth over the medium-long term.
The Trade and Investment Risks Index awarded Botswana a score of 47.1 for economic openness, placing it number 10 in the region and number 92 in the world. The Index also revealed that Botswana is a mature democracy with established rule of law and the lowest rates of corruption in Africa.
“Government intervention is particularly pronounced in terms of timely and costly bureaucratic procedures related to paying tax and opening a business,” read the report.