Botswana Courts SA Firms

Botswana is keen to cash in on an agreement, which determines that SA companies are not taxed on earnings of subsidiaries in Botswana, even though the tax rate of Botswana is lower.

Botswana incorporated it in an incentive package, which should be attractive to SA companies doing business in Africa.

Mr Brian Alexander, managing director of Andisa Securities in Gaberone says the headquarters, for example, of the African division of a South African retail chain can act as a conduit through which earnings from Africa can be remitted to South Africa.

The earnings would be taxed at Botswana's rate of 25%.

Botswana can offer tax credits in all cases where the rate in other African countries is higher than 25%.

These earnings for SA companies will not be subject to any further taxation in South Africa.

Botswana also offers a special tax rate of 15% for financial institutions doing business in other African countries. The rate is valid until 2020.

These schemes are part of an attempt to reduce the dependence of the Botswana economy on diamonds.

The country has set itself the tough target of trebling GDP per capital by 2016 and to eliminate unemployment.

With a GDP per capita of $3 000, Botswana is already the richest nation in Africa but the country wants to make a plan because the production of diamonds has reached a plateau and the growth rate of the economy has started to slow.

The World Bank reports that economic growth in Boswana was 6% in 2000, 5,3% in 2001 and 3,1% in 2002.

Continued growth would have to depend on non-diamond activities, said Baledzi Goalathe, Minister of Finance. He said growth of 8% pa is needed to meet the 2016 target.

Botswana looks like a dream country for investors. Company tax is only 25% and secondary tax on companies does not exist.

Company tax and STC in South Africa bring payments to the tax man up to 42%.

There is no exchange control in Botswana.

Botswana is the least corrupt country in Africa.

And this neighbour has the highest credit rating in all Africa.

There is no requirement that investors establish empowerment partnerships.

There is no required affirmative action and no employment quotas. The government also runs a fast track process for the issuance of visas for foreign experts. Botswana wishes to accelerate growth by developing tourism and financial services

The government is training hundreds of people for call centres in anticipation of financial institutions' offering services from Botswana.

source - Sake Rapport