Botswana Attracts SA Companies

A host of SA companies are moving administration functions of their African operations to Botswana's International Financial Services Centre (IFSC).

So far, South African domiciled companies; Standard Bank's African Banking Group, Metcash Africa, Brait's African Alliance fund managers, Zimbabwe's Econet Wireless and Wilderness Safaris, have all moved their administration and back office functions across and take advantage of the incentives offered by the IFSC.

The IFSC is Botswana's two-year old effort at becoming a financial services hub for foreign investors who want to run their Pan-African operations.

Metcash Africa's Financial Director, Steven Levinson, told Moneyweb, "There have definitely been good benefits into moving our African division from Johannesburg to Gaborone 18 months ago. Besides the tax benefits and no exchange control, Gaborone's growing financial community could become a source of capital for expansion should Metcash Africa ever require it." In Metcash's case, the African operation's head office is now in Botswana.

In total, the IFSC has already approved 18 license applications, 11 of which are now operational.

Botswana is a nation that grew rich on its diamond wealth soon after its independence in 1966 and has been able to generate an economic growth rate above 9% over the last three decades. The country, however, now seeks alternative forms of economic activity to further grow its economy and make it less dependent on gemstones.

The IFSC offers foreign investors a 15% corporate tax rate that is guaranteed until June 2020. Other benefits include exemption from withholding taxes, provision of credits for withholding taxes levied in foreign jurisdictions, access to Botswana's Double Taxation Treaty network and no foreign exchange or capital controls - which have been abolished since 1999.

IFSC CEO, Alan Boshwaen, said at a presentation in Johannesburg on Wednesday (10 September), "The main aim is to bring in back office administration, treasury and captive insurance and reinsurance activities to the country." Boshwaen also said that the success of the IFSC would turn Gaborone into the most attractive financial services hub for foreign companies operating on the African continent.

The regulatory framework for the IFSC allows the Bank of Botswana to fast track applications, but substantive business plans have to be presented said Boshwaen. He also said that this alone will show that the IFSC will not be seen as an offshore banking centre as the benefits are aimed at companies.

Another driver behind the development of the IFSC is the skills and technology transfer to Botswana's citizens.

source - Steven Jardim, Moneyweb