25 May, 2007
Springboard to SADC
Today's investors want access to regional markets. Alan Boshwaen, CEO of Botswana's International Financial Services Centre (IFSC) explains why his is the ideal gateway
The proud owner of Africa’s only Standard and Poor’s ‘A’-grade sovereign rating, Botswana is southern Africa’s hidden gem. Famed for its well managed economy and strong finances, it has powered to middleincome country status and in 2006 boasted per capita GDP of $11,200 and income of US $5,900. Though over one third of total GDP still stems from diamonds, Botswana is working to diversify its economy through the finance, tourism and high-tech industries.
The IFSC has launched new services for insurance companies – why?
We realised there was a gap in the market for a multi-country insurance product, one that is domiciled in Africa but can be taken into a number of countries. Up to eighteen months ago, investors were only interested in a few large economies, p r i m a r i l y South Africa and maybe Nigeria. We are now s e e i n g companies trying to understand how to navigate multicountry environments and set up their insurance products and services to respond to all the countries they operate in. Botswana has set up specific legislation and regulatory framework to respond to this and the government enacted the International Insurance Act in March 2007. We took advice from leading reinsurance and captive insurance companies about what to include, and believe it is businessfriendly. Our goal is to make sure people understand the possibilities for creating insurance, reinsurance and captive insurance companies through the IFSC to service Botswana and our region.
What other investment trends are BIFSC seeing and responding to?
International investors are showing much greater interest in domiciling and managing investment funds into Africa. Over the last six months there have been an encouraging number of serious enquiries from people wanting to domicile international investment funds in Botswana and invest across border into various countries. We expect to bring a US $200 million Africa Real Estate Fund on board in the next three to four months. This will have the IFC as a lead investor and will invest in all types of real estate in the SADC region. We are also finalising a deal with the Botswana-Africa Mining Fund, which is using seed capital from Botswana’s pension funds to create a fund giving international investors exposure to Africa’s booming commodities’ sector.
What makes Botswana well positioned to be a regional financial hub?
Botswana has several unique advantages for investors. It has leading-edge legislation, and a pool of local capital looking for good long-term investment opportunities to join with international investors. There are no exchange controls, so funds can be domiciled in hard currency, and there is the subsidiary issue of Botswana’s risk profile – it is a low risk destination. Our tax incentives are very competitive, but we shied away from creating a tax haven or offshore banking model as it doesn’t have underlying activity and sustainability. The IFSC’s main objective is to support regional financial intermediation. We want to take on more sustainable long-term projects integrated with the requirements of the region. Right now we are working on the WESTCOR project – a major regional power infrastructure project that will be domiciled in Botswana as an IFSC company. It is a power utility, a partnership between five national utilities including Eskom in South Africa and the Botswana Power Corporation.
What is the strategy to attract technology-focused investors to Botswana?
These investors require the rapid adoption of new technology, which has required a significant deregulation of the telecoms industry in Botswana. This began in September 2006 and the licensing framework is now under way so mobile phone companies, internet service providers and the fixed line operator are facing a whole new competitive game. We are optimistic that the deregulation will be significant and compare favourably to our neighbours including South Africa. We are also constructing a 57-hectare science, technology and business park called the Botswana Innovation Hub. This will pool the infrastructure provision and support to these high tech industries, to give them a soft landing when locating to Botswana. It will be a development zone and the IFSC tax framework will apply to all accredited companies, particularly if the company is working multi-country or in a regional setting in Africa.
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