30 Jul 2020

Botswana is well positioned as a regional gateway for financial and capital flows into SADC and rest of Africa, Botswana Investment and Trade Centre (BITC) chief executive officer, Mr Keletsositse Olebile has said.

Briefing the media in Gaborone on Tuesday Mr Olebile said BITC through the International Financial Services Centre (IFSC) stood to attract foreign investments, citing that through the centre, Botswana could use its political stability and desirability to serve the rest of SADC and first world countries from home.

Mr Olebile said foreign investors seeking to extend their investments into Africa usually appointed companies that would give them an idea around the country’s demographics. He said this included whether it was ideal for them to set up support structures to be able to anchor the operating subsidiaries in other countries.

As an example, Mr Olebile stated that as companies’ setup shared services function in Botswana, occasionally there would be skills transfer on arranged terms or at a subsidiary level whereby the management fee would get paid to the operating structure in Botswana.

He said this would have the country benefiting from the revenues that were derived in a different jurisdiction whereas, absence of this management meant such revenues generated would not be collected.

He emphasised that on a different note the central operating structures in Botswana could be lending money to their subsidiaries elsewhere in the region either as debt or taking an equity stake. 

This, he said, would mean deploying capital to the operating subsidiary in another country in a form of debt while the return of investment would be the nominal amount expended with the agreed interest.

He said the dividend became income which would pay for expenses, procurement items in Botswana and even salaries for Batswana employees that would have been engaged.

All these scenarios  Mr Olebile described  as the essence of IFSC which he said was in the best interest of Botswana, a country that had been widely endorsed internationally as an ideal Financial and Business services Hub in Africa.

He stated that proposed reforms for the financial sector which included, the development of legislation and regulations to support banking holding companies, were underway to match global standards.

Meanwhile, Tax Consultant Mr Jonathan Hore announced that Botswana’s IFSC tax regime had a 15 per cent corporate tax rate which translated to one of the lowest corporate tax in SADC hence the potential to attract Foreign Direct Investment (FDI).

He added that Qualifying Foreign Participation (QFP) was also an incentive which attracted FDI as foreign dividends were not taxed.

He concluded that Non-deduction of Withholding Tax helped the IFSC entities to obtain the best of non-resident consultants and investors, who did not have to suffer Botswana Withholding Taxes.

He reiterated that dealing with IFSCs was more business-friendlier as compared to dealing with any other entity, which deducts withholding tax from payments due to non-residents. ENDS