PROVISION of concessionary financial resources, the opening up of markets to African exports, and improved commodity prices are imperative to the rekindling of African economic growth. The kind of economic growth sougth by Botswana cannot be stimulated by local entreprenuers alone and the government subsequently sipports the activities of all investors who wish to participate in its national development. Botswana's political and social stability add to the advantages which attract foreign as well as local investors.
The nation's financial assets and subtantial foreign exchange reserves create a setting in which financial, business and information services are able to flourish. Several fledgling enterprises have been established in these areas and their international relationships are supported by reliable telecommunication services. In promoting economic diversification and exporrt orientation of domestic enterprises, the governement is able to pursue a libera; foreign exchange policy as psrt of its effort - this is achieved by sound monetary and fiscal policies, diminished regulation, favourable tax rates and a civil service that is responsive to private sector needs.
Total exports in 1993 showed a modest increase of 4,6 percent, while total imports showed approximately 6 percent in nominal terms. Growth in imports during the year reflected the general slowdown in economic activity in the country.
PROMOTION OF TRADE AND INVESTMENT
The Department of Trade and Investment Promotion (TIPA) of the Ministry of Commerce and Industry is a specialised agency established to provide information and asistance to investors and traders. Forming a liaison with relevant government, parastatal and business organisations, this department's activities include the organisation of trade and investment promotion missions to other countries and hosting of these from other countries, as well as the planning and launching of promotional campaigns, spcialised fairs and exhibitions for the support of local industries.
An international investment promotion conference was held in 1993, the aim being to bring together potential sectors; since then, local entreprenuers have reported that there has been active consultation between them and potential foreign investors, with the possibility that three projects in tourism, manuacturing and agro-industry will sonn be implemented.
EXPORT MARKET DEVELOPMENT
Botswana products have free access to the South African, Lesotho, Swaziland and Namibian markets through the customs union agreement, with growth of demand in these regional markets expected to accelerate. With the exception of a few items, all trade between Botswana and other member countries is free from customs and sales duties.
At the end of 1993 the Governemnt of Botswana completed the formalities for joining the General Agreement on Tariffs and Trade (GATT). Such membership provides improved and more dependable access for Botswana exports to the major markets of the world. Membership also permits Botswana to joins the Worl Trade Organisarion (WTO), signalling to the rest of the world that botswana is prepared to accept the obligations for trade, investment, intellectual property and services that may be agreed under the Gatt or WTO, a status also making Botswana a more attrative location for firms to invest and serve the regional market.
With duty-free access to the EC makets under the Lome IV agreement and to memebr countries of the Souther African Development Community, Botswana is also a member of the Organisation of African Unity and an observer to the Preferential Trade Area. Other trade agreements include those with the People's Republic of China, Czechoslovakia, Korea, Romania, the Commonwealth of Independent States, Yugoslavia and Zambia, as well as those with Malawi and Zimbabwe.
In order to assist manufacturers in the development of their export products, a national export development framework has been formulated which embodies numerous related projects, such as studies on export incentives and financing, training in export management and an information consultancy. Data on Markets and market channels in selected sectors is provided.
Various publications, including a paper on Botswana's industrial development policy, are produced in order to facilitate local and forein inveestment. (These are available on enquiry through TIPA). As full participants in Botswana economic life who identify with the country's development aspirations and its national planning objectives, foreign investors are expected to take a logn-term view of their contribution to Botswana, actively sharing the commitment to maintenance of a democratic, open and non-racial society, investors are also encouraged to offer shareholdingsin their ventures to citizens.
INVESTMENT INCENTIVES
In enchancing the competitiveness of the country's economy, the Financial Assistance Policy (FAP) continues to be an important instrument. Throught FAP grants, enterprises have been established to produce goods at copetitive prices for export markets. Assistance includes tax holidays, unskilled labour and training grants, and capital and sales augmentation grants, for a period of five years. Information of the incentives offered under FAP schemes for viable projects in the agricultural, industrial and mining sectors may be obtained from the relevant minitries.
An incentive in the form of a price advantage over goods of foreign manufacturersis provided by the Local Preference Scheme to Botswana manufacturers who sell to the government, local authorities and parastatals.
In cases where market demand is limited, resulting in a marginal investment projection, an investor may aplly for an exclusive license for a specific area.
Application may be made for a special incentives package for projects located in Selebi-Phikwe which create employment for Botswana citizens and in which the output is exported outside the Southern African customs region. The package includes a capital grant towards the fixed cost of the project, a step-down re-imbursement of unskilled labour costs, and augmentation and training grants. A nominal rate of 15 percent corporate tax and exemption from witholding tax on dividends from after-tax profits are also applied.
PRIVATE SECTOR EMPLOYERS' ORGANISATIONS
It is government's policy to encourage the formation of trade unions under the Trade Unions Act - the Botswana Federation of Trade Unions is the official coordinating body of such activities. The Botswana Confederation of Commerce, Industry and Manpower provides a useful advisory service for its more than 500 members as well as representing the interests of employers on a wide range of industrial issues. Furhtermore, at district labour offics throughout the country there are employment service units.
MANUFACTURING AND TRADING LICENCES
Industrial licences are issued by the Industrial Affairs Department of the Minitry of Commerce and Industry, with applicants encouraged to discuss their intentions with TIPA. All types of manufacturing activities are governed under the Industrial Development Act 1988. The Trade and Liqour Act 1986 categories different trading activities for which specific licences are issued, obtainable from the national or local licensing authorities.
EXCHANGE CONTROLS
Botswana continues to adhere to a policy of progressive liberalisation and simplication of exchange controls. The main thrust of reforms to the tax system has been aimed at establishing a better balance between direct and indirect taxes in order to attract foreign investment. Changes have involved upward adjustment in the limits on extremely remittable allowances for both citizen and non-citizen companies as well as individuals, with regards to external payments for such things as foreign travel, education, medical treatment and variuos sundry transactions. The government also continuies to review the existing exchange control regulations, particularly those relating to capital account transactions.
TAXATION
The principal law on taxation in Botswana is the Income Tax Act which incorporates taxation of capital gains from sales. Specifically, the rate of company income tax is 25 percent, while the additional company tax rate is 10 percent, with the effective company tax rate thus 35 percent.
Businesses may deduct annual allowances at rates ranging from 10 percent to 25 percent on plant and machinery and 2,5 percent on industrial and commercial buildings. An initial allowance of 25 percent is also avilable for industrial buildings and hotels. The Commissioner of Taxes is to be advised of all construction contracts by non-residents which are in excess of P5000-payments under such contracts are subject to a witholding tax if so directed, and the non-resident contractor may apply for a variation of the 25 percent rate by submitting a projected profit-and-loss account of the contract. The Government of Botswana has a double taxation agreements with the United Kingdom, South Africa and Sweden - deduction of such witholding tax from payments of magement or consulting fees may be subject to the intervantion of one of these agreements.
Additional tax relief to business may be so ordered if such business can promote the development of Botswana's economy, and the following are given consideration:
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