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A New International Financial Service Center Hub for Africa

Botswana has a long history of political and macroeconomic stability, in fact, the most stable in Africa. It has averaged annual growth rates of 9% since independence in 1966. It has a well developed and effective legal system, strong foreign exchange reserves, and the best credit ratings in the region for the last 7 consecutive years from both Moody's and Standard and Poor's. It is no wonder then that Botswana is set to become the preferred cross-border financial services center of Africa.

With this in mind, the Botswana government formed the Botswana International Financial Services Centre (IFSC) in 2002 and mandated it to create an active cross-border financial services center in the country. In addition, the government has enacted legislation to provide the tax incentives, approval processes, and regulatory structures necessary to sustain it. Since opening its doors in 2003, IFSC has successfully accredited 39 companies; 19 of these are fully operational and 9 more companies are beginning operations this year, with the trend expected to continue. The focus sectors include investment funds management, banking services, international insurance, business process outsourcing, and call centers.

Botswana's IFSC provides a niche offering to companies who see Africa as a growing market; this is facilitated by the fact that the IFSC framework was structured within internationally accepted regulatory standards, as noted by Serwalo S.G. Tumelo, Permanent Secretary of the Ministry of Finance and Development Planning. Some of the incentives offered to companies choosing to establish themselves in Botswana under the IFSC include a guaranteed corporate tax rate of 15% until 2020, exemption from withholding taxes in Botswana, credits for withholding taxes in other jurisdictions, and access to Botswana's expanding double-taxation treaty network.

In a recent interview, the CEO of the IFSC, Alan Boshwaen, commented on the competitive advantages of Botswana, "We are central in the mainland and next to some of the largest growing economies. This is where our key advantage is. If you want access to these other countries, it's easier to support a multi-country policy from Botswana than say from the UK or Mauritius."

Botswana has no foreign exchange controls and, as Permanent Secretary Tumelo observed, the domestic financial sector including banks, insurance companies, and the stock market is "thriving." In addition, over the past 5 years, the Botswana government budget on average has been in surplus due to a deliberate policy to maintain a balanced budget in the medium term. This ensures that any windfall in revenue will not lead to a huge increase in spending for that particular year. The government's strong financial position has also resulted in an accumulation of foreign exchange reserves. As of November 2007, these amounted to USD 9.2 billion, or the equivalent of 28 months of imports of goods and services.

Several years ago, the government started to issue bonds, mainly to develop the capital market, and it plans to support the development of this market with regular bond issuance programs. The financial sector has been undergoing periodic reforms to strengthen the operating environment. In this regard, the recommendations of the 2007 IMF-Word Bank Financial Sector Assessment of Botswana will be implemented to ensure a formal financial stability framework for monitoring and responding to system-wide macro-financial risks, and the strengthening of regulation and supervision of the pension sector and other non-bank financial institutions, as noted by Permanent Secretary Tumelo.

Also over the past several years, there has been a strong push to attract insurance companies. In July 2007, the government published regulations to underpin the International Insurance Act of 2005, thus making Botswana an attractive location from which to provide a wide range of insurance services to non-residents in currencies other than the pula. The introduction of these regulations is also allowing the IFSC to attract companies interested in setting up reinsurance or captive insurance businesses in Botswana.

The IFSC, according to Alan Boshwaen, is now broadening its activity base through call centers for companies based outside of Botswana who want to use Botswana and the IFSC as a springboard into Africa, particularly to the north of Botswana, in commercial areas beyond financial services. Two local call-centers are already gearing up to work internationally. Current focus is on companies in South Africa as well as subsidiaries of international operations. One of the first to sign up is Micro-Provident Africa, a retail lending company that is partnered with the International Financial Corporation of the World Bank.

All of these activities in the well-developed financial sector combined with Botswana's central location, educated workforce, political and economic stability, and tranquil natural environment are causing institutions to look closely at Botswana for regional offices and as an international financial services center hub.

Botswana International Financial Services Center (IFSC) 


+267 360 5000 

Permanent Secretary Serwalo S.G. Tumelo 

Ministry of Finance and Development Planning 

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