Build it and they will come

The recent signing of a landmark tax deal between Botswana and the Organisation for Economic Co-operation and Development (OECD) puts the cherry on top of multi-sectoral efforts to enhance the country’s investment climate.

For years, the country has been dogged by a tax haven status prompted by international perceptions of weaknesses in local tax administration, laws and institutions. In an age where the free exchange of tax information and high standards of administration are indispensable pre-requisites for engaging with the global investment community, the tax haven label has indeed cost the country greatly.

Botswana has been on the European Union’s tax greylist since December 2017 and has remained there through 11 updates that have resulted in other nations being removed and others added. The adverse listing, due largely to the EU’s unhappiness with Botswana’s tax regime and exchange of information, is seen as a disincentive to both foreign investment as well as local companies’ ability to trade with the world as the country is seen as a tax avoidance and evasion haven. The new deal signed in Paris and known officially as the Convention on Mutual Administrative Assistance in Tax Matters (MAAC), signals that the EU and 140 other members of the MAAC acknowledge that Botswana has addressed areas of concern around its tax regime. Authorities expect that the greylisting will be lifted “within months” putting a final rose on the bouquet of incentives Botswana offers to investors in return for their capital and willingness to carry risk. ndeed, since the greylisting, investment promotion agencies such as the BITC, our diplomats in various countries, numerous business lobby groups and individual companies have faced difficulties selling the country’s investment opportunities.

Investors ask hard questions during engagements. Over and above the actual investment opportunity, they need to know that a country has both domestic laws and institutions protecting their interests as well as international covenants guaranteeing them.

We applaud officials at the Ministry of Finance and Economic Development, the Botswana Unified Revenue Service as well as Members of Parliament for aggressively pushing through the policies and statutes needed to push the country towards the lifting of the greylisting. However, while the removal from greylisting is a significant milestone to celebrate, it is not a destination but a part of a longer journey to regaining Botswana’s former position as the Number One investment address in Africa. As acknowledged by the BURS, gaps still exist in our tax regime with sophisticated, creative multi-national corporations constantly developing workarounds that ultimately short-change Batswana, while casting a cloud over the country’s hard-earned tax reputation. The broader investment climate also continues to suffer from perennial weaknesses noted each year by the Global Competitiveness and Doing Business reports. These are well known to authorities and corporates and do not require repeating, save to say the pace of our reforms has lagged behind other aggressive countries within the continent. Even as the focus is on battling Covid-19, authorities would do well to remember that investor capital and its attendant job and opportunity creation, are waiting in the wings looking for the best address to call home.