Making Botswana an investment gateway to Africa

Project name:
Supporting the development of Botswana as an international financial services centre

Service:
Market analysis and positioning

Sector:
Financial services

Area of Expertise:
Capital markets

Client:
Global asset management company

Date:
2015 - 2016

Country:
Botswana


Channelling capital flows to Africa is essential for the continent’s development. International financial centres (IFCs) facilitate this and provide income and employment opportunities.

For this reason, Botswana established its International Financial Services Centre (IFSC) in 2003. The tax and regulatory incentives offered to investors were an important step towards developing an IFC, but Botswana faced stiff competition. The IFSC attracted only a handful of large companies compared with the size and gravitational pull of the incumbent financial centre in Africa, Mauritius.

Genesis partnered with a global asset management company to diagnose why the IFSC had not developed into a global financial hub and how to rectify this. We leveraged our understanding of how IFCs evolve – investors choose a location with a competitive and credible tax and regulatory offer and with a strong network of support services. 

These factors intersect to attract a critical mass of investors to the IFC. This creates a gravitational pull which attracts more investors and support services and establishes the IFC’s credibility, creating a virtuous cycle. 

To understand why most investors were choosing Mauritius over Botswana, we conducted extensive interviews with investors, tax lawyers, fiduciary service providers and policy-makers in South Africa and Botswana. The IFSC’s tax and regulatory offer was found to be less competitive than that of Mauritius. There was uncertainty regarding the treatment of investors and the guarantee of IFSC incentives. Botswana also lacked a large network of support services.

We identified that Botswana’s government had a choice: an opportunity to develop the IFSC into a global financial hub, but at significant costs. Achieving this will require more than matching Mauritius’s offer and making it credible – the IFSC will have to carve out a niche identity which establishes a distinct advantage over Mauritius. Choosing this path requires balancing the benefits of achieving true IFC status against the costs of establishing this distinct advantage. 

Genesis developed a roadmap detailing the steps Botswana required to match the Mauritius offer; establish this offer’s credibility, and leveraging Botswana’s proximity and ties to South Africa. The plan was presented to the president and his cabinet where the government affirmed its commitment to developing the IFSC. Botswana’s Investment and Trade Centre has adopted the roadmap.   

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