Due to the country’s small population and low supply of skilled workers, Botswana does not have enough experienced managers and technical experts to run many of the companies that would otherwise invest in the country.
A free trade agreement between the 16 SADC member states and the simplification of laws, regulations, and procedures would reposition Botswana as a transportation and logistics hub, the center of a 277-million-person free trade zone. However, the slow pace of negotiations within the SADC region has delayed trade liberalization.
Market challenges include regulatory constraints in certain sectors that have little or no public protection function, excessive red tape relating to licenses and permits, limited access to finance, expensive and poor performing internet, poor customer service, and low worker productivity. Some private sector entities report challenges obtaining work permits for foreign-origin skilled labor they seek to employ in Botswana. The government’s increasing number of state-owned enterprises (SOE) and market holdings crowd out the private sector. The GoB has implemented new programs to address each of these areas in line with IMF recommendations, but results have not yet materialized. Privatization plans for several SOEs have stalled.
Challenges specific to value addition in the minerals industry are the cost of manufacturing, a lack of project financing, and restrictions on the volumes of mineral output (copper and sometimes diamonds).
Botswana law restricts 35 service sectors to Botswana citizens. The Ministry of Trade and Industry has historically granted exceptions for large foreign-owned chain stores, but since 2016 it has only granted approval in cases where a localization agreement was reached with the applicant company. Botswana is currently in the process of implementing a Citizens Economic Empowerment (CEE) law, which will require foreign companies to outsource at least 50 percent of their services and projects to citizen-owned companies.
A recently installed Public Procurement Act, in placed since April 2022, comes with new procurement methods and processes that Botswana believes will be more conducive to international companies, including U.S. companies. The government, however, continues to put more procurement preferences for citizen owned companies. At the GoB’s urging, some private companies in Botswana also use local preferences in procurement.
Business decisions are generally slow in Botswana, sometimes taking months or even years, and risk tolerance is low.