ANNEX 1
BOTSWANASACU-Botswana WT/TPR/S/114/BWA
Page A1-51
CONTENTS
Page
I. THE ECONOMIC ENVIRONMENT 53
(1) M AIN FEATURES 53
(2) RECENT ECONOMIC DEVELOPMENTS 54
(i) Fiscal policies and public sector reforms 54(ii) Monetary and exchange rate policies 55
(3)
TRADE PERFORMANCE 57
(i) Trade in goods 57(ii) Trade in services 58
(4)
INVESTMENT PATTERNS 58
(5) OUTLOOK 59
II. TRADE AND INVESTMENT REGIMES 61
(1) P OLICY FORMULATION AND IMPLEMENTATION 61
(2) T RADE AGREEMENTS 63
(i) Bilateral agreements 64(ii) Other agreements 64
(3) I
NVESTMENT FRAMEWORK 65
(4) T RADE -RELATED TECHNICAL ASSISTANCE 67
(i) Implementation of WTO Agreements 67(ii) Trade negotiations 68(iii) Supply-side constraints and integration of trade into development strategies 69
III. TRADE POLICIES AND PRACTICES BY MEASURE 70
(1) O
VERVIEW 70
(2) M EASURES DIRECTLY AFFECTING IMPORTS 70
(i) Registration, and import duties and related measures 72(ii) Import prohibitions and licensing 72(iii) Standards and other technical requirements 73(iv) Government procurement 75(v) Local-content requirements 75
(vi) Other measures 75
(3) M
EASURES DIRECTLY AFFECTING EXPORTS 75
(i) Registration and taxes 75(ii) Export prohibitions, controls, and licensing 75(iii) Export subsidies, finance, and assistance 76
(4) M
EASURES AFFECTING PRODUCTION AND TRADE 77
(i) Incentives 77
(ii) Assistance for research and development 79(iii) State-owned enterprises and privatization 79(iv) Competition policy and price controls 80(v) Protection of intellectual property rights 81
IV. TRADE POLICIES BY SECTOR 84WT/TPR/S/114/BWA Trade Policy Review
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Page
(1) O VERVIEW 84
(2) P RIMARY SECTOR 85
(i) Agriculture, livestock, and forestry 85
(ii) Mining 89
(3) E NERGY 91
(i) Petroleum 91
(ii) Electricity 92
(4) M ANUFACTURING 93
(5) S ERVICES 94
(i) Communications 95(ii) Financial services 98(iii) Transport 101(iv) Tourism 102
REFERENCES 105
CHARTS
Page
IV. TRADE POLICIES BY SECTOR
IV.1 Sectoral composition of GDP, 1995/96 and 2000/01 85
TABLES
I. THE ECONOMIC ENVIRONMENT
I.1 Main economic and social indicators 53
I.2 Main macroeconomic trends, 1997-01 54
I.3 Exports by major commodity and destination, 1996 and 2001 57
I.4 Imports by commodity and source, 1996 and 2001 58I.5 Stock of foreign investment, by sector and source, end-2000 59
II. TRADE AND INVESTMENT REGIMES
II.1 Main trade-related legislation in Botswana, December 2002 63
II.2 Selected notifications to WTO, September 2002 63
IV. TRADE POLICIES BY SECTOR
IV.1 Mineral production, 1997-01 90
IV.2 Main financial services legislation 99SACU-Botswana WT/TPR/S/114/BWA
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I. THE ECONOMIC ENVIRONMENT
(1) MAIN FEATURES
1. The Republic of Botswana is located in sub-Saharan Africa and bordered by South Africa,
Zambia, Zimbabwe, and Namibia.  About half of its 1.68 million population (August 2001) live in
urban centres.
2. Botswana was a middle-ranking "medium human development" country in 2000.1  Impressive
economic performance since independence has raised GDP per head, estimated at almost US$3,000 in
2001, and promoted social development (Table I.1).  It has higher living standards on average than
other sub-Saharan African countries. Development has been driven mainly by a rich diamond mining
industry.  Mineral taxation has also enabled the Government to improve basic infrastructure, such as
transportation and telecommunication networks, and so cial services, such as education and health.
Table I.1
Main economic and social indicators
Land area 582,000 km2Urban share of population (2000) 49%
Population (August 2001) 1.68 million Nominal GDP at current market prices (2001) US$5.3 billion
Annual population growth (1980-93) 3.5% GDP per capita (2000/01) US$2,970
UN human development index (2000) GDP per capita annual growth rate (1995-01) 2.0%
- Overall ranking 126 Nominal GDP at constant 1993/94 prices (2001) P17.1 billion
- Category Medium human
developmentGDP shares (2000/01):
     Primary     Secondary     Tertiary37.4%
4.2%58.4%
- Ranking within category 73rdEnrolment ratio (net) in education (1998)
Life expectancy at birth (2000) 40.3 - primary 81%
Infant mortality rate per '000 (2000) 74 - secondary 57%
Adult literacy (2000) 77.2
Source : UNDP (2002), Human Development Report 2001;  and authorities of Botswana.
3. Since the mid-1990s, the HIV/AIDS pandemic has retarded Botswana’s economic and social
progress.  Its ranking on the UN human development index fell from a high of 71st in 1996 to 126th in
2000.  It has the world’s highest (and still rising) incidence rate of HIV/AIDs (38.8% in 2001), and
crucial social indicators have fallen drastically, e.g. life expectancy from 67 years in 1996 to 40 yearsin 2000.  The Government’s goal is for an "AIDS-free generation" by 2016.  Its comprehensive
programme is aimed at reducing new infections by 50% by 2010; an Anti-Retroviral Therapy
Programme was recently introduced.
2  Combating HIV/AIDS will have long-term budgetary
repercussions; the cost of treating it could rise from 5% now to over 10% of GDP by 2010.3
                                                     
1 UNDP (2002).
2 National AIDS Coordinating Agency (2001).  The current programme also aims to increase the rate of
access to basic, intermediate, and advanced care to 95% and to cut the impact of HIV/AIDS on the population
by 50%.
3 Mfunwa (2002).  See also BIDPA (2000).WT/TPR/S/114/BWA Trade Policy Review
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(2) RECENT ECONOMIC DEVELOPMENTS
4. Real GDP growth dipped to 4.1% in 1998, but had rebounded to 9.2% in 2000 (Table I.2).
Although diamonds are the main impetus to growth, non-mining activities, especially services,
maintained strong growth; 4% in 2000 and 6.0% in 2001.  Unemployment remains high.  However, it
fell from over 20% in the mid-1990s to 15.6% in 2000.  Formal employment grew by 4% in 2000 (8%
in the private sector), but slowed to 0.6% in 2001.
Table I.2
Main macroeconomic trends, 1997-01a
1997 1998 1999 2000 2001b
Real GDP growth (%) 8.1 4.1 8.1 9.2 1.2
   Non-mining private 7.3 7.8 6.2 4.0 6.0
Unemployment (%) 19.8 17.8 15.8 15.6 ..
   Formal employment growth (5) 6.1 6.4 2.1 4.0 0.6
Inflation (consumer prices, period average) 8.9 6.5 7.8 8.5 6.6
Money supply (M3) growth  (%) 19.9 34.5 28.9 -1.1 27.6
Bank credit growth (%) 5.4 56.1 41.4 17.7 10.7
Prime lending interest rate 14.0 14.0 14.8 15.8 15.8
Central government fiscal balance (% of GDP,
before grants)4.4 -6.7 5.8 8.9 -3.1
   Expenditure (% of GDP) 37.8 42.8 42.7 40.7 44.1
   Growth (%) 21.6 22.4 15.0 10.6 18.5
   Revenue (% of GDP) 42.3 36.2 49.0 49.8 41.0
   Growth 12.0 -7.3 55.8 18.0 -10.0
Balance of payments
   Trade balance (% of GDP) 17.2 1.6 15.5 16.8 12.6
   Current account (% of GDP) 13.9 4.1 12.2 10.2 7.4
   External reserves (months of imports, end-of-
year)28.8 28.2 31.2 32.6 32.1
   Real effective exchange rate (annual change %)cNa -0.9 6.0 3.8 6.7
External debt (% of GDP) 9.4 10.3 8.9 8.0 7.7
   Debt to export (goods and services) ratio (% ) 16.3 19.7 17.3 15.8 15.6
.. Not available.
a Certain data are based on fiscal years (1 April to 31 March).
bP r e l i m i n a r y .
c Period average; a positive figure indicates a real effective appreciation of the pula.
Source: Authorities of Botswana.
5. In early 2001, Botswana obtained its first international credit ratings of A2 and A by
Moody’s, and Standard and Poor's, respectively.  The Government was considering an international
and a domestic pula-denominated bond issue during 2002.
(i) Fiscal policies and public sector reforms
6. Recent budget surpluses (before grants) had risen to 8.9% of GDP in 2000 (Table I.2).
Long-term prudent fiscal management has generated substantial budgetary reserves, and theSACU-Botswana WT/TPR/S/114/BWA
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Government’s national planning objectives are closely linked to its fiscal outcomes.4  However, the
budget fell sharply into deficit in fiscal year 2001, to 3.1% of GDP (much worse than expected) and
deficits are forecast to be well over 4% in 2002 and 2003.  While such deficits can be accommodated
by accumulated reserves without government borrowings, they may reflect unsustainable public
expenditure growth, unless accompanied by increased productive capacity and sustainable, especially
non-mining, revenue sources.5  Development spending is forecast to accelerate towards the end of the
Eighth National Development Plan in March 2003, especially on health, for HIV/AIDS treatment,
including free access to anti-viral drugs.  Revenue growth lags well behind planned expenditure
growth, despite several revenue initiatives, such as replacing the sales tax with the comprehensive
VAT from July 2002.  Volatile mineral tax receipts will also be boosted by the pula’s depreciation
against the U.S. dollar.  While the Revenue Stabilization Fund was established to accrue funds frominvestments as a general revenue reserve, it has instead been used to provide loans to parastatals and
councils.
7. Public sector reforms to improve efficiency and contain costs are a government priority.
6  The
progressive implementation of the performance management system is to be completed by 2004.  A
defined-benefit pension scheme for public employ ees replaced from April 2001 (for new employees)
the unfunded scheme that had accumulated large government contingent liabilities, estimated at P
10 billion.7  The Public Enterprise Evaluation and Privatisation Agency (PEEPA) is preparing a
privatization master plan, despite Air Botswana’s deferred privatization in light of the depressed
global aviation market;  poorly performing parastatals, such as Botswana Railways, are being
restructured and commercialized.  Their access to concessional loans from the Public Debt Service
Fund also ceased; existing debt is to be sold to financial institutions through loan conversions to
marketable securities .8  Several new autonomous authorities and boards will operate commercially,
and revised legislation will facilitate private-sector development.
(ii) Monetary and exchange rate policies
8. The Bank of Botswana’s principal monetary policy objective is controlling inflation.9  I t
maintained a restrictive monetary policy stance in 2001 to reduce inflation in the face of demand
pressures from rising commercial ba nk credit and government spending.10  Buoyant foreign exchange
earnings boosted liquidity and money supply growth in 2001; M3 grew by 27.6% (-1.1% in 2000).
The Bank of Botswana certificates (BoBCs) were sold to mop up excess liquidity; such holdings,
mainly by commercial banks, totalled P 5.148 billion at end 2001 (P 3.712 billion at end 2000).
Holding weekly auctions and standardizing Bo BCs maturity at 91 days enhanced liquidity
management.  Inflation, rising since 1998, fell from 8.5% to 6.6% in 2001.  While the Bank Rate wasmaintained at 14.25% (set in October 2000), the prime-lending rate increased from 14.75% to 15.75%
                                                     
4 The fiscal goal of NDP 8 is to maintain a sustainable budgetary position, whereby non-mining
government revenue at least equals "non-investment recurrent expenditure" (recurrent expenditure apart from
outlays on health and education).
5 BIDPA (2002c).
6 The theme of the 2002 Budget Speech was Implementing Public Sector Reforms: a way Forward for
sustainable Economic Diversification, Ministry of Finance and Development Planning, Gaborone.
7 Bank of Botswana (2002a), p. 51.
8 It has been suggested that if the Government en ds up guaranteeing the debt service of PDSF loans,
then the privatization of the PDSF loan portfolio will be meaningless since the loans will be equivalent togovernment bonds.  See BIDPA (2002c).
9 Bank of Botswana (2002b), p. 1.
10 The Bank was also concerned about the inflationary impact of rising disposable incomes due to
public sector salary increases and tax cuts from raising the tax-free threshold.  Bank of Botswana (2002b), p. 7.
Public sector salaries were again increased by 6% from April 2002.WT/TPR/S/114/BWA Trade Policy Review
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in 2000, and real interest rates rose to well above regional and international levels as domestic
inflation fell.11
9. The Bank’s main monetary tool is interest rates set through open market operations. In
pursuing sustainable low inflation, it tries to maintain real interest rates at prevailing international
levels, subject to domestic demand and inflationary pressures.  In practice, it tries to keep Botswana’s
inflation rate at no higher than the weighted average level of its major trading partners.  The Bankfocuses on intermediate targets that influence domestic demand levels, especially private-sector credit
growth, which interest rates directly affect.  Other demand indicators used are public expenditure
growth and factors affecting domestic costs, such as wage and productivity growth.
10. The Bank’s inflation targets are set through exchange rate policy.
12  It maintains the pula’s
nominal effective exchange rate constant and seeks to achieve an inflation rate that, at a minimum,also maintains a relatively stable real effective exchange rate, so as to promote export competitiveness
and economic diversification.  Inflation was expected to increase in 2002, due to credit growth, sharp
increases in government expenditure, and the one-off price effects of the VAT introduction.  The
Bank’s target inflation rate for 2002 of 4% to 6%, with private-sector credit growth of 12.5% to
14.5% (credit growth of 17.7% in 2000 and 10.7% in 2001), was expected to achieve a stable realeffective exchange rate.
11. Botswana has continued to try to contain the fluctuations of the pula against the rand.
However, unstable and sharp divergence in the value of the rand and the U.S. dollar, the major
determinant of the SDR, increasingly complicated Botswana’s exchange rate management.
13  While
the rand has a large weight in the currency basket, attempts to maintain the pula’s real value against
the rand, when the U.S. dollar was also strengthening, required periodic technical adjustments of the
currency basket.  Nevertheless, during 2000 and 2001, Botswana’s international competitiveness, asmeasured by the real effective exchange rate, deteriorated by about 4% and 7% respectively, thereby
making domestic producers on balance less competitive against imports and in export markets
(Table I.2).
12. The pula’s real exchange rate against the rand has appreciated substantially since the rand
sharply depreciated against major currencies. The pula strongly appreciated nominally against therand, by 21.8% in 2001 (rising to 1.74 rand), while depreciating substantially against the SDR by
20.1%.
14  Its nominal effective exchange rate appreciated by 5.1% in 2001.  Allowing for inflation
differences between Botswana and its major trading partners, the pula’s real exchange rate
appreciated against the rand by 21.8%.  Recent exchange rate movements are claimed by some to
contradict the exchange rate policy, reiterated in the 2002 Budget Speech, of maintaining andenhancing international competitiveness of domestic producers by ensuring that the real exchange rate
                                                     
11 The real three-month yield on BoBCs rose, for example, from 3.9% at end-2000 to 6.1% at end-
2001.  The real prime-lending rate also rose from 6.5% in February 2000, to 7.8% in February 2001, and to9.5% in February 2002.  BIDPA (2002a), p.2.
12 The pula exchange rate is pegged to a basket of currencies comprising the South African rand and the
IMF’s Special Drawing Right (SDR), in unpublished proportions that broadly reflect Botswana’s trade patterns.
The SDR’s value is set by the IMF as a weighted aver age of the U.S. dollar, the euro, the yen, and pound
sterling.
13 Botswana also needed to avoid the so-called "Dutch disease" of a diamond-led exchange rate
appreciation that would make non-mineral exports less co mpetitive and expand the non-traded sector relative to
the traded sector, thereby hamperi ng the economic restructuring needed to diversify production and exports.
14 During 2001, the pula depreciated against individual currencies by 23.2% (U.S. dollar), 21% (pound
sterling), 19.5% (euro) and 12.1% (yen).SACU-Botswana WT/TPR/S/114/BWA
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of the pula remains relatively stable.15  Such developments may further undermine Botswana’s
diversification efforts.  Botswana’s loss of international competitiveness based on the real exchange
rate is compounded by its trade patterns.16
13. Botswana’s balance of payments remains strong, despite subdued diamond exports due to
demand slowdown, especially in the United States, a nd declining world prices, such as for copper and
nickel.  Trade and current account surpluses declined as a share of GDP from 17% to 13% and from10% to 7% in 2001.  Foreign reserves remained substantial, providing 32 months of import coverage
at end-2001 (33 months at end-2000).  Botswana has not regulated current or capital account
transactions since February 1999.  Its external debt to export ratio was below 16% in 2001.
(3) 
TRADE PERFORMANCE
(i) Trade in goods
14. Diamonds dominate exports, accounting for 85% in 2001, up from 78.5% in 1996 (Table I.3).
Other exports include mainly meat, copper/nickel, soda ash, textiles, and vehicles (mainly Volvo
tractors after the Hyundai assembly plant closed in 2000).  Exports are also heavily concentrated
geographically.  Europe, especially the United Kingdom, accounted for 85% of exports in 2001,
compared up from 77% in 1996 (Table I.3).  SACU  members, mainly South Africa, accounted for
10% of merchandise exports in 2001 (18% in 1996), but are important markets for manufactured
products, e.g. textiles.
Table I.3
Exports by major commodity and destination, 1996 and 2001(US$ million and per cent)
Commodity/destination 1996 2001
Value Share Value Share
Commodity
Mining 1,745 85.7 2,047 90.1
   Diamonds 1,597 78.5 1,937 85.2
   Nickel/copper 125 6.1 70 3.1
   Soda ash 23 1.1 40 1.8
Non-mining 291 14.3 9.9
   Meat 85 4.2 73 3.2
   Textiles 59 2.9 43 1.9
   Other 147 7.2 110 4.8
Total 2,035 100.0 2,274 100.0
Destination
SACU 372 18.3 236 10.4
Other Africa 75 3.7 80 3.5
   Zimbabwe 63 3.1 54 2.4
Europe 1,564 76.7 1,925 84.7
   United Kingdom 1,106 54.3 1,512 66.5
United States 19 1.0 16 0.7
Other 5 0.3 17.0 0.7
Total 2,035 100.0 2,274 100.0
Source: Authorities of Botswana.
15. Imports consist mainly of machinery, including electrical equipment, metals, transport
equipment, including vehicles, food and bevera ges, mainly (over three quarters) from SACU
members, especially South Africa (Table I.4).
                                                     
15 BIDPA (2002c), and BIDPA (2001).
16 The pula’s sharp real appreciation against the rand makes its non-mineral products, such as textiles,
less competitive against South African products.  While the pula’s real depreciation against the U.S. dollar will
improve pula-denominated export earnings, it is unlikely to boost the volume of diamond exports.WT/TPR/S/114/BWA Trade Policy Review
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Table I.4
Imports by commodity and source, 1996 and 2001
(US$ million and per cent)
Commodity/source 1996 2001
Value Share Value Share
Commodity
Food, beverages, and tobacco 294 16.9 264 14.0
Wood and paper products 127 7.3 153 8.1
Textiles and footwear 129 7.4 112 5.9
Chemical and rubber products 178 10.2 176 9.3
Fuel 111 6.4 81 4.3
Metal and metal products 153 8.8 164 8.7
Machinery and electrical equipment 280 16.1 401 21.2
Vehicles and transport equipment 245 14.1 257 13.6
Other 221 12.7 282 14.9
Total 1,739 100.0 1,891 100.0
Source
SACU 1,356 78.0 1,448 76.6
Other Africa 107 6.1 79 4.2
   Zimbabwe 100 5.7 74 3.9
Europe 118 6.8 174 9.2
   United Kingdom 45 2.6 51 2.7
Republic of Korea 76 4.4 49 2.6
United States 22 1.3 35 1.8
Other 60 3.4 106 5.6
Total 1,749 100.0 1,891 100.0
Source: Authorities of Botswana.
(ii) Trade in services
16. Botswana is a net importer of services, especially of transportation services.  In 2001, trade in
services (invisibles) recorded a deficit of P 1.2 bi llion (US$202 million).  A small surplus is recorded
on tourism (US$26 million in 2001).
(4) INVESTMENT PATTERNS
17. The stock of foreign direct investment (F DI) was P 9.8 billion (US$1,920) at end 2000
(Table I.5); almost 60% related to non-equity in vestment (P 4.5 billion (US$1,225 million) at end
1997).17  About 80% of total FDI is in mining, follow ed by retail and wholesale trade (8%), finance
(6%), and manufacturing (4%).  Most FDI is from  South Africa (61%), followed by Europe (37%),
especially Luxembourg (25%).
18. Inward FDI was some US$55 million in 2000 and 2001, down from US$96 million in 1997.
The main factors facilitating Botswana’s inward FDI have been political stability, strongmacroeconomic fundamentals, good governance, low corruption, improved human and physical
capital, low labour costs, and low tax rates.
18  However, its FDI performance appears to have slipped
from being a "front-runner FDI performer with high  FDI potential" in 1988-90 to "performing below
its high FDI potential" in 1998-00.19  An impediment to investment and to the country’s
                                                     
17 Bank of Botswana (2002a), p. 57.  The stock of FDI declined during 2001 to US$1,734 (UNCTAD,
2002).  Botswana has nine foreign affiliates.
18 Basu and Srinivasan (2002), p. 22.
19 UNCTAD (2002).  The analysis uses two indices.  The Inward FDI Performance Index, the ratio of a
country’s share in global FDI flows to its share in global GDP, indicates how a country has performed inattracting FDI relative to its economic size.  A value below unity means it has attracted less FDI than expected
by its size.  The Inward FDI Potential Index measures a country’s potential for attracting FDI given its structural
factors.  It is derived from the unweighted normalized values of eight variables: GDP growth; GDP per capita;SACU-Botswana WT/TPR/S/114/BWA
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diversification is increasing difficulties in employing expatriates through hindrances in obtaining
work permits.20
Table I.5
Stock of foreign investment, by sector and source, end-2000
(P '000 and per cent)
Sector/source Foreign direct investment Other investment
Value Share Value Share
Sector
Mining 7,791,739 79.3 1,363,213 28.6
Manufacturing 343,497 3.5 233,693 4.9
Finance 618,917 6.3 140,589 2.9
Retail and wholesale 773,017 7.9 95,064 2.0
Electricity, gas and water 0 0 403,243 8.4
Real estate and business services 161,145 1.6 69,620 1.5
Transport, storage and communication 105,177 1.1 130,214 2.7
Construction 15,622 0.1 25,224 0.5
Hospitality 17,371 0.2 1,261 ..
Public administration 0 0 2,304,430 48.2
Other 0 0 15,309 0.3
Total 9,826,485 100.0a4,781,580 100.0a
Source
North and Central America 96,959 1.0 242,721 5.1
     United States 96,958 1.0 242,721 5.1
Europe 3,627,657 36.9 1,505,785 31.4
     United Kingdom 970,104 9.9 141,202 2.9
     Germany 0 0 1,207,851 25.2
     Luxembourg 2,478,342 25.2 82,601 1.7
Asia pacific 910 .. 74,217 1.5
Africa 5,998,657 61.0 604,979 12.6
South Africa 5,982,755 60.9 588,856 12.3
Middle East 102,356 1.0 9,807 2.0
Other 0 0 2,355,123 49.1
Total 9,826,540 100.0a4,792,993 100.0a
.. Not available.
a Figures may not sum to 100 due to rounding.
Source : Bank of Botswana (2000), Annual Report 2001 , p. 57.
(5) OUTLOOK
19. Botswana’s short-term economic performance relies heavily on its main growth primer,
diamonds.  Such exports depend in turn on global economic prospects, especially in the major gem
                                                                                                                                                                    
export share of GDP; telephone lines per 1,000 inhabitants; commercial energy use per capita; R&D share in
gross national income; share of tertiary students of population; and country risk.  Despite obvious limitations,comparing these two indices may give a rough guide to whether countries are performing adequately given their
(restricted set of) structural assets.  Botswana fell in world ranking from 29
th in 1988-90 to 109th in 1998-00 on
FDI Performance and from 41st to 45th on the FDI Potential Index.
20 BIDPA (2002c).WT/TPR/S/114/BWA Trade Policy Review
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markets, e.g. the United States.  While such developments are volatile, diamond exports appear to be
rebounding, suggesting that future stockpiling of diamonds is unlikely.  Real GDP is forecast to
improve in fiscal year 2002 to around 3-4%, fuelled mainly by buoyant non-mining growth of over
6%.21  Diamond exports are projected to rise by 5%, reflecting mainly the pula’s depreciation against
the U.S. dollar.  Inflation is expected to rise to 7% (above the Bank’s maximum target rate of 6%),
and future trends are uncertain.  Despite a restrictive monetary policy and declining bank creditgrowth, further inflationary pressures are likely due to large government spending increases in fiscal
years 2001 and 2002, and the introduction of the VAT, which is estimated to create a one-off price
increase of 3% to 5%.
22  Unemployment is projected to fall slightly to 15.2% in 2002, with expected
formal employment growth of 5%.  While the current account surplus is forecast to rise by 13% in
2002, foreign reserves are expected to fall slightly.
20. The economy’s longer term outlook will also be heavily influenced by economic strategies
used to support economic diversification, such as providing sound macroeconomic policies, including
fiscal balance with low tax rates, monetary stability and competitive exchange rates, as government
embarks on National Development Plan 9 in early 2003.  Economic diversification policies to
encourage broad-based and sustainable development should lessen dependence on governmentassistance, since increasing government expenditures and subsidies cannot be sustained without
commensurate private-sector growth and productivity improvements.
23
                                                     
21 BIDPA (2002b).
22 BIDPA (2002a), and (2002b).
23 BIDPA (2001).SACU-Botswana WT/TPR/S/114/BWA
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II. TRADE AND INVESTMENT REGIMES
(1) P OLICY FORMULATION AND IMPLEMENTATION
1. As a member of the Southern African Custom s Union (SACU), Botswana has, until now, had
most of its trade policy instruments (customs matters in particular) set at the regional level (Main
Report, Chapter II(2)).  There have been few changes since the last Trade Policy Review of Botswana
in 1998.  The Ministry of Trade and Industry retains primary responsibility for formulating andimplementing trade and industry policies, especially in areas not covered by the SACU Agreement.
Within the Ministry, the Department of Trade a nd Consumer Affairs handles foreign trade policy,
including multilateral, regional, and bilateral trade relations;  consumer protection and education;  and
issues import permits.  The Department of Industrial Affairs formulates and implements industrial
policy, including support measures, issues manufacturing licences, and is Secretariat to the NationalIndustrial Licensing Authority.  The Authority, whose members are appointed by the Minister of
Trade and Industry, approves industrial licences in accordance with the Industrial Development Act of
1988; it also reviews industrial and licensing policies.  Applicants must meet certain zoning, health
and environmental requirements.  Following the National Conference on Citizen Economic
Empowerment in 1999, some industrial programmes, especially the Micro-credit Scheme for Small,Medium and Micro Enterprises (SMME), and the Financial Assistance Policy (FAP), which began in
1982, were abolished and replaced in 2001 with the newly created Citizen Entrepreneurship
Development Agency (CEDA) to improve effectiveness.  This reflected the Government’s policy of
increasing the Ministry’s policy formulation and performance monitoring responsibilities while
devolving programme implementation to autonomous agencies.
2. Other institutions having important inputs into trade-related policies include the ministries
responsible for finance (budget, expenditure/revenue measures, and development plans); mineralresources, transport and communications; and agriculture;  as well as the central bank, the Bank of
Botswana. The Public Enterprise Evaluation and Privatisation Agency (PEEPA) was also established
in late 2001 to formulate and administer the Government’s Privatization Policy. A national committee
was established to coordinate the implementation of the Government’s Industrial Development Policy
with a view to stimulating manuf acturing activity; industrial development is a key objective and has
been incorporated in the Ministry of Trade and Industry’s strategic plan for 2001-09.  Furthermore,
the 2002 SACU Agreement provides for a National B ody to be established in each member country;
the Body will be in charge of SACU issues (incl uding tariff changes) at the national level and will
make recommendations to the Customs Union Commission (Main Report, Chapter II(2)(ii)(a)).
3. Trade policies are formulated through a consultative process involving all stakeholders,
including government, business, workers, and civil society.  An initial consultancy report is prepared
and released for public comment through a national seminar.  Following revisions, a white paper is
usually produced as the basis of government policy.   Trade policy coordination among officials is
conducted mainly on an ad hoc basis with few formal structures in place.  The High Level
Consultative Council, chaired by the President, consists of the Vice-President, Ministers and
private-sector representatives.  Discussions and recommendations at sectoral levels are reported to the
Council, and once approved, are discussed in national seminars before draft bills are prepared.
4. The Botswana Confederation of Commerce, Industry and Manpower (BOCCIM) is the main
body representing the private sector’s views to government.  Implementation of policies at the
national level is reviewed every three years under the auspices of BOCCIM.  The Botswana Chamber
of Commerce and Industry acts as the voice of small and medium-sized businesses to government.
The Exporters Association of Botswana also represents major exporters’ interests, and providesWT/TPR/S/114/BWA Trade Policy Review
Page A1-62
specialized export services, including assistance in identifying foreign markets.  The Botswana
Federation of Trade Unions represents workers in the tri-partisan consultative process with business
and government.
5. There is no independent statutory body that specifically reviews or advises the Government
on trade policies, including the provision of government assistance to industry.  The Government,
however, established the independent Botswana Inst itute for Development Policy Analysis (BIDPA),
in 1995, to conduct contractual public policy research for it and other clients, including monitoring of
economic performance.  Its main research areas are economic planning and projections; welfare,
incomes, and poverty; and structural change of the economy.  BIDPA also trains local economists in
policy research and provides valuable public commentary on topical economic policy issues.
6. Trade liberalization and investment promotion remain key elements of Botswana’s trade
policy framework and its development strategy.  The Government’s main objectives are to promote
export-led industrialization;  foreign direct inve stment is attracted to diversify the economy away
from diamond (and other minerals) into non-traditional goods, such as textiles, clothing, engineering
products, leather goods, electronics, and pharmaceuticals.  Broadening Botswana’s manufacturing
base is a key objective of the Government’s industrial policies.  Developing small and medium-sizedenterprises is also a high priority.  Economic empowerment of its citizens is to be achieved by
promoting their participation in mainstream economic activities, without compromising transparency,
accountability, competition, efficiency, and equity.  The Government also wishes to create a more
enabling business environment to facilitate private sector growth, which it sees as essential to the
economy’s sustained and balanced development.  Promoting vigorous competition, including from
imports, is to be encouraged while ensuring that adequate safeguards and regulatory measures protect
consumers from monopoly prices and other unfair trading practices, as well as ensuringenvironmental conservation.
7. The Government's four development planning ob jectives are economic growth, social justice,
economic independence, and sustained development.  Its Eighth National Development Plan 1997/98-
2002/03 adopted the theme of "sustainable economic diversification".
24  The Ninth Plan, to cover the
period April 2003 until March 2009, is well advanced, and its theme is to realize Botswana's Vision2016 by achieving "internationally competitive sustainable economic diversification", with ambitious
growth and poverty-reduction targets, and greater economic empowerment of its citizens.  Key
priorities are to control the cost of development projects and maintain existing public infrastructure.
8. The Government views rural development as essential for alleviating poverty.  It recently
released for public comment a draft White Paper on the Revised National Policy for RuralDevelopment, which highlighted the urgent need to tackle the HIV/AIDS pandemic through more
effective drug distribution, as well as other deve lopment impediments, such as ill-defined property
rights in rural areas.  The Government’s National Poverty Reduction Strategy, which was to be
completed in April 2002, is aimed at designing a cohesive national action framework to guide anti-
poverty initiatives.
9. Table II.1 presents Botswana's main trade-related laws.
                                                     
24 Six-year national development plans are subject to mid-term reviews; the Eighth Plan was reviewed
in 2000 with the theme of "accelerating economic diversification."SACU-Botswana WT/TPR/S/114/BWA
Page A1-63
Table II.1
Main trade-related legislation in Botswana, December 2002
Area Legislation
Exports and imports Customs and Excise Act, and 2001 amendments and regulations
Government procurement Public Procurement and Asset Disposal Act, 2001
Competition Consumer Protection Act, 1998
Services Botswana Power Corporations Act, 1971
Mining Mines and Minerals Act, as amended in 1999
Standards Standards Act, 1995
Intellectual property rights Copyright and Neighbouring Rights Act, 2000; Industrial Property
Act, 1996; Industrial Property Regulations, Statutory InstrumentNo. 78 of 1997; Industrial Property (Amendment) Act, 1997
Price control Control of Goods, Prices and Other Charges Act
Foreign investment Foreign Investment Act; Foreign Investment Code, 2001
Source: Information provided by the Botswana authorities.
(2) T RADE AGREEMENTS
10. Botswana attaches great importance to its WTO membership and is committed to a liberal and
fair trade regime.  Table II.2 shows selected recent notifications by Botswana to the WTO.
Table II.2
Selected notifications to WTO, September 2002
WTO AgreementDescription of
requirementPeriodicityMost recent
notificationComment
Agreement on Agriculture
(Article 18.2)Domestic support Annual G/AG/N/BWA/5
15 April 1997Domestic support
commitments for
1995/96
Agreement on Agriculture(Article 10 and 18.2)Export subsidies Annual G/AG/N/BWA/4
24 February 1997No export subsidies
during 1996
Agreement on Agriculture
(Article 5.7)Special safeguard
provisionsAnnual G/AG/N/BWA/3
21 February 1997No special
agricultural
safeguards were
invoked in 1996
Agreement on Implementation of
Article VI of the GATT 1994
(Article 18.5)Laws and regulations Once, then changes G/ADP/N/1/BWA/1
29 September 1995No laws and
regulations on anti-
dumping practices
TRIPS (Article 63.2) Laws and regulations Once, then changes IP/N/1/BWA/1
19 February 2002Copy of copyright and
industrial property
legislation
Agreement on Safeguards
(Article 12.6)Laws and regulations Once, then changes G/SG/N/1/BWA/1
11 February 1997No laws or
regulations on
safeguards
Agreement on Sanitary and
Phytosanitary Measures
(Article 7, Annex B)SPS to be notified
promptlyOnce, then changes G/SPS/N/BWA/3
29 October 1997Microbiological
specifications for raw
and processed milk
GATT 1994 (Article XVII:4(a)
and Understanding on the
interpretation of Article XVII:1State-trading
enterprisesAnnual G/STR/N/1/BWA
7 February 1997No state-trading
enterprises
Agreement on Subsidies and
Countervailing Measures(Article 25.11)Countervailing
actions takenSemi-annual G/SCM/N/23/Add.1/
Rev.823 April 2002No countervailing
actions taken during1 July-31 December
1996
Agreement on Subsidies and
Countervailing Measures
(Article 25)Measures Annually G/SCM/N/71/BWA
7 March 2002No export subsidies
Agreement on Technical Barriers
to Trade (Annex 3, Paragraph C
of Code of Good Practice for
Preparation, Adoption andApplication of Standards)Acceptance or
withdrawal from the
Code of Good
PracticeOnce, then changes G/TBT/CS/N/109
31 August 1999Acceptance of Code
of Good Practice
Source: WTO documents.WT/TPR/S/114/BWA Trade Policy Review
Page A1-64
11. Botswana is a member of the Southern African Development Community (SADC) and the
African Union/African Economic Community, in which all the other SACU countries also participate
(Chapter II, Common Report).25  Botswana's capacity to negotiate trade agreements bilaterally is
further curtailed by the 2002 SACU Agreement.  Botswana is concerned about the adverse economic
impact of the European Union-South Africa Trade, Development and Cooperation Agreement
(TDCA).  Although the major products of interest to Botswana, such as beef, have been excludedfrom the TDCA, Botswana (and other SACU member s) is de facto obliged to implement the
reciprocal tariff preferences negotiated by South Africa on EU exports, without receiving
corresponding improved market access to the EU.  This situation is to be aggravated by the
establishment of the EU/South Africa Free Trade Area in 2012, well ahead of 2020 for other ACP
states.  Of further concern are the revenue losses for Botswana from reduced tariffs on imports fromthe EU.  To address these concerns, the EU agreed to establish an appropriate institutional mechanism
in consultation with Botswana (and Lesotho, Namibia, and Swaziland) to consolidate its existing trade
preferences to BLNS beyond 2007, to improve immediate access, and to assist BLNS in fiscal
restructuring commensurate with revenue losses from the TDCA.
26
(i) Bilateral agreements
12. Botswana signed a bilateral arrangement with India in 2001.  Its 1988 bilateral trade
agreement with Zimbabwe provides generally for reciprocal duty-free entry of each other’s goods.  To
be eligible for preferential treatment, manufactured goods must meet rules of origin requiring at least
25% local content and Botswana/Zimbabwe, as the exporting country, must be the place of last
substantial manufacturing (or where solely produced or grown for non-manufactured products).  The
Botswana Department of Customs and Excise issues certificates of origin to exporters.  Botswana
imposes quotas on clothing imports from Zimbabwe; according to authorities the quota has not beenused since the mid 1990s.  Trade between the two countries has declined in relative importance;
Zimbabwe represented about 2% of Botswana’s merchandise exports and 4% of imports in 2001.
13. Botswana has an old reciprocal customs agreement with Malawi dating back to 1956, which
works on a de facto basis, whereby all goods, except spirits, reared, grown or produced, can be
imported duty free.  Although Botswana has occasionally imported sugar from Malawi under thisagreement, it is rarely used.
14. Botswana has MFN trade agreements with the following countries; China, Czech Republic,
Cuba, India, Slovakia, Romania, Russia, Republic of  Korea, and Zambia.  These agreements provide a
general framework for the bilateral trade between Botswana and each of these countries.
(ii) Other agreements
15. As a developing country, Botswana is eligible for GSP treatment from most industrialized
countries, which provide preferential access to their markets (at zero or reduced tariffs) for eligible
products, subject to rules of origin.  Product coverage and origin rules vary between countries, but
generally require the goods to be wholly obtained or sufficiently processed in Botswana, as evidenced
by certificates of origin issued by the Department of Customs and Excise.  Countries providingBotswana with GSP treatment include Australi a, Canada, EU, Japan, New Zealand, Norway,
                                                     
25 Botswana ratified the SADC Trade Protocol on 7 January 1998 and the SADC Amendment Protocol
on 1 December 2000 (signed 10 November 2000).
26 Resolution adopted by the ACP-EU Joint Parliamentary Assembly on 1 November 2001 (ACP-EU
3296/01/fin).SACU-Botswana WT/TPR/S/114/BWA
Page A1-65
Switzerland, and the United States.  These arrangements have particularly benefited craft and leather
exports.
16. Botswana also has preferential access to the EU market under the Cotonou Agreement,
subject to meeting certain rules of origin (Main Report, Chapter II(6)(i)).27  Exports of hides, skins,
and leather products are duty free and quota free.  Beef exports to the EU are dutiable at a reduced
rate of 10% of the specific element of the tariff, up to an annual quota of 18,916 tonnes, which isunder-utilized.  Botswana is ineligible for the EU 's "Everything But Arms" (EBA) Initiative, which is
available only to least developed countries.
17. While a beneficiary under the US African Growth and Opportunity Act (AGOA) (Main
Report, Chapter II(6)(ii)) , Botswana was ineligible until recently for the enhanced access afforded to
"lesser developed beneficiary sub-Saharan African countries", which extends duty-free and quota-freepreferential access to the U.S. market for apparel exports made of fabrics from any source until end-
September 2004, subject to a specific aggregate cap on these U.S. imports from all beneficiary
countries.
28  This limited preferential U.S. access for Botswana’s apparel exports to garments using
U.S.-made fabric, or for some clothing items, us ing sub-Saharan African-made fabrics, U.S.-made
fabrics or sub-Saharan African yarn, subject also to the specific aggregate cap on U.S. imports.However, the United States extended from 6 August 2002 "lesser developed country status" to
Botswana, despite its relatively high GNP, thereby allowing producers to use third-country fabric in
qualifying clothing exports (so-called AGOA II).  Acco rding to authorities, this will generate more
investment in Botswana’s textiles industry.
(3) I
NVESTMENT FRAMEWORK
18. Botswana has continued to develop a regulato ry framework conducive to investment.  The
Government acknowledges the critical role of private, especially foreign, investment in stimulatinggrowth, sustainable employment, and poverty alleviation.  It remains committed to maintaining
Botswana’s position as one of the most competitive and leading developing economies in attracting
foreign investment.  This was reinforced by the release in 2001 of Botswana’s first international credit
rating by Moody’s, and Standard and Poor's of "A2" and "A", respectively, putting it ahead of many
countries (highest in Africa).  The August 2002 rating remained unchanged; "A" for long-term and"A1" for short-term foreign currency debt, and "A +" for long-term local currency debt.  Investment
incentives include a reduced corporate tax rate of 15% (instead of 25%) for all registered
manufacturing companies.  The Minister of Finance and Development Planning may also grant tax
relief for certain businesses under Development Approval Orders (Chapter III(4)(i)).  Profits,
dividends, and capital can be readily repatriated, and all remaining foreign exchange controls,including on capital transactions were eliminated in February 1999.  No restrictions exist on portfolio
investment and the Botswana Stock Exchange allows dual company listings.
                                                     
27 The Agreement permits cumulation of origin between ACP countries and the EU.  Cumulation with
South Africa will be permitted from 2003.
28 Botswana’s per capita gross national product in 1998 exceeded the threshold of US$1,500 set under
the AGOA for "lesser developed beneficiary sub-Saharan African countries".  Botswana was declared by the
United States as eligible for AGOA benefits on 2 October 2000 and eligible for the apparel provisions on 3December 2001.  Also covered are non-clothing products grown or produced in sub-Saharan African beneficiary
countries, subject to rules of origin requiring local materi als and direct processing costs to be at least 35% of the
product's appraised value when it enters the United States  (the transaction value or adjusted f.o.b. price).WT/TPR/S/114/BWA Trade Policy Review
Page A1-66
19. A Foreign Investment Code was released in 2001 to guide investors and to consolidate
Botswana’s investment policies and legislation.29  Foreign investors are to be law-abiding and support
the Government’s national principles of economic diversification, non-corruption, and democracy.
Foreign investment is allowed in all sectors, except in activities reserved for small and micro
enterprises.  These include commercial activities, such as retail functions, small general trading, petrol
stations, bottle stores, butchers, fresh produce shops, village restaurants, supermarkets (but excludingchain stores), simple speciality operations (e.g. clothing and footwear boutiques); taxi and security
services; government building projects, including minor maintenance and building works up to
P 150,000 in value; road contracts and railway maintenance, such as fencing, road maintenance,
culvert construction, bridge painting, and plant hire; and industrial activities, including school
furniture, uniforms, ordinary cement and bricks, bread baking, sorghum milling, and burglar-proofsecurity bars.  Foreign investors can participate in reserved activities up to 49% equity if the
investment would expand the activity to me dium scale within an approved schedule.
20. Foreign investors are encouraged, but not compelled, to establish joint ventures; no foreign
equity limits apply.  However, minimum foreign investment levels are reduced for joint ventures by
either one half, one quarter or one third, depending upon the sector.  Minimum foreign investmentlevels are set respectively for non-joint-ventures and joint-ventures at US$100,000 and US$75,000 for
manufacturing; US$150,000 and US$100,000 for trading activities; US$200,000 and US$100,000 for
tourism; US$75,000 and US$50,000 for other non-financial services; US$100,000 and US$75,000, to
be registered with the Public Procurement and Asset Disposal Board, for government procurement
30;
US$100,000 and US$75,000 for property and real estate; US$50,000 and US$25,000 for information
technology; and invariably at US$75,000 for agriculture.  For each investment proposal, two foreign
directors/shareholders are permitted to reside in Botswana; additional foreign directors/shareholderswishing to live and work in Botswana require fu rther investment of 50% of the original amount.
Business licences necessary to commence activities, such as for manufacturing, trading, and tourism,
are issued on proof of the minimum funds being deposited in Botswana.  All foreign-owned firms,
and citizen-owned companies with ten or more employees or with mini mum power consumption of
20 kilowatts (or its equivalent), must be licensed.  Licence applications are normally processed by theMinistry of Trade, Industry, Wildlife and Tourism within four to five weeks.  Work and resident
permits are issued when the investor qualifies for an operating licence.
21. The Botswana Export Development and Investment Authority (BEDIA) commenced
operation in 1998 (following legislation passed in 1997) to promote foreign investment, especially in
export-oriented manufacturing.  The Government is es pecially targeting investment in export-oriented
or import-substitution manufactures, including textile and garments, leather goods, electrical products
and electronics, light engineering, plastic products, ceramics, pharmaceuticals, assembly operations,
and printing and publishing.  BEDIA operates a "one stop" Investor Service Centre designed to assist
investors with pre-investment services, such as obtaining land, buildings, work and residency permits,
licences and grants, and satisfying other regulatory requirements.  It is preparing an IT investmentguide and a customized database to link all authorities and to present licensing requirements for easy
access.  BEDIA  also develops industrial estates with factory buildings for lease by investors.
22. Foreigners can purchase freehold land.  Government land must be leased, for 50 years for
business purposes and 99 years for residential use, subject to renewable options.  A discriminatory
                                                     
29 Ministry of Trade and Industry (2002a).  The discussion in the text is based on the Code.  However,
authorities indicated that although the Government had approved the Code, it had not been implemented.  It iscurrently being reviewed.
30 The construction industry is subject to a building code whereby smaller contracts (below P 8 million)
are reserved for local or joint-venture companies.SACU-Botswana WT/TPR/S/114/BWA
Page A1-67
transfer duty applies to property sales at the rate of 5% of the value, subject to an exempt threshold of
P 20,000.  Non-citizens, including companies with le ss than majority local ownership, receive no such
threshold and pay a higher rate equal to 10% on rural property.
23. No performance requirements are imposed on foreign investors; while export-orientation is
preferred, the Government does not distinguish be tween inward-orientation and outward-orientation
of local production.  Factors used to assess foreign investment include company registration inBotswana and transfer of technology and skills, such as developing training and localization
programmes to employ citizens within periods ag reed with the Commissioner of Labour.  Foreign
firms are encouraged to use Botswana citizens instead of foreigners, and local materials, where
possible.  Botswana has a relatively secure commercial legal system and the Constitution prohibits
nationalization of private property.  Domestic law assures the right to establish, acquire, and disposeof business interests and guarantees the right to private ownership.
24. Botswana is a member of the International Centre for the Settlement of Investment Disputes
and the Multilateral Investment Guarantee Agency .  It signed a ten-year investment treaty with
Germany in 2000 to protect bilateral investment against nationalization and other risks.  It also has
investment guarantee treaties with China (2000), Switzerland (1998), Malaysia (1997), and France(Cooperation in Tourism in 2000 and the Overseas Pr ivate Investment Corporation in 1997).  It is
negotiating investment agreements with the Un ited States, Italy, Belgium/Luxemburg, the
Netherlands, Egypt, the United Kingdom, Turkey, Mali, Ghana, Zimbabwe, Kenya, and Mauritius.
Botswana  has double taxation agreements with the Un ited Kingdom, South Africa, Sweden, and
Mauritius.
(4) T
RADE -RELATED TECHNICAL ASSISTANCE
25. As with other SACU-member countries, trade-relate d technical assistance has a critical role in
enabling Botswana to derive benefits from open trade policies and its participation in the international
trading system.  Botswana needs technical assistance, including capacity building, in the following
areas:  (i) implementation of WTO agreements (and in deriving benefits from implementation); (ii)
trade negotiations; (iii) supply-side constraints; and (iv) the integration of trade into overall
development strategies.
26. For a number of specific areas, notably in relation to "behind the border" issues, the delivery
of technical assistance and capacity building measur es to Botswana and other SACU countries has the
potential, if properly coordinated, to strengthen the integration of SACU countries into the
international trading system, as well as their integration, on a regional basis, into an area of shared
trade policy.
(i) Implementation of WTO Agreements
27. Botswana recognizes the need to implement legislation on anti-dumping, safeguards, and
countervailing measures.  The WTO provided a national technical assistance activity on trade
remedies in June 2002.  Enhancing Botswana’s capacity to develop such rules-based trade measures
may help reduce the scope for disruptions to reforms.  It can also contribute to stable and predictabletrade policies within the SACU region.
28. Botswana faces the challenge of diversifying away from heavy dependence on diamonds.
Assistance is needed in identifying measures th at are WTO-consistent, and that do not introduce
inefficiency.  The Government has also pointed to the need for assistance in developing a foreign
direct investment strategy.  As policies in regard to export promotion are currently not harmonizedWT/TPR/S/114/BWA Trade Policy Review
Page A1-68
across SACU, assistance in developing a WTO-consistent set of policies amongst members will
contribute to strengthening SACU by ensuring that  its members do not engage in practices that could
cause injury to regional partners.
29. As other trade barriers are reduced, standards and sanitary and phytosanitary (SPS) measures
are increasingly likely to be binding constraints on exports.  Given the role of agricultural exports in
Botswana's trade – notably of bovine meats and products – compliance with SPS requirements is aparticular challenge.  The Government has underlined the need for training in relation to equivalence,
transparency, and pest-risk analysis.  The shortage of trained personnel and "hard infrastructure" in
relation to SPS is a characteristic of BLNS countries.  Consequently, the delivery of capacity-building
assistance at the regional level would provide economies of scale, and contribute to common
standards across the SACU region.
30. Botswana’s legislation by and large complies with the TRIPS Agreement, except for
geographic indications and integrated circuits (Chapter III(4)(v)). Capacity building is mainly needed
for enforcement of intellectual property rights.
31. Botswana has benefited from technical assistance delivered by the World Customs
Organisation.  The Government needs capacity-bu ilding assistance in customs reforms and trade
facilitation in general.  Botswana would like to use its relatively well developed road linkages and
central position in the SACU region to become a regional transit hub.  Delays at border crossings and
lack of facilities have been cited as factors depressing traffic levels on the trans-Kalahari highway.
(ii) Trade negotiations
32. Botswana is involved in trade negotiations at a number of levels.  These include the EU-ACP
Cotonou agreement, SADC, SACU, including the SACU-US Free Trade Area, and the Doha
Development Agenda.  This overlapping negotiating agenda entails a need to develop and coordinatenegotiating positions.  Since negotiations are often a means of strengthening and "locking-in"
domestic reforms, capacity building should focus on formulating negotiating positions and strategies
that are anchored in the domestic reform process.
33. In relation to multilateral trade  negotiations under the Doha Development Agenda, the
Government has highlighted services as being a key area for technical assistance, including capacitybuilding needs.  Three priority areas for Botswana are financial services, telecommunications, and
tourism.  It has been identified as having a key role in Botswana's economic diversification.
Assistance will be needed to craft offers that are integrated, and to reinforce the Government's
strategy in these three subsectors.  The strategy for tourism emphasizes the need for regional
cooperation in the management of trans-frontier resources, and in the provision and marketing oftourism services.  Assistance to SACU members in developing a common approach to commitments
in the GATS framework could yield benefits in strengthening negotiating capacity, and also enhance
the ability of SACU members to develop a common approach to tourism.
34. The Government has also indicated a need for seminars to help stakeholders understand and
prepare for negotiations on:  market access for non-agricultural products; trade and investment; tradeand competition; transparency in government procurement; trade facilitation; trade and environment;
and trade and development.
35. In 2001, Botswana opened a mission in Geneva. This reflects the increased awareness and
importance attached to participation in the day-to-day work of the WTO.  In common with a number
of other developing countries, Botswana therefore faces a considerable challenge in dealing with theSACU-Botswana WT/TPR/S/114/BWA
Page A1-69
volume of work involved in the WTO's current pr ogramme.  While measures, taken by the WTO and
other organizations, to assist the mission in its work are helpful, attention should also be given to
strengthening links between the Geneva-based staff and staff in Gaborone involved in policy
formulation.
(iii) Supply-side constraints and integration of trade into development strategies
36. Botswana suffers from range of supply-side constraints.  Although its land-locked position
hinders trade, it has a relatively good internal road network.
37. Botswana's participation in international trade and its adoption of relatively open trade
policies have been significant factors in promoting economic growth and alleviating poverty.  Some
trade and trade-related policy issues are considered on a sectoral basis, and policy priorities are set out
in successive national development plans.  Inter-mi nisterial coordination exists in relation to the
formulation of trade policy.  However,  greater collaboration between ministries and departments on
integrating trade into the overall architecture of development policy would be beneficial.  Botswana
would also benefit from a more systematic analysis of trade policy options geared towards poverty
reduction, and a more systematic integration of trade policy actions and capacity-building needs
within an overall policy framework geared toward s poverty reduction.  The Government is currently
in the process of finalizing arrangements with the Department for International Development (UK) for
the implementation of a Trade and Poverty Programme, which could help to integrate trade and
development policy.WT/TPR/S/114/BWA Trade Policy Review
Page A1-70
III. TRADE POLICIES AND PRACTICES BY MEASURE
(1) OVERVIEW
1. Botswana is streamlining customs procedures and has amended its customs legislation to
meet the U.S. requirements under the AGOA.  Few si gnificant changes have been made to its import-
licensing regime since 1998.  All imports must be licensed;  certain products are subject to non-
automatic permits and prohibitions, mainly for self-sufficiency, health, safety, and environmentalreasons.  Botswana standards are based on international norms, or those of its major trading partners.
It has accepted the Code of Good Practice under the WTO TBT Agreement.
2. The Public Procurement and Asset Disposal Board oversees government procurement.
Small-scale construction is reserved for Botswana citizens (Batswana); medium-scale projects are also
open to joint ventures with majority domestic ownership.  At least 30% of non-constructiongovernment procurement must be from eligible firms (domestic or foreign) that have minimum 25%
local content and meet specified minimum turnov er, investment or citizen employment levels.
Botswana is not a member or observer of the Government Procurement Agreement.
3. In July 2002, the sales tax was replaced by a 10% VAT.  There are no export taxes.  Some
exports (e.g. agricultural products, unpolished diamonds, and hides) are subject to non-automaticlicences. Botswana has strategic reserves of grains and petroleum products.  Numerous tariff
exemptions and concessions apply to imported inpu ts used in goods exported to non-SACU markets.
The Botswana Export Credit and Guarantee Company (BECI) provides export insurance; the
Government reinsures the related political risk.  The Botswana Export Development and Investment
Authority (BEDIA) conducts export promotion.
4. The Financial Assistance Policy (FAP) was abolished and replaced with the Citizen
Entrepreneurship Development Agency (CEDA) to promote industrialization and economicempowerment of citizens.  Certain state-owned enterprises have de facto  or de jure  monopolies over
utilities, among others.  Some have performed poorly, relying heavily on concessional government
loans.  A master privatization plan is being prepared.  The Government intends to introduce
competition legislation to prevent anti-competitive practices.  It has taken important steps to comply
with TRIPS obligations.  New copyright legislation has been passed and comprehensive amendmentsmade to strengthen industrial property rights.
(2) M
EASURES DIRECTLY AFFECTING IMPORTS
(i) Registration, and import duties and related measures
5. Under the SACU Agreement, BLNS countries apply import duties and related measures set
by South Africa.  However, in practice, applied customs tariffs, excise duties, valuation methods,
origin rules, and contingency trade remedies are, so far, the only trade policy measures harmonized
throughout SACU.  These common policy measures ar e covered under the Main Report (Chapter III).
For import duties and related measures, differences exist among SACU members in customs
procedures, import duties (other than customs tariffs and excise duties), and duty and tax concessions.
6. In Botswana, all traders must be licensed with the Ministry of Trade and Industry.  Licensing
is handled by the National Licensing Authority.  Customs clearing agents are licensed by the
Department of Customs and Excise of the Ministry of Finance and Development Planning.  While it is
not mandatory to use an agent to clear goods, agents need to be engaged for commercial and regular
importers.SACU-Botswana WT/TPR/S/114/BWA
Page A1-71
7. Botswana is streamlining its customs procedures and has adopted the ASYCUDA system.
According to the authorities, it currently takes 10-45 minutes to clear commercial goods, providing
that all documents are in order.  Computerization through ASYCUDA has been implemented at the
Gaborone Inland Office and the busiest border with South Africa (Tlokweng Border Gate).  Imported
goods are randomly checked.  Botswana does not have a bond guarantee system.  It introduced a
Single Administrative Document for customs declaration from 1 May 2002.  The customs legislation(the Customs and Excise Act  (Cap 50:01) of 1970), was amended in July 2001 to implement the U.S.
requirements for Botswana to export goods, especially textiles and clothing, preferentially to the
American market under AGOA.
31  The customs legislation is being amended to update and align it
with the South African Customs and Excise Act.
8. Commercial importers (and exporters) may apply to operate customs bonded warehouses.
Using either storerooms, fixed vessels, tanks or other premises.  Security on the bonded warehouse
must cover duty liability, and the operator must maintain a stock register.  Goods may be stored for up
to five years, during which time duties are paid on goods released.  Warehouses must be physically
secure.    
9. Botswana has used the possibility available to BLNS countries under the SACU Agreement to
protect infant industries on three occasions.32  These were to protect the Kgalagadi Soap Industry
(KSI) during the 1970s (by an additional tariff of 100%), the Kgalagadi Breweries Ltd during the
1980s and early 1990s (by a 50% additional tariff) and Bolux Milling Pty Ltd (by quotas for the first
five years, and then an additional tariff of 75% for three years).  In each case, the temporary
protection was provided for the maximum period of eight years permitted under the SACU
Agreement.  These industries still exist;  Kgalag adi Soap Indstry is exporting to such countries as
Malawi, Namibia, and occasionally South Africa, while Bolux Milling Pty Ltd is facing intensivecompetition from South African suppliers and is seek ing further protection against "dumping".  While
no industries currently receive infant industry protection, an application from Okavango Wineries on
bottled drinking water is under consideration.  The general criteria and procedures for determining
whether to provide such protection are being developed.
10. In July 2002, the 10% sales tax, which applied uniformly to imports and domestically
produced consumer goods (but not staple foods), a nd some services, was replaced with a value-added
tax (VAT) of 10% with few exemptions, such as petrol, diesel, paraffin, maize and sorghum meal,
financial, educational, and health services.
33  Exports and fuel products are zero-rated; producers can
claim tax credits for VAT paid on inputs.  VAT refunds must, by law, be repaid to exporters within
one month of submission of returns,  and two months for other taxpayers.34  The customs legislation is
currently being amended to introduce a fuel levy on petrol and diesel.
11. The business threshold for VAT registration is annual turnover above P250,000.35  The VAT
applies uniformly to domestic and imported goods, including from SACU members.  The base for
levying VAT on imports varies slightly betwee n SACU and non-SACU countries.  For non-SACU
                                                     
31 Customs and Excise Duty (Amendment) Act.  Accompanying regulations (Customs and Excise
(Amendment) Regulations) were introduced in August 2001 requiring textile and clothing manufacturers and
exporters to keep appropriate records for at least five years.
32 Mpabanga (1997), p.377.
33 Value Added Tax Act, 2000 (Act No.1 of 2001).
34 Interest will be paid on overdue amounts at the rate of 1% per month.  The law also permits such
refunds to be offset against the taxpayer’s other tax liabilities.
35 Auctioneers must register irrespective of turnover, and voluntary registrations for lower turnover
may be allowed.WT/TPR/S/114/BWA Trade Policy Review
Page A1-72
countries, VAT is levied on the import’s landed duty-paid price i.e. f.o.b. price and import duties, plus
the value of any services relating to the good, such as commission, packaging, transportation, short-
term warranty insurance, and warranty expenses.  Imports from SACU members are levied VAT on
the greater of their f.o.b. price plus freight and insurance costs (i.e. landed duty free-price), and their
"fair market price".  "Fair market" prices are used to stop under-valuation where a sale occurs
between related parties.  It is determined using th e ruling market price of identical goods in the same
market.
12. Government receipts from the SACU Common Re venue Pool are forecast to fall in 2002-03
to P 1.541 billion, down from P 1.735 billion in 2001-02 and P 2.188 billion in 2000-01.  In 2000-01,
SACU revenue accounted for 15% (13% in 2001-02) of  total government revenue (including grants).
The introduction of the VAT with its extended coverage on goods and services was expected to raiserevenue substantially and thereby to reduce the share of SACU revenue in the total.
(ii) Import prohibitions and licensing
13. There have been few significant changes to Botswana’s import licensing regime since 1998.
Imports of certain agricultural products, such as ve getables, dairy products, meat and meat products,
and poultry must be licensed on food-security grounds.  The licences are usually issued by theMinistry of Trade and Industry.  Imports of firearms and ammunition are also licensed for security
reasons.  In addition, import licences are issued for boats and aquatic apparatus by the Department of
Minerals, Energy and Water Affairs, and for imports of second-hand goods, such as motor vehicles
and clothing.  The Ministry of Environment, Wildlife and Tourism licenses imports of endangered
species covered by the Convention on International Trade in Endangered Species of Wild Fauna and
Flora (CITES).  In general, imports of agricultural products and plants require approval from the
Ministry of Agriculture in the form of a permit, for sanitary and phytosanitary reasons.
14. Imports of fresh pork are banned; import permits are granted only on processed pork
products.  Poultry imports are permitted only when there is a shortfall of poultry products in the
domestic market.  Imports of some vegetables, meat, and dairy products are seasonally banned.
Import prohibitions apply to goods such as obscene material and environmentally hazardous products,
such as toxic or radio-active waste, mainly to protect health, safety, and morality.
(iii) Standards and other technical requirements
15. The Botswana Bureau of Standards was established in 1997 (Standards Act No. 16, 1995) and
is responsible for standardization and quality assurance, through testing, including of imports,
industrial metrology, quality and environmental management systems.  The Bureau, headed by a 12-
member Standards Council, is a member of the International Organization for Standardization (ISO).It is the national contact point for SADC standard ization programmes and the national inquiry point
under the WTO TBT Agreement.  The Bureau participates in international and regional
standardization initiatives.
16. Technical committees, whose members represent various key stakeholders, set standards,
coordinated by the Bureau.  The number of technical committees has increased from eight in 1998-99to 42 in December 2002;  the number of approved standards rose from 30 to 167 over this period.  In
principle, all product standards that affect health, safety, and the environment are mandatory, such as
on animal feeds and the handling, transportation, and storage of liquefied petroleum gas.  The Bureau
also maintains microbiological specifications for raw and processed milk, to protect human safety.
36
                                                     
36 WTO document G/SPS/N/BWA/3, 29 October 1997.SACU-Botswana WT/TPR/S/114/BWA
Page A1-73
All other standards are voluntary.  Recent efforts have focused on formulating standards in agriculture
and foodstuffs, chemicals, building and construction, electronic and electrical products, mechanical
engineering, the environment, and clothing and textiles.  Labelling, presentation and advertising
requirements were adopted in 2000 for pre-packaged consumer goods (BOS 9: 2000).
17. The Bureau is developing Quality Management Systems, and recently introduced a Standards
Mark for product certification.  This relies on a combination of type testing, assessment of factoryquality systems, and surveillance, including testin g of samples from the factory and the market.  If
acceptable, the Bureau issues a licence to use the Standards Mark; a separate application is needed for
each standard and factory.  A Batch Certification Scheme also operates to certify that a batch of
products meet the client’s specifications.
18. Standards are based on international norms, such as ISO and IEC, and those of Botswana’s
major trading partners, especially South Africa.  Botswana’s conformity testing infrastructure is
limited.  It is developing a National Testing System comprising all testing laboratories, led by the
National Testing System Advisory Committee, with  the Bureau as coordinator.  The National
Metrology System, comprising all calibration facilities and led by the National Metrology System
Advisory Committee, again with the Bureau as coordinator, is also being put in place.  Botswanarecognizes foreign results and standards, and uses foreign accredited laboratories to conduct testing
not available domestically.  It has not signed any mutual recognition agreements, but is collaborating
with SADC countries to develop a regional body fo r accreditation of conformity assessment facilities
(SADCA), which would allow mutual recognition am ong all members.  Botswana has accepted the
Code of Good Practice for the Preparation, Adoption and Application of Standards contained in
Annex 3 of the WTO TBT Agreement.
37  Under the new SACU agreement, Botswana and other
members have agreed to strive to harmonize product standards and technical regulations (MainReport, Chapter II).
19.  SPS provisions, handled by the Department of Agricultural Research under the Pest and
Disease Act of 1959, apply to agricultural imports.  Health restrictions apply to imports of seeds,
bulbs, and plants.  Imports of all plants and plant products require a Plant Import Permit, but there are
no specific regulations governing their movement.  Cereal imports must be declared free from diseasee.g. grain borer and Khapra beetle.  According to authorities, Botswana’s compliance with the WTO
SPS Agreement is very low, due to a lack of technical expertise and obsolete legislation.  The
Agrochemical Act, although enacted, is not yet fully implemented.
(iv) Government procurement
20. The Public Procurement and Asset Disposal Board (PPADB) was established as an
independent statutory body to manage public procur ement.  It took over the procurement functions
carried out by the Central Tender Board of the Ministry of Finance and Development Planning, and is
responsible for procurement by all entities (Public Procurement and Asset Disposal Act No. 10 of
2001).
38  The Board adjudicates and awards tenders based on the evaluation report and
recommendation of the procuring (or disposing) entity.  The entity conducts the evaluation using"suitably qualified staff" or third-party procurement agencies.  To be eligible for procurement (and
disposal) contracts, parties domiciled in Botswana must be registered (section 118); this requires
contractors to be licensed or incorporated under the relevant laws of Botswana (section 117).  Foreign
                                                     
37 WTO document G/TBT/CS/N/109, 31 August 1999.
38 Procurement using government funds by entities outside the scope of the legislation, such as
parastatals, local authorities, private companies, n on-government bodies, charities and trusts, must be in
accordance with the Act’s provisions (section 8).WT/TPR/S/114/BWA Trade Policy Review
Page A1-74
firms can register as contractors, subject to provisions reserving certain grades of activities for citizen
firms (Part VIII of the Act). In pursuing its economic and social objectives, the Government may
introduce reservation and preference schemes for citizens provided they are: targeted and time bound;
phased in and out; non-discriminatory between targeted groups or grades of contractors; based on
competition among eligible contractors; have clear quantifiable objectives;  contain benchmarks to
assess progress (section 66(1));  and the costs are calculated relative to the costs of unrestrictedprocurement (or disposal).  All tenders, irrespective  of value, may be subject to such arrangements.
21. For construction, registered companies are classified into various grades based on company
size and ownership.  Small-scale work (below P 350,000 for grade OC contractor, P 900,000 for grade
A contractor and P 1.8 million for grade B contractor) is reserved for citizens.  Larger jobs (grades C
and D with values up to P 4 million and P 8 million, respectively) are reserved for citizens or jointventures with majority domestic ownership.  The larg est jobs (grade E, over P 8 million) are open to
foreign suppliers.
22. The Local Procurement Programme (LPP) is an example of a preference scheme applied
under the procurement legislation.  It was introduced on a three-year pilot basis in 1997 to help local
firms to access public procurement.
39  The LPP was evaluated in November 2000, and extended to
include services and to cover also procurement by local authorities and parastatals.  The programme
requires that 30% of annual public purchases of goods and services be from eligible firms, which can
be either local or foreign owned.  Eligible firms must be registered annually with the Ministry of
Trade and Industry (Department of Industrial Affairs) and have at least 25% local content, defined as
annual sales revenue less foreign content, including imported raw materials, petroleum fuels, and
services and labour supplied by non-citizens.40  The firms must be properly licensed, and their
products must meet the Bureau of Standard’s requirements or any other recognized standards.41
23. An eligible firm must also meet at least two of the following: have an annual turnover of
between P 200,000 and P 5 million; employ between ten and 200 staff; or have total machinery
investment of P 50,000 to P 5 million.  The procurement agency issues one tender specifying that 30%
will be exclusively reserved for bidding by LPP certificate holders and 70% will be open to
competition from all suppliers, i.e. both LPP certificate holders and non-LPP certificate holders.  LPPbidders must submit the same price when bidding for the same product under the 70% share of the
procurement that is open to competition.
42  Where there are no LPP certificate holders or when they
do not satisfy the requirements on which tenders are to be evaluated, such as price, quality, timely
delivery or other specifications, the tender is awarded to non-certificate holders.
24. The Local Procurement Monitoring Committee, which includes the PPADB, government
departments, and private-sector representatives, monitors the procurement of all authorities to ensure
that the LPP is implemented effectively and that eligibility criteria for qualifying companies are
                                                     
39 It replaced the Local Preference Scheme (LPS), which provided domestic suppliers a 40% price
preference over foreign providers on their local content.
40 Also included as foreign content are:  deprecia tion on imported machinery, dividends, and rent paid
to non-citizens, and interest and loan amortization payments to non-citizens or to institutions not registeredunder the Financial Institutions Act.  Non-citizens include majority-owned foreign companies.
41 The Industrial Development Act requires all firms to be licensed, except citizen companies
employing less than ten people.
42 Ministry of Trade, Industry, Wildlife and Tourism (2002b), p. 8.SACU-Botswana WT/TPR/S/114/BWA
Page A1-75
enforced.  It also hears disputes between procurement agencies and LPP holders and ensures that the
LPP remains within the "framework of the WTO".43
25. Tendering procedures are being revised, including introduction of a standardized bidding
package and a new computerized system of registering suppliers.  The PPADB is yet to approve such
proposals.  The Government initiated a Quality Improvement Project designed to improve production
quality of local manufacturers, especially small an d medium-sized enterprises, to enable them to
participate more successfully in public procurement.  Two pilot sectors were selected: garments, and
concrete products.  Entrepreneurs are provided non-financial support.  The Project is about to be
extended to other industries.  A four-member Independent Complaints Review Committee has been
established to hear procurement complaints.  The Finance Minister appoints Committee members
from the public and private sector.  It deals with challenges arising from any part of the procurementcycle, including complaints by contractors relating to registration classifications and awards made by
the PPADB or its committees (section 103).
26. Botswana does not intend to become a member or observer of the WTO plurilateral
Agreement on Government Procurement.
(v) Local-content requirements
27. A local content of at least 25% is among the criteria for firms to be eligible for a 30% share
under the Local Procurement Programme (section (iv) above).
(vi) Other measures
28. Botswana has no official countertrade or offset arrangements, or agreements designed to
influence the quantity or value of goods and services exported to Botswana.
29. Botswana has no trade sanctions in force.
30. Botswana has strategic reserve stocks in grains and petroleum products.  The Botswana
Agricultural Marketing Board holds grain reserves.  Under the Government’s Oil Storage
Development Programme, strategic fuel storage faci lities, constructed at Gaborone and Francistown,
maintain stocks equivalent to 90 days of national consumption.
(3) M
EASURES DIRECTLY AFFECTING EXPORTS
(i) Registration and taxes
31. The same registration procedures apply to both importers and exporters (section (2)(i) above).
All commercial exports require an Export Declaration Form.
32. An export tax applies to beef.
(ii) Export prohibitions, controls, and licensing
33. Export licences are required for all exports, incl uding to SACU members, for "food security",
sanitary and phytosanitary, and statistical reasons, and under international conventions to which
Botswana is a signatory.
                                                     
43 Ministry of Trade, Industry, Wildlife and Tourism (2002b), p. 7.WT/TPR/S/114/BWA Trade Policy Review
Page A1-76
34. No government restrictions apply to the export of rough diamonds.  However, such exports
have, on occasions, been affected by the terms of commercial agreements governing the sale of
diamonds by Debswana (currently Botswana’s only diamond producer, in which the Government
holds a 50% stake with De Beers) to the Diamond Trading Company (DTC), an international cartel
operated by De Beers, which is the exclusive purchaser of Debswana’s output.  The sales
arrangements provide for the stockpiling of diamonds by Debswana during periods when supplyexceeds demand at ruling prices, in the form of export quotas set by the DTC.  The Government does
not sanction these quotas.  Legislation is about to be introduced to enforce restrictions under the
United Nation’s Kimberley Process International Certification Scheme to control trade in "conflict"
diamonds (Chapter IV(2)(ii)).  This will require all rough diamonds exported from Botswana to have
a valid Kimberley Process Certificate (all imports must also have a valid certificate issued by theexporting country).
(iii) Export subsidies, finance, and assistance
35. Botswana operates a number of schemes providing tariff exemptions and concessions on
imported inputs used in exports to non-SACU markets.
44 A duty credit certificate scheme, introduced
in 1993, provides duty credits to enable imports, at reduced customs duties, of inputs used in themanufacture and export of specified textile and cl othing products, to non-SACU members; firms must
have exported for a minimum of one year to be eligible.  The duty credit is set at a percentage of the
value of exports, and varies across products; credits are allowed against duties paid on importation of
certain textile and clothing products.
45  The scheme is aimed at increasing the international
competitiveness of exporters of eligible products.46  Six firms currently benefit from the scheme;
exports covered are blankets, T-shirts, jerseys, household textiles, jeans, and duvets.
36. Industrial rebates for specific exporting industries, such as food, textiles, and beverages, and
general rebates of customs duties for exclusive exporters, also apply.  Rebates cover components and
materials used in the manufacture, processing or packaging of goods exclusively for export.  The
participant should intend to manufacture the material imported under the scheme as goods for export,
and the imported material cannot be sold domestically or within SACU (without prior permission
from the Department of Customs and Excise).  All export earnings must be repatriated to Botswana.Duty drawback on capital equipment and manufactur ed inputs used in exports exists, mainly for
irregular exports.  Such claims must be made within one month from the date of export and take up to
three months to be paid.
37. SACU members are to harmonize their duty and tax concessions (rebates, refunds, and
drawbacks of customs duties on imports) as requ ired by the 1969 and the 2002 SACU agreement
(Main Report, Chapter II(2)).
38. The Export Credit Insurance and Guarantee Company (BECI) provides export insurance
covering pre- and post-shipment credit.  It was es tablished in 1996 as a wholly owned subsidiary of
the Botswana Development Corporation.  It offers insurance against non-payment  by foreign buyers
resulting from commercial risk (default and insolvency) and political risk (transfer delays, strikes, waror import restrictions that prevent entry in the buying country).  While BECI carries all insured
                                                     
44 To be eligible exporters must be registered with the Department of Customs and Excise.
45 The percentages used to determine the amount of duty credit are 25% of the export value for clothing
and accessories, 8% for yarns, 17.5% for household textiles, and 12.5% for fabrics and other textiles.
46 The scheme covers clothing and clothing accessori es (tariff headings 61.01 to 61.17 and 62.01 to
62.17); household textiles (63.01 to 63.04); fabrics and other textiles (several items in 51 to 56 and 58 to 60);
and yarns (51.06 to 51.10, 52.04 to 52.07, 54.01 to 54.06 and 55.08 to 55.11).SACU-Botswana WT/TPR/S/114/BWA
Page A1-77
commercial risks, the Government has reinsured its political risks since 1997 (Political Risk
Reinsurance Act 1997).  Goods and services are elig ible.  Exports covered include steel, optical and
computer equipment, textiles, and motor component s to countries such as South Africa, Namibia,
Kenya, and the United States.  Since its inception, the BECI has covered exports totalling P 174
million (to June 2002).  BECI has recently extended its insurance business to cover non-payment risks
on domestic credit sales.  It also offers an export financing scheme to its policy holders wherebyBECI guarantees their bridging finance from commercial banks.  The Ministry of Trade and Industry
is currently examining a proposal for government involvement in the scheme.
39. Export promotion is mainly the responsibility of the Botswana Export Development and
Investment Authority (BEDIA), established in 1998.  It arranges participation of manufacturing
enterprises in regional and international exhibitions.  It also conducts overseas market research aimedat finding export markets for Botswana-made products. BEDIA is also responsible for promoting
Botswana as a viable location for foreign direct investment, and encourages joint ventures between
foreign investors and citizen entrepreneurs.
(4) M
EASURES AFFECTING PRODUCTION AND TRADE
(i) Incentives
40. The Government funds a number of assistance schemes under its industrial policy of
promoting export-led industrialization and the economic empowerment of Botswana’s citizens.  The
main scheme was the Financial Assistance Policy (F AP), started in 1982, to encourage investment and
employment, mainly in manufacturing, but also in agriculture (apart from cattle and dry-land
farming), small-scale mining, and more recently certain services, such as tourism.  Increasingly, the
assistance, by way of grants based on the number of jobs created by the project, had moved from
small business ventures to large-scale projects.
41. Following an evaluation of FAP in 2000, which found that there was it fraud, abuse and
inadequate monitoring and administrative capacities, especially for small-scale activities, both FAP
and Small Business Finance (MBF) ceased in June 2001 to be replaced by the newly established
Citizen Entrepreneurship Development Agency (CEDA).47  All approved projects financed under FAP
and MBF were transferred to CEDA for monitoring and management until expiry of their agreements.CEDAs operations are designed to increase the economic empowerment of citizens by providing
training, mentoring, monitoring, and concessional loans (instead of the previous FAP grants) to
citizen-owned businesses to develop entrepreneurial skills.  The 2002-03 budget allocation was
P 250 million.  CEDA provides concessional loans at 5% interest rate for small projects (loans of
between P 500 and P 150,000) and 7.5% for medium-scale projects (loans from P 150,000 up to P2 million).  By end-December 2001, 126 applications, valued at P 74 million, had been approved.
The Government announced several administrative procedures in the 2002-03 Budget designed to
accelerate the processing processing of applications.  It is also establishing a Venture Capital Fund
(VCF) to provide equity and/or loans to joint ventures between citizens and foreign investors.
42. Government policy on small, medium and micro enterprises (SMMEs) was introduced in late
1998 following the recommendations of a SMME Task Force.
48  Apart from the introduction of the
                                                     
47 The review found that 75% of small-scale FAP projects failed to survive past the period of
assistance.  The corresponding rates for medium- and large-scale projects were 45% and 35%.
48 There are an estimated 50,000 micro-enterprises (annual turnover of below P60,000) in Botswana;
6,000 small enterprises (annual turnover below P1.5 million); and 400 to 500 medium enterprises (annual
turnover under P5 million).  See BIDPA (1998).WT/TPR/S/114/BWA Trade Policy Review
Page A1-78
micro-credit scheme, a credit guarantee scheme was implemented through the banks to provide partial
guarantees of up to 60% for bank loans from P10,000 to P250,000.  It is currently being reviewed.  A
new institutional framework for SMMEs was also implemented by the Small Business Act, which
established the Small Business Council, an autonomous mainly private-sector-based body to advise
government on policies including monitoring prog rammes, and identifying regulatory and licensing
changes to facilitate SMMEs.  The Council is supported by the Small Business Promotion Agency, aSecretariat in the Ministry of Trade and Industry.  All business activities, except majority-owned
citizen companies employing more than ten staff must be licensed.
49
43. The Citizen Entrepreneur Mortgage Assi stance Equity Fund (CEMAEF), a Government
citizen-assistance scheme, was established to intervene and empower citizen investors in the property
market.  The Fund provides equity finance to eligible citizens or wholly citizen-owned propertycompanies facing loan foreclosure by financial institutions.  It operates on commercial lines to rescue
financially distressed entities that hold properties (commercial, industrial, and residential).  The Fund
is administered by a Trust that has been manage d by the Botswana Development Corporation since
May 2001.  The Trust purchases shares in qualifying companies for future disposal.   As at
December 2001, five applications had been approved, valued at P 15 million.
44. The Minister of Finance and Development Planning may also authorize Development
Approval Orders granting tax relief, such as tax holidays, and/or education training grants for specific
projects.  Such projects must benefit the economy or contribute to the economic advancement of
citizens.  Applications are assessed on a case-by-case basis according to the applicants' job-creation
prospects, training plans for citizens, plans to localize non-citizen positions, citizen participation in
management, citizens’ equity, investment location, flow on effects for other economic activities, and
effects on reducing consumer prices.  Registered manufacturing activities under the ManufacturingDevelopment Order of 1996 are taxed at a reduced rate of 15% instead of the standard company rate
of 25%, whether exporting or supplying the domestic market, and this was amended to include milling
and bricklaying.
45. The Government also periodically provides emergency funding to firms experiencing severe
financial difficulties.  For example, P 145 million was provided in May 2001 and a further P 150million in November 2001 to the copper-nickel mining company, Bamangwato Concessions Limited
(BCL).
50
46. Under the 2002 SACU agreement, members ar e to develop common policies on industrial
development.  According to the auth orities, this is expected to take into account the different stages of
development, economic structures, size, and resource endowments of members, as recognized in thedraft industrial development policy among SADC me mbers.  Botswana believes SACU should adopt
the SADC approach, to ensure steady progress towards harmonizing selected strategies.
                                                     
49 Trade and Liquor Act of 1986, as amended.  Many of the recommendations of the Task Force,
including especially the deregulation, de-licensing, an d de-zoning proposals and opening of reserved activities
to foreign participation, were not implemented.  However, the Government is in the process of separating the1986 legislation into two separate Acts aimed at libera lizing the trading system to  promote competition.  The
Government also intends to introduce new companies legislation during 2002-03.
50 BCL also received an emergency government loan to meet its operating costs in 1998.SACU-Botswana WT/TPR/S/114/BWA
Page A1-79
47. Farmers benefit periodically from emergency drought relief and other forms of domestic
support, such as the free distribution of seeds and medicines for livestock, including Green Box
measures notified to the WTO.51
(ii) Assistance for research and development
48. The Government assists farmers with research and agricultural extension services, particularly
those located in communal areas.
49. The Rural Industries Promotion Company (RIP CO) promotes industrial development and
employment in rural areas by assisting in the dissemination of technology.  It is aimed at achieving
self-sufficiency in developing technology to reduce reliance on imports.  RIPCO works closely with
the Rural Industries Innovation Centre.  RIPCO, for example, was involved with two plants
manufacturing nails and pelletized animal feeds in 2001, and transferred technologies to the privatesector for the manufacture of a maize sheller and a multi-purpose thresher.  Some 18 companies
participated during 2001-02 in RIPCO technologies, valued at P3 million.
50. The government-funded Botswana Technology Centre (BOTEC), established in 1979, fosters
industrial and scientific development through research and technology innovation in collaboration
with the private sector.  The Government adopted a science and technology policy in July 1998,which involved the formation of the National Commission on Science and Technology (NCST) in
2002.  It is the supreme advisory body to the Government.  Specific responsibilities include providing
policy guidelines for the establishment of a new Science and Technology Research Development
System; promoting linkages with other sectoral pr ogrammes and policies; advising the Government
on priority research areas; and encouraging business to invest in research and development.  It is also
intended to create a Botswana Research, Science and Technology Investment Agency as the main
funding body for the recommended National Priorities Research Fund, Non-Targeted Research Fund,and the Technology Development Fund.  It will also provide advisory functions for coordination
between the Operational Research Fund, the Education Research Fund, and any other funds.
(iii) State-owned enterprises and privatization
51. There are a number of state-owned enterprises or parastatals in Botswana.  They cover de
facto or de jure  monopolies that provide key utilities, including electricity and certain
telecommunications, and other services, such as air and rail transport.  The parastatal Botswana Meat
Commission has a monopoly on beef exports; it has the only EU-approved slaughtering facility.  The
veterinary authority renews the Commission’s export and meat-processing licences annually.  Exports
of live animals are sanctioned by the Minister of Agriculture.   Parastatals also compete commercially
with private companies, for example, in the financ ial services subsector.  Many private firms also
have indirect state ownership through equity  investments by the commercially run, Botswana
Development Corporation.
52  The Botswana Agricultural Marketing Board's import monopoly on
sorghum was eliminated in 1992; it now engages main ly in trading grains, including maintaining grain
reserves, and supplying farm inputs (imported fetilizers, seeds, and poultry feed).53  It has 26
marketing facilities with storage capacity of 140,000 tonnes; 30,000 tonnes are earmarked for
                                                     
51 WTO document G/AG/N/BWA/5, 15 April 1997.
52 The Corporation is the largest state-owned entity and provides long-term loans and guarantees.  It is
involved in various activities, including property develo pment and hostelry.  Its board comprises representatives
of both the public and private sectors.
53 Botswana notified to the WTO in 1997 that it had no state-trading enterprises within the meaning of
Article XVII:4(a) of the GATT 1994.  WTO document G/STR/N/1/BWA, 7 February 1997.WT/TPR/S/114/BWA Trade Policy Review
Page A1-80
strategic reserves.  Most cereals are sourced locally; grains are imported only when there is a shortfall
in domestic production.
52. Some parastatals have performed poorly, relying on substantial government financial support,
especially loans.  The Public Debt Service Fund (PDSF), initially established in 1973 to service the
public debt, increasingly provided informal concessional loan capital to parastatals, which submitted
requests annually to the Government for capital projects.  Such outstanding loans represented over11% of GDP at end-March 1997.
54  The Government recently raised interest rates on these loans to
near commercial levels, and tightened administrative and drawdown procedures to curtail new
lending.  Outstanding loans from this facility declined accordingly from P 2.168 billion at end-March
1994 (equivalent to almost 20% of GDP) to P 1.522 billion at end-March 2001 (5% of GDP).  The
Government also intends to guarantee debt servic ing of outstanding PDSF loans and to sell them to
private financial institutions through open tender, expecting buyers to convert the loans to marketable
securities for sale on the stock exchange.55
53. The Government announced a Privatization Policy in April 2000 aimed at divesting partially
or fully some 15 parastatals as a means of increasing efficiency and performance.56  The autonomous
Public Enterprise and Privatization Agency was established as a registered company to oversee thepolicy’s implementation and to monitor parastatal performance.  It reports to the Finance Minister and
is preparing a master plan and identifying priori ties for privatization.  The plan will indicate the
privatization methods to be used, the extent of foreign participation and any mechanisms for
promoting citizen ownership.  Privatization is expected to be through share listings on the stock
exchange; foreign participation will be encouraged.
57  The Government may establish an investment
trust fund to purchase shares for later selling to citizens in small lots.
54. Little privatization has taken place.  Although it would improve the economy’s efficiency,
especially where accompanied by improved competition from deregulation of parastatals, the
Government wishes to ensure that privatization does not result in private-sector monopolies being
formed.  Another setback was the suspension, in early 2002, of the privatization of Air Botswana,
until the international business aviation environment improved;  it was due to be completed by end
2001.
(iv) Competition policy and price controls
55. Under the new SACU agreement, members are encouraged to develop competition policies.
Botswana does not have legislation on competition per se.  Consumer protection regulations were
gazetted in 2001, following enactment of the Cons umer Protection Act, 1998 (Act No. 21).  The
regulations outline the procedures for consumer protection, including on lodging complaints andinvestigation.  Consumer protection is the respons ibility of the Department of Trade and Industry.
                                                     
54 World Bank (1999), p.22.
55 Budget Speech 2002, p. 23.
56 The Eighth National Development Plan referred to the introduction of a privatization scheme.  The
parastatals listed for privatization in the Government's white paper included Botswana Railways, BotswanaTelecommunications Corporation, Botswana Postal Services, Air Botswana, Botswana DevelopmentCorporation, the National Development Bank, Botswana Building Society, Botswana Savings Bank, BotswanaMeat Commission, and the Botswana Agricultural Marketing Board.
57 Some reports indicate that local investors may be given preference, and that foreign equity limits
may be set for strategic or other reasons on a case-by-case basis.SACU-Botswana WT/TPR/S/114/BWA
Page A1-81
The Government intends to implement a Competition Law as part of its privatization policy, to
prevent anti-competitive practices.58  A competition policy is being drafted.
56. The only product prices currently set by the Government are retail levels and profit margins
for petroleum products (Control of Goods, Prices and Other Charges Act).  All petroleum products are
imported, mainly from South Africa, and the Government believes that price controls are necessary
due to the limited number of suppliers.  The Petroleum Management Unit, responsible for the pricecontrols, was transferred from Ministry of Trade and Industry to the Ministry of Minerals, Energy and
Water Affairs.  The Botswana Agricultural Marketing Board also sets minimum producer prices on
cereals and pulses on the basis of import parity.
(v) Protection of intellectual property rights
57. Botswana has taken important steps to comply with the requirements under the WTO TRIPS
Agreement.  New copyright legislation was passed in March 2000 to replace the 1965 legislation,  and
industrial property protection provided under the Industrial Property Law of 1996 (and accompanying
1997 regulations) was amended in 1997 (Industrial property (Amendment) Act No. 19).
59  In 1998,
Botswana became a member of the Berne and the Paris Conventions.  It is also a member of the
World Intellectual Property Organization (WIPO), and a founding member of the African Regional
Industrial Property Organization.  Botswana has not notified to the WTO any contact points under the
TRIPS Agreement.60  The WTO Council for TRIPS reviewed Botswana’s intellectual property
legislation in 2001.
(a) Copyright and neighbouring rights
58. The Copyright and Neighbouring Rights Act No. 8 of 2000 protects literary, artistic and
musical works embodied in such mediums as films, sound recordings, broadcasts and published
editions, by providing exclusive rights to the ow ner as required by the Berne Convention.  Computer
programs, databases or compilations of data are protected as "literary works".  Performers also have
exclusive rights to broadcast or communicate to the public, to make fixations and reproductions.
Copyright is protected for the life of the author plus 50 years.  Performers and producers of sound
recordings receive the same protection.  Rental rights are recognized, and specified according to the
type of work, such as for phonograms, computer programs, databases, and cinematographic works.General exemptions or limitations to exclusive rights are in accordance with international
conventions, such as for personal or educational purposes.  Retroactive protection is provided for
works protected under the previous legislation.
59. The right holder (including the licensee and the author or performer) may seek civil remedies
and criminal sanctions against infringements in Botswana’s standard courts.  Relief may take the formof injunctions restraining illegal activity and impounding or destruction of illegal works.  Imports of
unauthorized reproductions of any works relating to copyright are unlawful under the copyright
legislation, which requires customs officials to use their powers under the Customs and Excise Duty
Act to prohibit or destroy illegal imports.
61  Copyright infringements are prescribed as criminal
offences subject to penalties of imprisonment and/or fines, of up to ten years and P 20,000 for firstoffence, and of up to ten years and from P 30,000 to P 5 million for subsequent convictions.  The
Office of Registrar of Companies of the Ministry of Trade and Industry is developing the
                                                     
58 Ministry of Finance and Development Planning (2000), p.18.
59 WTO document IP/N/1/BWA/1, 19 February 2002.
60 WTO Document IP/N/3/Rev.6, 1 March 2002.
61 The customs legislation also allows for exports of counterfeit goods to be suspended.WT/TPR/S/114/BWA Trade Policy Review
Page A1-82
implementing regulations.  The Government plans to establish a Copyright Office to administer the
legislation and a Collecting Society to distribute royalties to right holders during 2002-03.  The
Government intended to ratify the WIPO Copy right Treaty and the WIPO Performances and
Phonograms Treaty during 2002.
(b) Industrial property rights
60. Industrial property legislation (Industrial Property Act No. 14 of 1996; Industrial Property
Regulations, Statutory Instrument No. 78 of 1997;  and Industrial Property (Amendment) Act No. 19
of 1997) provides protection for patents, trade marks, industrial designs, and utility models.  The
Industrial Property Office of the Ministry of Trade, Industry, Wildlife and Tourism administers the
legislation.  Any decision of the registrar or the Minister can be appealed to the High Court.
Patents61. Patents specifically cover inventions, whether products or processes, provided they are new,
involve an inventive step, and have an industrial application.  Patent protection is for 20 years from
the filing date.  The legislation provides for exclusions of patents, mainly for scientific discoveries,
diagnostic, therapeutic, and surgical methods for treatment of humans or animals, plants and animals
and essentially biological processes for their production, and inventions contrary to public order ormorality.  Patent holders have exclusive rights against making, selling or importing illegal products,
which are enforceable in the courts.  There are specific limited exceptions to exclusive rights, such as
experimental acts relating to a patented invention and right of prior use done in good faith.  Under the
new legislation, the Government may authorize compulsory non-exclusive licences (without the
holder’s consent), predominantly for domestic supply, when held to be in the public interest or to
remedy anti-competitive behaviour by the right holder, subject to payment of "equitable
remuneration".  Public interest covers national security, nutrition, health or the development of othervital sectors.  Compulsory licences can also be issu ed if the patent has been insufficiently used in
Botswana, or is not being "supplied on reasonable terms", as determined by the High Court.  Agreed
remuneration, set if necessary by the High Court, must be paid to the right holder.  Such action is only
possible where the applicant has taken "all reasonable steps" and failed to acquire the licence "on
reasonable terms", and after four years from the date of filing of the patent application or three yearsfrom when the patent was granted, whichever period expired last.
62
62. Remedies available to the right holder include damages or profits derived from the
infringement, injunctions restraining the illegal ac tivity, and destruction of illegal works.  Criminal
penalties comprise fines of between P 2 million a nd P 5 million and/or imprisonment of six months to
two years.  The burden of proof is reversed (on the defendant) in civil proceedings relating to the
infringement of process patents where the product is new or there is a "substantial likelihood that the
product was made by the process and the patent holder has been unable, through reasonable efforts, to
determine the process".  The Government intends to amend the legislation to make such conditions for
granting unauthorized patent use fully WTO-compliant.  Imports are considered as "working a
patent"; compulsory licences cannot be granted where the product is being imported since thelegislation allows a licence to be granted only where the market is not being supplied on reasonable
terms.
Industrial designs and utility models
                                                     
62 The legislation does not define what is "reasonable"; this is determined in each case by the courts.SACU-Botswana WT/TPR/S/114/BWA
Page A1-83
63. The owner of a registered design may seek civil remedies for illegal use by way of damages,
or profits derived from infringements, injunctions against illegal activity and destruction of infringing
products.  The legislation extends protection of industrial designs in line with the Locarno Agreement
Establishing an International Classification for Industrial Designs.  Textile designs are covered.  The
registered owner of the design has exclusive rights of use, including importation.  There are no
provisions for issuing compulsory licences.  Registered industrial designs are protected for 15 years(five years initially, renewable twice).
64. Utility model certificates are granted to protect new and industrially applicable inventions for
seven years from the date of filing.
Trade marks and other distinctive signs
65. Protected trade marks include service marks and trade names, but not sound elements.  A
mark is defined to cover any visible sign capable of distinguishing goods and services of an
enterprise.  The legislation protects well-known marks by preventing registration of identical or
confusingly similar marks. However, in determining whether a trade mark is well known, it is unclear
whether knowledge of it by the public in the relevant sector, including through promotion of the mark,
is considered.  The Government intends to address this ambiguity in the next legislative amendments.The legislation maintains the registration period of trade marks at ten years, renewable indefinitely
every ten years, and a minimum period of non-continuous use of three years.  The registered owner of
a trade mark may take court action against unauthorized use.  Civil remedies cover damages or profits
derived from the infringement, injunctions against illegal use, and destruction of infringing products.
Criminal penalties do not apply to illegal use of trade marks.
Other industrial property rights
66. Current legislation does not cover geographical indications, layout designs (topographies) of
integrated circuits or protection of undisclosed information, including trade secrets.  Amendments to
the Industrial Property Act introducing these rights are expected in 2003-04.  Marks are not to be
registered under current legislation if "likely to mislead the public or trade circles, in particular as
regards the geographical origin of goods or services concerned, or their nature or characteristics".
67. No specific protection is provided for mi cro-organisms, non-essentially-biological or
microbiological processes.  Plants, animals, and es sentially biological processes are not excluded from
patentability.  Botswana is also developing a sui generis  system of protection for new plant varieties.
(c) Enforcement of intellectual property rights
68. Imports of illegal products are regulated by the customs legislation, while those infringing
trade marks or patents may be suspended pending legal action.  Such legal action takes place inBotswana’s ordinary civil courts, and may involve criminal prosecution and damages, injunctions, and
destruction of illegal works.  Courts may order interlocutory or temporary injunctions pending final
judgement.   In order to obtain evidence, the High Court may also instruct its legal officer to enter the
premises of the alleged infringer to seize the offending material and equipment (the "Anton Piller
Order").  Only the police have ex officio powers under the copyright and industrial propertylegislation.
69. There are no reported criminal prosecutions involving intellectual property enforcement or,
according to authorities, any reported cases of infringement.WT/TPR/S/114/BWA Trade Policy Review
Page A1-84
IV. TRADE POLICIES BY SECTOR
(1) OVERVIEW
1. Botswana is a small agrarian economy rich in minerals, especially diamonds.  Diamonds
account for most exports and government revenue, but much of the population relies on agriculture.
Although an exporter of beef, mainly to the EU under unfilled preferential quotas, Botswana is a net
food importer.  While food self-sufficiency was abandoned, food security remains a cornerstone ofgovernment policy.  Agricultural development is a high priority.  Long-standing farm-assistance
schemes and past price supports have been costly, with little effect on production.  Assistance is to
target "sustainable economic diversification" in agriculture and increased employment.  Production
and marketing functions are to be supplied privately, and prices market-determined.  Insecure land
title from communal farming, and a land market that is not "well-functioning" impair agriculturalproductivity and investment; land reforms are a high priority to address these concerns.
2. The Botswana Agricultural Marketing Board trades in cereals and manages the Government’s
strategic grain reserves, but it has minimal marketing, trade, and price support functions.  Trade in
sensitive products, such as import of cereals, are licensed.  The parastatal Botswana Meat
Commission has a statutory export monopoly.
3. Mineral revenue consists of dividends from government equity in some mining ventures,
company tax, and royalties (10%, 5% or 3%); profit-sharing arrangements seemingly apply to
diamonds.  Revised mining legislation has improved investor security and reduced administrative
uncertainties.  The Debswana Diamond Company, which is jointly owned by the State and De Beers,
mines and sells diamonds through Diamond Trading Company, the De Beers marketing arm. This is
an international cartel, which controlled supply by commercially setting export quotas in 2001.  The
Government controls trade in diamonds.  Mining of  other minerals, such as copper, nickel, and soda
ash, has had mixed success; one of the copper-nickel mines required emergency government funding
in 2001.  Government policy promotes mineral processing.  Petrol, diesel and paraffin prices are
controlled.
4. The 1998 Industrial Development Policy guides manufacturing policy, and is aimed at
expanding exports through productivity growth.  Dome stic processing (e.g. of minerals, timber, and
hides) is to be promoted.  Temporary infant industry protection, using prohibitive tariffs, was
previously provided to beer and soap producers, with limited success.  The garment industry is
expected to be boosted by the U.S. AGOA initiative s.  Manufacturing tariffs average 11.8%, but have
a high incidence of non- ad valorem duties.
5. Services have an important bearing on the economy’s performance.  GATS scheduled
commitments are minimal; Botswana did not participate in the WTO extended telecommunications
and financial services negotiations.  Although telecommunications was deregulated in 1996 and the
independent Botswana Telecommunications Authority was created to safeguard competition and
inter-connection to the public network, the stat e-owned company has a de facto monopoly as the sole
licensed supplier of basic telecommunications.  A second licence is being proposed.  Botswana’stelecommunications regime follows SADC principles.  A state monopoly exists over postal deliveries.
Foreign suppliers dominate the financial markets, including insurance and licences are issued on
prudential merit.  Prudential supervision is being strengthened.  The International Financial Services
Centre was created to promote international business, such as insurance.  Air Botswana’s privatization
was deferred.  Tourism is to be promoted by a Tourism Board and a Tourism Development Fund is to
help finance citizen-owned projects.SACU-Botswana WT/TPR/S/114/BWA
Page A1-85
(2) PRIMARY SECTOR
6. The main primary activities in Botswana are mining and agriculture.  These accounted for
37% of GDP in 2000/01, compared with 38% in 1995/ 96 (Chart IV.1).  During this period, the share
of mining rose from 34% to 35%, while the share of agriculture fell from 4% to 2%.  Minerals,
overwhelmingly diamonds, accounted for 90% of merchandise exports in 2000/01, from 89% in
1995/96.  However, the share of diamond exports rose  from 77% to 85%, while that of copper and
nickel declined from 11% to 3%.  Although a relatively minor contributor to GDP, agriculture
provides the livelihood for a substantial share of the population.
(i) Agriculture, livestock, and forestry
(a) Main features
7. While agriculture production varies depending upon climatic conditions, the sector’s share of
GDP has fallen substantially over the longer term .  In 1966, at independence, agriculture’s GDP share
was about 40%.  Its decline reflected the rapid growth of other sectors, especially mining, as well as
very poor performance in terms of productivity and output growth, despite considerable government
support, particularly for basic products such as eggs and milk.63  The dualistic agriculture sector
consists of commercial and traditional subsistence subsectors; each unedertakes both crop andlivestock activities.  Productivity in tradi tional farming is below commercial activities.
64  Commercial
                                                     
63 Bank of Botswana (2000), p. 68.
64 Bank of Botswana (2000), p. 69.Chart IV.1
Sectoral composition of GDP, 1995/96 and 2000/01
Per cent
Source : Botswana authorities.General 
Governemnt
14.9
Mining 
33.8
Manufacturing
4.3
Water and 
electricity
1.9Transport
3.6
Banking 
insurance and 
business
11.4
Trade and 
hotels
10.1Construction
6.2Social and personal 
services  4.3Adjustment 
items
5.2Agriculture
4.1
Total GDP: US$5.1 billion Total GDP:US$5.0 billion1995/96 2000/01
General 
Governemnt
15.9Mining 
35.0
Manufacturing
4.2
Water and 
electricity
2.4Transport
3.7
Banking 
insurance and 
business
10.8
Trade and 
hotels
10.9Construction
5.3Social and personal 
services  3.7Adjustment 
items
5.7Agriculture
2.4
Services
57.6Services
58.4Primary 
sector
37.9Primary 
sector
37.4WT/TPR/S/114/BWA Trade Policy Review
Page A1-86
agriculture covers about 30% of arable land, comprising mainly cattle grazing on freehold or leased
holdings.  The major subsistence crops are sorghum, maize, millet, and pulses.  Beans, groundnuts,
sunflowers, cotton, and horticultural crops, such as cabbages, tomatoes, and potatoes, are also grown.
Although the economic significance of subsistence agriculture is declining, it remains important for
many people, particularly in rural areas with few alternatives.65  While Botswana’s urbanization is
increasing, about half of its population still resides in rural areas, of which about half depends onagriculture for income.  Agriculture also accounts  for about 2% of formal and much more informal
employment.  Erratic rains limit rain-fed farming, and irrigation, which is restricted to a few relatively
large-scale commercial horticultural farms in Tuli  Block utilizing the Limpopo River, is constrained
by uncertain and scattered water resources.  Nevertheless, irrigated farming is seen to have potential
within existing water resources.
8. Botswana is about 20% self-sufficient in grains, 15% in vegetables, 25% in fruits and 3% in
dairy products.  It produces almost all of its poultry requirements, and is a net exporter of beef,
exporting some 90% of production, mainly of chilled and frozen beef to the EU under Cotonou
preferences, and to South Africa.
9. Food security remains a cornerstone of government policy, and agricultural development is a
high priority.  The Government abandoned food self-sufficiency in the early 1990s
66; it was seen as an
unrealistic policy objective, given Botswana’s resource endowments.  The Government released a
White Paper in 2002 on a National Master Plan for Arable Agriculture and Dairy Development.67  The
Government believes that long-standing schemes to  promote agriculture, including the Arable Lands
Development Programme (ALDEP), the Accelera ted Rainfed Arable Programme (ARAP), the
Service to Livestock Owners in Communal areas (S LOCA), the Bull Subsidy Scheme, and projects
funded under the Financial Assistance Policy (FAP), have been costly and had minimal success inexpanding output.  Total government support, for example, exceeded the arable subsectors’
contribution to GDP, and the cost of ALDEP was approximately twice the import parity value of
production.
68  Farming subsidies have generally been inefficient, subject to abuse, and poorly
targeted, often benefiting better-off farmers.  Such assistance schemes encouraged farmers to retain
small inefficient land plots rather than having them farmed by larger more efficient producers.  Pricesupport measures to raise farm prices significantly above import parity were also terminated because
they failed to increase production and to achieve self-sufficiency.
69
10. Other agricultural policy objectives are:  diversified production; increased employment; a
secure and productive environment for farmers; and conserving scarce agricultural and land
resources.70  Agricultural development is to be based on "sustainable economic diversification."
Production and marketing functions are to be privately supplied and prices left to market forces.  The
Government aims to develop policies to promote domestic and international competition within the
framework of existing trade agreements.  Subsidies are to be better targeted, monitored, and evaluated
                                                     
65 Report on the Review of the Rural Development Policy, prepared by the Botswana Institute for
Development Policy Analysis for the Ministry of Finance and Development Planning, Volume 3,
September 2001.
66 Bank of Botswana (2000), p. 73.
67 Government White Paper No. 1, 2002, National Master Plan for Arable Agriculture and Dairy
Development . This was based on an earlier consultant’s report (Ministry of Agriculture, 2000).
68 Government White Paper No. 1, 2002, pp. 4 and 7.
69 Ministry of Agriculture (2002), p. 3-2.  According to the Bank of Botswana, the practice of generally
avoiding policies to influence prices has been sound.  Bank of Botswana (2000), p. 72.
70 Government White Paper No. 1, 2002, p. 10.SACU-Botswana WT/TPR/S/114/BWA
Page A1-87
to ensure that farmers in most need are assisted.  Traditional rain-fed farms are uneconomical;  larger
and more mechanized farms of at least 40 hectares are required.
11. The Master Plan calls for substantial investment, including private, in agricultural production,
of well above P 0.5 billion (at 2001 prices) over ten years, with about one third to be spent on
irrigation facilities.71  Additional public expenditure of P 423 million on infrastructure, mainly roads
and telecommunications, is also envisaged.  Agricultural output is to be increased:  in particular,annual production of sorghum is expected to rise to 114,000-147,000 tonnes (a self-sufficiency ratio
of 100%); maize to 42,000-44,000 tonnes (self-sufficiency of 20%); vegetables to 43,000-
48,000 tonnes (75%);  and fruits to 64,000 tonnes, with half of output to be exported.  Cotton
production of some 18,000 to 24,000 tonnes is also projected, mainly in the Chobe district, and the
Government plans to construct a P 10 million cott on-ginning factory at Pandamatenga.  Traditional
farmers are to be encouraged to form groups to improve mechanization and farming techniques.  The
number of traditional farms is expected to fall from 63,000 to 15,000 over ten years.  Total arable land
suitable for rain-fed farming has been identified at 190,000 hectares.  It is planned to increase
irrigated land to about 5,400 hectares for horticulture, especially grapes, apples, citrus fruit, and olives
(mainly for EU markets), wheat, and fodder, using wells and mainly reclaimed urban wastewater and
sewerage.  In addition, it is planned to increase dairy production to 25 million litres, providing some
40% self-sufficiency.
12. The Government intends to provide financial assistance to enable traditional farmers to
become commercial farmers, including forming farm groups, and for commercial farmers to upgrade
technology and management levels.  Farmers are eligible for financial assistance, for example,
through the Citizen Entrepreneurship Developm ent Agency (CEDA) to commercialize farming
practices.  The Government will also encourage private insurance companies to establishcomprehensive self-financing crop insurance to cover agricultural losses.  The Master Plan’s
implementation is to be monitored by a unit specific ally created in the Ministry of Agriculture.  The
Government also revised its 1973 rural development policy in 2002 calling for a more integrated but
diversified approach to rural development in line with Vision 2016.
72  The revised policy objectives
are to reduce poverty, increase income generation opportunities, create employment and achievebroad-based, balanced, sustainable development.  Privatization is seen as a means of encouraging the
private sector to supply goods and services, which would improve efficiency and generate sustainable
rural employment.  Since rural development is vi ewed as one of the major means of alleviating
poverty, the national Strategy for Poverty Reduction in preparation will be a key instrument for rural
development.
13. Land reforms are a high government priority, and a new land policy is being formulated.  The
Agriculture Master Plan envisages improving farm lease arrangements, including consolidation and
leasing of agricultural land between farmers, to facilitate larger holdings.  Property rights on land are
to be clarified and strengthened for easier transfer and use as loan collateral.  Market forces will allow
tribal land to be sub-leased; current allocations of communal land by the Land Boards are inefficientand undermine its effective use.  The Government is also reviewing the National Water Master Plan.
                                                     
71 Projected spending depends upon the option chosen to develop rain-fed and irrigation farming.  The
Plan has two policy options.  The socially oriented policy involves intensive government intervention andsupport of traditional farming, while the economically oriented policy is based largely on private-sector
investment and larger farms of over 1,000 hectares.  The Ministry of Agriculture recommended that the socially
oriented policy be applied to most of the country.
72 Ministry of Finance and Development Planning (2002b).WT/TPR/S/114/BWA Trade Policy Review
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14. Tariffs on unprocessed agricultural commodities average 5.5%, and are predominantly ad
valorem , ranging from zero to 35% (Main Report, Chapter III(3)(ii)).  However, since unprocessed
agricultural commodities are largely non-traded (internationally), farmers in practice appropriate a
share of tariff protection afforded processed foodstuffs, through higher domestic prices for non-traded
farm outputs.
(b) Policy by product category
Main crops
15. Sorghum is the staple crop, but maize is also increasingly grown.  A cornerstone of
Botswana’s agricultural policies is to allow domestic prices for food grains to be at export parity for
exportable crops and import parity for importable crops.73  The Botswana Agricultural Marketing
Board (BAMB) is responsible for managing the Government’s strategic grain reserves, set at about30,000 tonnes.
74  Although the BAMB sets minimum producer prices, it has no compulsory
acquisition powers over farm production.
16. Imports of maize, wheat, sorghum and related products, pulses, fresh milk, major fruits (e.g.
oranges, watermelons) and vegetables (e.g. cabbages, choumollier, rape, spinach, potatoes, and
tomatoes) are restricted;  they require a permit from the Ministry of Agriculture.  This system isdesigned to protect an infant horticultural indust ry, which meets about 20% of requirements.  Import
permits are withheld when there is sufficient domestic production, but this usually lasts for only up to
a month.  The export restrictions on castor beans, groundnuts, maize and maize products, millet,
millet products, pulses, sorghum and sorghum products were lifted when the policy objective was
changed from food self-sufficiency to food security.  BAMB’s import monopoly on sorghum was
removed in 1992.  It no longer has any privileges for the import or export of agricultural products.
Livestock17. Beef processing represents some 80% of agricultural output.  The parastatal Botswana Meat
Commission (BMC) has a statutory export monopoly on meat, canned meat, and live cattle.  Its main
abattoir, located at Lobaste, includes a cannery producing corned beef for export, and a tannery.  A
small abattoir is also located at Francistown; the Maun abattoir is still closed.  BMC’s operating loss
in 2000 was P 21.6 million, up from P 7.1 in 1999.  Cattle-slaughter numbers in 2000 were among the
lowest, but rose to 169,000 in 2001; capacity utilization increased to 88% at the Lobatse abattoir and
to 54% at the Francistown abattoir.  A strategic review of BMC is being considered by Government.
Most beef is exported to the higher-priced EU market under Cotonou preferences, which provide
access at a reduced tariff for an annual quota of almost 19,000 tonnes; this quota is rarely, but
increasingly, filled (Chapter III).  Botswana is implementing the Livestock Identification and
Traceback System required by the EU for beef exports.  The first phase was completed in
August 2001, at a cost of P 29.5 million, and involved the development of a central database and
identifying cattle in two pilot districts.  The system is to be fully operational nationally during 2003, at
a total projected cost of over P 300 million.
18. The Ministry of Agriculture’s Department of Animal Health handles disease control.  Imports
of cloven-hoofed animals, their products, and feed  from South Africa are prohibited due to foot-and-
                                                     
73 Government White Paper No. 1, 2002, p. 10.
74 BAMB’s operations are being restructured in order to reduce losses.  Revised BAMB legislation is
due in 2002.SACU-Botswana WT/TPR/S/114/BWA
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mouth disease concerns.  Botswana also has other qu arantine bans.   The Animal Disease Act and six
laws on the livestock industry are under review.75
19. There are no quantitative restrictions, including licensing requirements, on imports of meat or
cattle, and private-sector imports are unrestricted, subject to meeting quarantine and other sanitary
requirements.
20. Botswana imports over 90% of its dairy requirements, including of fluid milk and milk
powder.  Imports of fresh milk are licensed and require a permit.
Forestry
21. Botswana has large areas of commercial forests and woodlands.  Licensed private operators
harvest forests and pay royalties.  Deforestation is a problem.  Improved inventories of timber
resources are being prepared, and new concessions may not be granted.  Forestry legislation androyalty payments are under review.
22. Tariffs on forestry and logging average 3%, and are all ad valorem , ranging from zero to 25%
(Main Report, Chapter III(3)).
(ii) Mining
23. Botswana’s mining industry consists mainly of diamonds; it is among the world’s top
producers of gem diamonds.  Other minerals include  copper-nickel matte, coal, soda ash, salt, and
small amounts of gold (Table IV.1).  Most minerals are exported.  The Government is also examining
the prospects of exporting coal.
76  The Ministry of Minerals, Energy and Water Resources
(Department of Mines) is responsible for mineral policy, aided by the inter-ministerial Mineral Policy
Committee.  The Mines and Minerals Act was revised in 1999 to increase the sector’s competitiveness
by, inter alia , improving security of tenure for investors by removing ministerial discretion, lowering
royalty rates, introducing retention licences that do not require immediate development and thatlengthen the time period (by six years) over which an investor can hold uneconomic deposits, and
streamlining licensing procedures to reduce administrative uncertainties.
77  It also facilitated
exploration and production of other minerals.  Other mining legislation is being revised.78
24. Mineral revenue, the main source of government receipts, rose from P 4.681 billion (69% of
total tax revenue), in 1997-98 to P 8.368 billion (67%), in 2000-01.  Almost all revenue is fromdiamond mining.
79  The main revenue components are dividends, company tax, and royalties.  The
Government holds 50% equity in diamond and soda ash mining, and 15% and 33% equity in the two
copper-nickel mining companies.  Where the Government’s equity share exceeds 15%, the additional
holding was purchased while the initial 15% equity was acquired free.  However, the free equity
policy has ceased.  Debswana Diamond Company recently acquired the Morupule Colliery, in which
                                                     
75 Botswana Review , 21st Edition, p. 88.
76 Budget Speech 2002, p. 25.  Coal is used by Botswana Power Corporation to generate power.
77 Botswana Review , 21st Edition, p. 60.
78 Other legislation includes the Mineral Rights in Tribal Territories Act, which deals with exploitation
of industrial minerals by various districts for domestic purposes; the Precious and Semi-Precious Stones(Protection) Act, which regulates dealings in precious and semi-precious stones; and the Petroleum (Explorationand Production) Act.
79 The two major non-diamond mining projects, copper-nickel and soda ash, have failed to achieve
their intended profitability due to technical and financial problems.WT/TPR/S/114/BWA Trade Policy Review
Page A1-90
the Government had no direct equity.  Mining companies are subject to the standard tax rate of 25%.
Royalties on mineral production are 10% of the gross market value for precious stones, petroleum,
and natural gas; 5% for precious metals; and 3% for all other minerals.  Profit-sharing arrangements
seemingly still have to be negotiated for diamond mining.80  Except for diamonds, the revised
legislation provides for automatic progression from exploration to mining. Retention licences also
allow prospectors to defer mining of uneconomic deposits for up to six years.
Table IV.1
Mineral production, 1997-01(P million and '000 tonnes, unless otherwise indicated)
Mineral 1997 1998 1999 2000 2001
Diamonds
  V o l u m e  ( m i l l i o n  c a r a t s ) 2 02 02 12 52 6
Copper-nickel matte
  Value 759 456 558 801 ..
  Volume 42 37 39 46 31
  Unit value (pula per tonne) 18,201 12,343 14,195 17,595 ..
Coal
  V a l u e 2 53 02 63 0 . .
  Volume 775 924 945 947 702
  Unit value (pula per tonne) 32 32 27 31 ..
Soda ash
  Value 132 137 106 122 ..
  Volume 200 190 229 190 177
  Unit value 658 720 463 639 ..
Salt
  V a l u e 3 73 01 93 2 . .
  Volume 185 140 168 185 126
  Unit value 202 212 115 175 ..
.. Not available.
Source: Botswana Central Statistics Office.
25. Debswana Diamond Company Pty Ltd, currently the only diamond producer, is an equal joint
venture between the Government and De Beers.  Debswana has been the only company to discover
commercially viable diamond deposits.  There are no restrictions prohibiting other companies from
mining diamonds and marketing them as they wish.  Other companies are exploring for diamonds.
Debswana’s diamonds are sold through De Beers’ marketing arm, the Diamond Trading Company (aninternational cartel).  Exports of unpolished diamonds are subject to certification under the United
Nation’s Kimberley Process International Certific ation System, from 1 January 2003, to exclude trade
in "conflict diamonds" by rebels from war-ravaged areas to finance their operations.  During 2001, the
diamond market was weak, and consequently De Beers reduced its purchases from Debswana and
some of its other suppliers in the form of export quotas.  When the market improved in 2002, De
Beers purchased all of Debswana’s production, including stocks accumulated in 2001.  International
diamond sales depend heavily on U.S. demand.  Although the diamond market was depressed in 2001and was facing an uncertain outlook depending on U.S. economic performance, Botswana maintained
higher production levels of, 26 million carats, in 2001.  A new Debswana mine, at Damtshaa near
Orapa, is expected to commence operations in 2003, and follows expansion of other mines at Jwaneng
and especially Orapa, where output has doubled in recent years.
                                                     
80 For example, Debswana has agreed to pay usual company taxes plus dividends on the State’s 50%
equity so that the overall government profit share is 75%.SACU-Botswana WT/TPR/S/114/BWA
Page A1-91
26. Nickel and copper production has performed poorly, partly due to recent depressed world
commodity prices, but also to technical problems, such as low-grade deposits for the main producer,
BCL Ltd.  It mines and smelts about 40,000 tonnes of copper-nickel matte annually for refining in
Zimbabwe and Norway.  BCL’s financial position deteriorated in 2001, and emergency government
funding was provided: P 145 million in May 2001 and P 150 million in November 2001.81  Due to
BCL’s deteriorating financial position, shareholders commissioned an independent review of itsoperations with a view to identifying operational problems and strategic issues to turn around the
company’s performance.  The review was completed in March 2002; on-going implementation of
recommendations is generating encouraging results.  The Tati Nickel Mining Company (15%
government owned) also mines copper-nickel ore at Phoenix and Selkirk.  The expanded Phoenix
mine, including construction of a concentrator, commenced operations in 2002.
27. Botswana Ash mines soda ash and salt at Sua Pan.  The company has had financial
difficulties, and was restructured in 1995 when Soda Ash Botswana (SAB) was liquidated.
82  I t s
future depends heavily on exports to South Africa, which face strong competition from U.S. exports
dutiable at a 10% tariff.
28. Government policy is to actively promote dow nstream processing of minerals, such as
diamond cutting.  It is also looking at the opportunities for further processing its salt and soda ash
resources, for example by establishing a local glass works.83
29. Tariffs on imports of minerals average 0.7%, and are all ad valorem , ranging from zero to
10% (Main Report, Chapter III(3)(ii)).  Tariffs on coal and oil imports are duty free.
(3) ENERGY
30. Energy policy objectives are to supply alternative sources of energy efficiently to households
at affordable prices, and in an environmentally friendly and sustainable way.   The Ministry ofMinerals, Energy and Water Resources formulates and coordinates national energy policies.  The
Master Energy Plan is based on Integrated Energy Planning (IEP) and the collective consideration of
all energy sources.  Botswana’s energy is dominated by wood fuel, followed by coal, petroleum, and
electricity.  All petroleum products are importe d, predominantly from South Africa.  Botswana
produces virtually all of its coal requirements, mainly for electricity generation.  The Governmentencourages the use of coal to replace firewood, but this is constrained by the low quality of domestic
coal.  A coal briquette plant is being considered, and the feasibility of coal beneficiation to improve
quality is being examined during 2002-03.
(i) Petroleum
31. The Ministry of Trade and Industry controls the retail prices of petrol, diesel, and illuminating
paraffin, along with profit margins (Control of G oods Prices and Other Charges Act).  Domestic retail
prices are based on the imported cost plus local taxes and levies, where applicable, and the industry
and dealer margins.  The Government believes that such controls are needed to safeguard consumers
against unscrupulous pricing by the limited number of suppliers.
                                                     
81 Budget Speech 2002, p. 24.  BCL also received an emergency government loan in 1998 ( Botswana
Review , 21st Edition, p. 66).
82 SAB’s shareholders repaid all outstanding state guaranteed loans, including P 135 million to the
Government.
83 Eight National Development Plan, p. 273.WT/TPR/S/114/BWA Trade Policy Review
Page A1-92
32. The Government requires strategic reserve stocks of petroleum products.
(ii) Electricity
33. The state-owned national electricity utility, Botswana Power Company (BPC), operates under
the Ministry of Minerals, Energy and Water Resources.  It has a monopoly over generation,
transmission, distribution, and importation of electricity under the Botswana Power Corporations Act
of 1971.  The mining industry, the largest consumer of electricity, accounts for about half ofconsumption; BCL alone uses about one third.  About 55% of Botswana’s electricity is imported,
mainly from the Southern African Power Pool (S APP), but also directly from South Africa,
Zimbabwe, and Zambia through regional interconnections to meet demand surges.  Domestic
production is mainly from a 132 MW thermal power base load station at Morupule.  A diesel
generating facility at Ghanzi was privately contracted in November 1999.  Electricity charges haveremained constant in the past five years, causing a real decline of almost 50%.
84  Th e Gov ernm ent
regulates tariffs; increases are limited to 50% of th e inflation rate, thereby ensuring declining real
prices.  Prices are based on cost-recovery and the Minister must approve increases.  Cross-subsidies
are likely to exist between urban and rural consumers.  Some 30% of the population has access to
electricity; 18% in rural areas.
34. Since 1992, the Government has not pursued self-sufficiency goals for power.  The
Memorandum of Understanding, signed in 1995, established the SAPP to facilitate electricity imports
from neighbours to diversify Botswana’s dependence on South Africa.  Government policy is to
continue importing cheaper power; it is expected that Botswana will import some 70% of its
electricity by 2007.85  Recent infrastructure expenditure has focused on improving cross-border
interconnections and associated transmission lines, for example, at the Phokoje sub-station in Selebi-
Phikwe, the main interconnection with the SAPP.  Nevertheless, the authorities are examining thedesirability of substantially increasing Botswana’s generation capacity and assessing the longer term
cost effectiveness of increasing its power self-sufficiency.  Transmission projects costing P 20 million
were undertaken in 1999-00.  The feasibility of expanding the facilities at Morupule is being
examined, and the construction of a major transmission line to Thamaga, costing an estimated P 150
million, is planned for 2003 to improve electricity supply to the country’s southern parts, followingopening of the Thamaga sub-station in March 2000.
35. Although the Master Energy Plan is to provide electricity at affordable prices, the government
increasingly requires parastatals, including BPC, to behave commercially.  Electricity demand has
increased substantially, as BPC’s customer base has expanded in line with government policies to
improve power access, especially in rural areas.  About 25% of the population uses electricity, but thisdrops to 3% in rural areas.  The state-funded Rural Electrification Project to connect 72 villages to the
grid, was due to be completed by end-2001.  In addition, rural consumers benefit from easier payment
terms on electricity connections under the Rural Electrification Collective Scheme.
86  Electricity is
mainly supplied in remote rural areas by centralized power supply systems (CPSS) run by the
Ministry of Works, Transport and Communications (the Department of Electrical and MechanicalServices) based on stand-alone diesel generators.  BPC connects them to the grid where public
demand is sufficient.
                                                     
84 Botswana Review , 21sr Edition, p. 143.
85 Morupule’s small capacity prevents it from realizin g the economies of scale of larger stations, such
as South Africa’s Matimba Station.  It has a long run cost of electricity of US$0.037 per kWh compared withUS$0.005 per kWh at Matimba.  See Eight National Development Plan , p. 219.
86 Individuals connecting pay 5% of the fee upfront and repay the rest to the Government over 15 years.
The scheme is administered by BPC on behalf of the Government.SACU-Botswana WT/TPR/S/114/BWA
Page A1-93
36. The Government has no plans to deregulate the electricity market.  However, it is undertaking
a preliminary study into restructuring the industry  and investigating the creation of an independent
regulator.  There are no immediate plans to privatize BPC.
37. The Government is examining the prospects of using solar energy.  The National Photovoltaic
Rural Electrification Programme establishes village installations, and the Photovoltaic Master Plan
provides a framework for promoting solar energy.
(4) MANUFACTURING
38. Manufacturing has remained at about 4-5% of GDP since the mid 1990s, and has had
relatively slow growth overall, fo llowing higher growth in earlier decades.  The structure of the sector
has changed substantially.  For example, the share of meat (mainly beef) products has fallen from
95% at independence (and 78% in 1972), to below 15%.87  At the same time, the share of other
foodstuffs, mainly dairy and bakery products and beverages has expanded, along with textiles,
chemical products, metal products, paper and paper products.  Food and beverages now account for
about half of manufactured output.  Other major e xports have been vehicles and textiles.  However,
Botswana’s motor vehicle production was set back in 2000 when the Hyundai motor plant, which
assembled imported semi-knocked down (SKD) kits, mainly for export to South Africa, closed.88
Other vehicle assemblers continue to import SKD kits from Scandia and Volvo.
39. The Industrial Development Policy (IDP), 1998, encourages greater productivity through
using skilled workers and modern technology, so as to expand efficient export industries.  It foresees
downstream processing possibilities in areas such as diamonds, salt, soda ash, timber, hides, and
skins, facilitated by the expansion of small-scale component manufacturers, including in rural areas,
to efficiently supply inputs.  The IDP also shifts the provision of incentives away from location-
specific to location-neutral measures.  It allows firms to establish their own capital-labour mix,without government intervention.  Skill development and training are a key priority of the IDP, and a
Botswana Training Authority is foreseen.  IDP also provided for exclusive manufacturing licences to
be eliminated by amending the Industrial Development Act, 1998; a draft amendment has been
prepared and will be presented to Cabinet after consultations with stakeholders.
40. Botswana has used infant industry tariff protection allowed under the SACU Agreement on
three occasions: for beer, soap and milled products (Chapter III(2)(i)).  The tariffs were set at high
levels, and accompanied by price controls to protect the consumer by linking the domestic price to
that of former imports from South Africa.  Infa nt industry protection has not proved effective in
creating new industries in Botswana, although the industries concerned, except milled products, have
generally adjusted to the removal of temporary protection.
89
41. The textiles industry has developed on the basis of exports.  Although exporters lost
competitiveness in Zimbabwe during the early 1990s, after its dollar depreciated and an origin
                                                     
87 Bank of Botswana (2000), p. 100.
88 It has been suggested that a major reason behind the plant’s closure was a decision in 1998 by South
Africa that required Hyundai to change its assembly operations from using imported semi-knocked-down (SKD)kits, subject to low tariffs under a special provision of the Common External Tariff, to using importedcompletely-knocked-down (CKD) kits, dutiable at a much higher tariff of 75%.  Hyundai agreed to change itsoperations, and subsequently closed.  See. Mpabanga (1997), p.377.  The Company also produced only 7,000units over two years, well under the annual break-even level of 15,000 units.  Loans and interest arrears were
not repaid to the Botswana Development Corporation.
89 See Clark Leith (1997), p.537.WT/TPR/S/114/BWA Trade Policy Review
Page A1-94
criterion in the bilateral agreement was increased from 20% to 25% (due to the waiver ending), they
were able to penetrate the South African market.  AGOA initiatives appear to be benefiting the
apparel industry.90  At least nine Botswana firms are eligible to export apparel to the United States
under these provisions; five are currently exporting.  These firms are expected to expand employment
by at least 2,000 by end 2002, as well as production, and involve new investment of US$1.5 million
from Sri Lanka.91  Also, AGOA benefits to Botswana may increase following the U.S. decision to
"narrowly expand" trade opportunities and to extend from 6 August 2002 "lesser developed
beneficiary country" status to Botswana (AGOA II), despite its relatively high GNP, thereby allowing
its producers to use third-country fabric in qualifying clothing.92
42. Tariffs on manufactured imports average 11.8%;  ad valorem  duties generally range up to
60% (Main Report, Chapter III(3)).  Relatively high average tariffs (above 20%) apply to tobacco(36%), clothing (35%), carpets (30%), knitted and crocheted fabrics (28%), leather products (26%),
and footwear (21%).
(5) S
ERVICES
43. Services (including electricity and water, and construction) accounted for 58% of Botswana's
GDP in both 1995/1996 and 2000/01.  They comprised mainly central government services (16% ofGDP in 2000/01), trade and hotels (11%), banking, insurance, and business services (11%),
construction (5%), and transport (4%).
44. Botswana made minimal commitments on services under the General Agreement on Trade in
Services (GATS).  They covered mainly a few professional business services, such as architecture,
engineering, medical, dental, and veterinary services; computer and related services, such as
consultancy, software implementation, and data-base services; research and development; and real
estate.  It committed to having no limitations to market access and national treatment on these servicesfor consumption abroad and also made commitments  on two tourism-related activities: hotels and
restaurants, and travel agencies and tour operators.
93  Measures affecting supply of computer services
through commercial presence were generally either unbound, or subject to the requirement that
foreign companies must be allowed to practice in their home country, and that qualifications of
foreign nationals must be recognized by the appropriate Botswana body.  Botswana made nocommitments on supply of services by temporary movement of people, and generally on cross-border
trade, requiring in some instances that the service be supplied through commercial presence by a
supplier who meets all residency requirements, such as for real estate services.
45. Botswana did not participate in the extende d GATS negotiations on basic telecommunications
(Fourth Protocol) or on financial services (Fifth Protocol). It made commitments in only onetelecommunications subsector, courier services, but made no commitments on financial services.
While the regulatory authority (BTA) has prepared draft WTO commitments on basic
                                                     
90 It has been estimated that AGOA will raise the level of non-oil exports from sub-Saharan Africa to
the United States by between 8% and 11%, depending on how restrictive the rules of origin in the non-apparel
sector are in practice.  However, these trade benefits wo uld have increased by up to fivefold if no products had
been excluded from AGOA, and if less stringent rules of origin (the multifibre or MFA rules) had been applied.Such gains from the AGOA represent losses for other suppliers due to trade diversion.  See Mattoo, Roy andSubramanian (2002).  The trade diversion in favour of sub-Saharan African countries may be at the expense ofother, including developing countries.
91 USTR (2002), p. 77.
92 U.S. Trade Act of 2002, 6 August.
93 WTO document GATS/SC/109, 30 August 1995.SACU-Botswana WT/TPR/S/114/BWA
Page A1-95
telecommunications, these have not been submitted to the Government; BTA is not convinced that
joining the WTO Basic Telecommunications Agreement would offer immediate benefits to
Botswana.94
46. The Government’s 1998 industrial policy reinforces efforts to reduce the cost of utilities, but
to ensure also that the full costs of such servic es are covered.  Any cross-subsidies from business to
consumers are to be removed where possible, and appropriate mechanisms established to regulatepublic monopolies, whether operated privately or by the public sector.
(i) Communications
(a) Telecommunications
47. Botswana has relatively well developed telecommunications.  Its all-digital microwave and
fibre-optic network links 12 main processors, with a switching capacity of 150,000 lines.  Botswana’steledensity increased to 9 at end-2002, with 145,852 fixed-line customers.  A new 7-digit numbering
system is being implemented.  Mobile use has e xpanded rapidly, and at end-October 2002, there were
387,643 subscribers, corresponding to some 23% of the population.  However, Internet use is very
limited, slow, and expensive, mainly because there is no formal national Internet exchange point.  All
Internet traffic must pass through the parastatal Botswana Telecommunications Corporation (BTC)network, which has very low capacity, and the lines leased by the majority of Internet providers are
slow.  However, the Internet and National and International data gateway markets have been
liberalized, with the aim of promoting competition and improving efficiency.
48. The telecommunications market was liberalized in 1996 following the adoption of the
Telecommunications Policy of 1995 and enactment of the Telecommunications Act (Act No. 15 of
1996), which abolished BTC’s monopoly in some segments of the market and established the
independent regulator, the Botswana Telecommunications Authority (BTA).
95  However, BTC still
has a de facto  monopoly as the only licensed provider of fixed-line voice services, including
international calls.  BTA is examining the possible introduction of a second licensed operator of the
fixed-line network.  Voice-over Internet Protocol (VoIP) is not allowed (except over private
networks); this prevents licensed Internet providers, as well as suppliers of international data
transmission through very small aperture terminals (VSATs), from offering voice services incompetition with BTC.
49. BTA aims to facilitate entry of service providers and a competitive market by guaranteeing
their interconnection to the public network at "fair and reasonable" cost (section 47), and ensuring that
telecommunication services are provided on a "competitive and non-discriminatory basis"
(section 48).  Interconnection charges are to be agreed between the parties, but set by the Authority ifin dispute.  Certain anti-competitive conduct, su ch as collusion between providers, forming price-
fixing cartels and using a dominant market position to restrict, prevent or defer another provider from
entering the market or to eliminate a competitor, is illegal and subject to a fine of between P 10,000
and P 5 million (section 48).  All service providers, including BTC, must be licensed by the BTA,
which has almost complete freedom in deciding the number of licences and associated conditions.BTA must approve tariffs in accordance with its publi shed principles for national, including mobile,
                                                     
94 International Telecommunications Union (2001), p. 4.
95The agreement for Cable and Wireless to manage BTC as the sole provider of telecommunication
services was terminated in November 1995.WT/TPR/S/114/BWA Trade Policy Review
Page A1-96
telephony services.96 Draft "Guidelines and Principles for the Pricing of the Telecommunications
Services", which focused mainly on telephony services and interconnection charges, were released by
BTA for comment in late 2000.  Final pricing guidelines are being prepared.  BTA also sets rules on
matters such as numbering, property access, radio communications equipment and testing, and type
approval (Telecommunication Regulations, 1997).97
50. Although there are no universal service provisions in the Telecommunications Act, BTA is
responsible for implementing government policy on such services and on special tariffs for
disadvantaged users.  The Government is currently formulating a new universal service policy to
replace existing subsidies paid annually to BTC, under the Rural Telecommunications Programme, to
provide basic services to rural users.  BTA is developing a programme based on a universal service
fund, and is proposing legislative changes.   
51. BTA has issued licences for a range of telecommunication services.  During 2001, it issued
four private network telecommunications licences and six licences for the provision of national and
international data services.  Market segments liberalized so far are mobile telephones, data
communications, payphones, sale of telecommunications equipment, and Internet services.  The first
Internet (ISP) licence (excluding VoIP) was issued in August 1999, and in 1998 BTA issued two15-year GSM mobile service licences to majority-owned domestic joint ventures Mascom Wireless
Pty Ltd and Vista Cellular Pty Ltd.
98  No restrictions apply to foreign ownership in mobile services.
The licences stipulated that no additional national mobile licences would be issued for five years, and
indicate certain coverage and roll-out requirements.99  The duopolists have exceeded these
requirements, although commissioning of some base  stations is awaiting BTC transmission, and they
were granted permission by BTA to cross over into each other’s mandatory coverage areas so as to
increase cellular penetration.100  Both operators referred an interconnection dispute with BTC to the
BTA.  Its ruling, valid for two years, expired in February 2000.  BTA rulings need not be made
public, and interconnection agreements between parties (copies are provided to the BTA) remain
confidential.  BTA intervenes only when there is a dispute between the parties.  Almost 80% of
BTA’s budget is financed from telecom operators licence fees of 5% of their net annual turnover
(mobile operators also pay an annual radio licence fee of P 300,000 and were required to pay an initialone-off fee of P 1 million).  Most other revenue is from radio licence fees based on the number of
transmitters.  BTA’s tariff decisions may be appealed to the Ministry and all other decisions to the
High Court.
101
                                                     
96 Charging tariffs that are not in accordance with  the applicable tariff structure or charging
unreasonable prices for telecommunications equipment is also outlawed (section 48).  Charges for internationalcalls as well as for other services, such as packet switched data services, e-mail and paging, are not regulated.
97 Type approval is required for switching equipment, VSAT, and fixed line handsets to protect the
public network.  However, BTA does not require type approval for network equipment used by licensedoperators.  Mobile networks are also excluded from type approval.
98 Mascom is domestic-owned by DECI investments; foreign interests include Portugal Telecom and
T.S. Masiyiwa Holdings of Zimbabwe.  Vista is 51% domestic-owned, mainly by Mosokelatsebeng Cellular; its
foreign partner, France Telecom, was replaced by Orange SA.
99 The criteria used to award the licences were cove rage (45%), overall experience (10%), experience
outside country of origin (5%), level of local ownership (15%), roll-out speed (10%), and creativity, includingstrategic ownership, local employment policy, training, technology transfer, and service innovation (15%).
100 BTA also suspended national roaming, a licence condition for the mobile operators, in October 2001
because it felt that this would discourage both operators from rolling out their network.
101 For example, BTC is disputing, in the High Court, BTA’s ruling directing it to provide leased line
capacity to two Internet service providers.SACU-Botswana WT/TPR/S/114/BWA
Page A1-97
52. Telecommunications liberalization has provided a number of "best practices", including the
crafting of a regulatory environment suited to its own circumstances, and BTA’s high level of
independence from political interference.102  BTC operates commercially and manages the public
network under a performance contract with the Government.  It is the only licensed operator to
provide fixed-line voice services, and is also licensed to provide value-added services, but not mobile
services.103  BTC must run any new telecommunications services as subsidiaries or associated entities
to allow sufficient accounting separation from its fixed-line operations (BTC Act and 1996
amendments).  BOTSNET, a BTC subsidiary, for exampl e, is competing in Internet services with nine
other licensed providers.  BTC's privatization remains a priority policy objective, and it favours a
strategic partnership.  However, the Government has not set any dates for privatization.  Competition
in telecommunication services has reduced tariffs.104
53. Botswana is a founding member of The Telecommunication Regulators’ Association of
Southern Africa (TRASA), inaugurated in September 1997 among SADC nations.105  I t  a i m s  t o
harmonize telecommunications policies, especially regulatory practices, in the region.  TRASA has
five committees covering licensing and universal service; interconnection and competition;
numbering and standards; human resource development and empowerment; and radio frequencyplanning, technology, and advanced services.  Each committee is responsible for developing agreed
regulatory guidelines.  TRASA adopted a five-year Strategic Business Plan in 2000.  Model
guidelines and regulations have been developed for a SADC Regional Frequency Based Plan and on
interconnection tariffs.  These provide for mandatory interconnection, time limits for negotiations,
cost-based pricing, unbundling of services, non-discriminatory terms, publication of terms, arbitration
by regulator and approval of interconnection agreements.
(b) Postal and other services
54. Postal services are provided by the parastatal, BotswanaPost, which was restructured in 2000
(previously called the Botswana Postal Services).  It is expected to operate commercially and must
meet certain universal service obligations, such as maintaining loss-making rural post offices.
BotswanaPost still has a monopoly in mail delivery; there are no plans to privatize BotswanaPost
structure.  The objective is to provide high quality postal services and Cabinet influences its price.Competition only exists in the courier market where foreign companies also operate.  Greater private
competition has increased BotswanaPost’s services.  It introduced a next-day delivery service to all
urban areas within Botswana, and built three mail-sorting centres, in Gaborone, Francistown, and
Palapye.
55. There are two private commercial radio stations, both operating in Gaborone, and both
majority domestic owned, and the national state-owned broadcaster, Radio Botswana.  The state-
owned Botswana Television commenced operations in July 2000.  There is no commercial television
service or cable TV, but parties have approached BTA to obtain a cable licence.
106  Both Radio
                                                     
102 International Telecommunications Union  (2001), p. 13.  See also statements by ITU’s Secretary-
General, Mr Yoshio Utsumi, that "BTA’s level of independence and effectiveness may develop as a world
model", Accra Mail , 8 September 2002, "Botswana Telecommunications Authority May Develop as a World
Model".
103 BTC’s joint venture with Vodacom of South Africa was unsuccessful in bidding for a mobile
licence.
104 BTA (2002), p. 11.
105 Other founding members are Mozambique, Namibia, South Africa, Tanzania, and Zambia.
106 ITU (2001), p. 4.WT/TPR/S/114/BWA Trade Policy Review
Page A1-98
Botswana and Botswana Television are the responsibility of the Department of Information and
Broadcasting, under the Ministry of the State President.
56. The Broadcasting Act, 1998, established an independent National Broadcasting Board (NBB),
formed in August 2000.  Before July 2001, BTA licensed and regulated broadcasting.  NBB is also
responsible for supervising broadcasting activities and allocating radio spectrum frequencies for the
broadcasting portion of the National Radio Frequency Plan, which remains BTA’s responsibility.  Itawarded the tender for developing the National Radio Frequency Plan to an international firm in
November 2000.  BTA is the NBB’s technical adviser.   NBB is preparing a draft government national
broadcasting policy.
(ii) Financial services
57. Botswana’s financial subsector is relatively well developed.  There are five commercial
banks, three stockbrokers, four life insurance companies and seven non-life insurers.  The
merchant/investment bank, Investec Bank (Botswana) Ltd, was incorporated in 2000, and there were
159 pension funds at end 2000.  The Stock Exchange was established in late 1995.
58. The financial subsector has been substantially reformed since the mid 1980s.  Commercial
bank licences were liberalized in 1990 and relevant legislation was updated in the mid 1990s, forexample, the Banking Act, 1995, and amendments to the Bank of Botswana Act (1975) in 1996 and
1999 (Table IV.2).  Private institutions, including foreign owned, dominate the financial subsector.
The main parastatals are the Botswana Savings Bank (BSB), the Botswana Building Society (BBS),
the National Development Bank (NDB), and the Botswana Development Corporation (BDC).  Both
the NDB and the BDC were heavily restructured during the 1990s following substantial losses.  The
State has indirect ownership in some private instit utions through BDC holdings, such as its equity in
Investec Bank, and 25% shareholding in the life insurance company, Metropolitan Life.  TheGovernment’s direct lending facility to parastatals, the Public Debt Service Fund (PDSF), which was
the largest lender, is being terminated.  The Government is developing an International Financial
Services Centre, through the BDC.
(a) Banking
59. Commercial and investment/merchant banks are prudentially regulated by the Bank of
Botswana (the central bank), under the Banking Act, 1995.  This replaced the Financial Institutions
Act, 1986, and provides a legal framework for the ownership, establishment, licensing, and prudential
supervision (based on the Basel Core principles) of banks.  The Bank conducts on-site examinations,
off-site monitoring, and meets with licensed banks.   While it now also supervises the BSB and
collective investment undertakings (CIUs), the Ministry of Finance and Development Planningcontinues to regulate the NDB and the BBS.  The Government is examining shifting their regulation
to the central bank.  Banks cannot provide non-bank financial activities, either directly or indirectly.
60. Since 1990, the Bank processes licence applications on prudential merit.  It no longer
determines whether the domestic market can absorb a new bank.  The number of foreign bank
licences is unrestricted.  Foreign banks must operate as locally incorporated subsidiaries; foreign bankbranches are not allowed.   Some local ownership is encouraged in each financial institution.
107  The
                                                     
107 See K. S. Masalila, Banking Supervision and Regulations: The Case of Botswana, in Aspects of the
Botswana Economy, Selected Papers , edited by J.S. Salkin, D. Mpabanga, D. Cowan, J. Selwe and M. Wright,
Gaborone, 1997, p.278.SACU-Botswana WT/TPR/S/114/BWA
Page A1-99
role of commercial banks has increased substantially.  In 2000, they accounted for 60% of total
institutional lending, up from 41% in 1990.  In 1998, they surpassed the PDSF as the largest lenders;
PDSF's share declined from 50% to 26% over this period.  Government policy has encouraged
parastatals to rely on commercial credit, partly as a forerunner to privatization.
61. The payments system is being modernized by establishing a legal and regulatory framework
to support an efficient and sound system.  Botswana has actively participated in the SADC paymentssystem reform process.  The Botswana National Payments System Framework and Strategy
Document, completed in 2001, provides a five-year programme to develop a payments system
compliant with international standards, and is to be overseen by the National Payments Council and
the National Payments Task Force.  New legislation, The National Clearing and Settlement Systems
(NCSS) Act is being drafted.  Other relevant legislation, such as the Bills of Exchange Act, theCriminal Procedures and Evidence Act, the Companies Act and the Insolvency Act, are also being
reviewed.
Table IV.2
Main financial services legislation
Legislation Content
The Bank of Botswana Act, 1975 and Amendment
Acts, 1996 and 1999• Establishes the bank of Botswana as a central bank and mandates it to
ensure efficiency and soundness of financial markets
The Banking Act, 1995 and banking Regulations, 1995 • Applies to the banking industry, including commercial banks, credit
institutions, investment banks and discount houses.  Provide for the
prudential regulation and supervision of banks, as well as timely exit of
failing institutions
• Banks are generally prohibited from engaging, directly or indirectly, in the
merchandise wholesale or retail business, including import or export trade;acquiring or holding, directly or indirectly, any part of the share capital of
any financial, commercial, agricultural, industrial or other undertaking,
acquiring or taking a lease, whether directly or indirectly, on immovableproperty
The Botswana Savings Bank Act, 1992 • Establishes the Botswana savings bank and regulates the conduct of its
operations.  While the Act empowers the bank to issue financialinstruments, such as bonds, certificates and notes, or offer other viable
banking and financial services, it is silent on specific prohibitions
The Building Societies Act, 1961 • Provides for the establishment of building societies, such as the Botswana
Building Society (BBS).  It empowers the BBS to invest in bills, bonds,
certificates, debentures, stock and municipal loans.  The Act is underreview
The National Development Bank Act, 1964 • Establishes the National Development Bank and governs its operations.
The Act empowers the bank to borrow money as necessary to meet its
obligations, including bond insurance.  It further empowers the bank to
lend to and own equity in business undertakings across all economicsectors; manage, operate or control any property, enterprise or undertaking
on behalf of any person in connection with any loan or guarantee given by
it; and to operate any savings scheme or any combined life assurance andsavings scheme approved by its board.  However, the bank may not
provide financial assistance for buildings or public works
The Botswana Development Corporation • Set up under the Companies Act, 1959, as amended in 1995.  Its
memorandum and articles of association guide its operations.  It has thewidest investment and borrowing mandate.  It can engage in any business
as sole proprietor, in partnership or joint venture, with local or foreign
investors, in all kinds of activities across all economic sectors; can providefinancial and management assistance to subsidiaries and associated
companies; can borrow in any manner it considers necessary, which could
include issuing all kinds of securities
Table IV.2 (cont'd)WT/TPR/S/114/BWA Trade Policy Review
Page A1-100
Legislation Content
The Collective Investment Undertakings Act, 1999 and
Regulations, 2001• Apply to Collective Investment Undertakings, which include investment
companies and unit trusts or mutual funds.  The Act and regulations
compare favourably with modern legislation overseas for such
undertakings
The International Financial Services Centre • Provides for the establishment of IFSC companies in the following
activities: exempt companies, trusts, registries of ships and aircraft,
international banking and financial services (includes deposit-taking,foreign exchange services, custodial functions), and investment business
(including collective investment undertakings, personalized investment or
private banking management and captive insurance
Insurance Industry Act, 1987 • Applies to insurance business (life and non0-life) and reinsurance.  The
Act prohibits simultaneous transacting of both types of insurance business
by a single company
Pension and Provident Funds Act, 1987 • Applies to approved private pension and provident funds
Botswana Stock Exchange Act, 1994 and Regulations,
1995; Botswana Stock Exchange Listing
Requirements, 1999, and Botswana Stock Exchange
Members’ Rules, 1996• Apply to the Botswana Stock Exchange
Source: Bank of Botswana (2002), Annual Report 2001 , pp. 75-76.
(b) Insurance and other financial services
62. The Ministry of Finance and Development Planning regulates insurance companies and
pension funds.  Companies are prohibited from offering both general (short term) and life (long term)insurance (Insurance Industry Act, 1987, effective 1992).  All insurers and insurance brokers must be
registered with the Ministry’s Registrar of Insurance.  Only resident registered insurers can be
licensed.  The minimum paid-up capital for an insurer is P 2 million.  New regulations were
introduced on registration renewals (Insurance Industry (Amendment) Regulations, 2000).  Residents
(including companies, but not insurers) require the Registrar’s written approval to buy insurance from
overseas companies.  The Government operates an Employees Motor Vehicle Advance Scheme and a
Local Authorities Self Insurance Fund.  Third-party motor-vehicle injury is covered by the MotorVehicle Accident Fund, which is funded from petrol levies.
63. Most insurance companies are foreign owned.   Investment of insurance funds abroad is
limited to 70% of the assets of the company, and must be cleared through the Registrar, although
adherence is reportedly weak.
108  Most reinsurance is placed overseas.
64. The core of the capital market is the stock exchange.  It trades in corporate equities and
company bonds, such as BTC’s publicly traded l ong-term bond issue in 1999.  At end 2000, there
were 16 listed domestic companies, covering finance, wholesale, retail, and brewing.  Total
capitalization was P 5.245 billion.  Dual listings are accepted for foreign registered public companies.
Foreign portfolio investors can purchase shares within limits.109  Pension funds have grown rapidly;
total assets were P 4.4 billion at end 2001. In April 2001, the civil service pension arrangements werechanged from a non-funded defined benefit scheme to a defined contribution scheme.  At least 30% of
pension funds are to be invested locally.
                                                     
108 Report of the Registrar of Insurance for the Year Ended 31 December 2000, p.11.
109 Individual non-residents cannot own more than 5% of a company’s shares, and foreign ownership of
any company is limited to 49% of its "free" share capital (that not controlled by the parent company).SACU-Botswana WT/TPR/S/114/BWA
Page A1-101
65. The International Financial Services Centre (IFSC) commenced in 2001.  Incentives for IFSC
investors include a corporate tax rate of 15% and no withholding tax.110  Ten IFSC projects operate.
Legislation is being drafted on IFSC insurance services to help Botswana to become a centre for
conducting international insurance business.
(iii) Transport
66. Transport policy is formulated by the Ministry of Works, Transport and Communications.
Government policy is being increasingly directed at rationalizing transportation services to ensure a
balanced system that promotes co mpetition among the various modes.
(a) Road
67. Road transport is the main mode in Botswana.  The road network is 18,000 kilometres of
mainly bitumen and gravel roads.  Cost-recovery construction and maintenance programmes are beingimplemented.  A road fund is to be established to finance road maintenance;  it will be funded by
vehicle licence fees and the fuel levy.  Road transport fees and other related charges were increased in
June 2000.  Road tolls are being considered, such as for the Kazungula bridge, and for some heavily
used roads.
68. All commercial vehicles operating in Botswana  must have an annual (BA) permit (Road
Transport (Permits) Act).  Foreign registered vehicles are issued such permits on the condition that
they do not engage in cabotage.   Single Trip (BS) permits and Transit Single Trip (TS) permits are
issued to enable vehicles registered in neighbouring countries to conduct return and transit trips in
Botswana.  SACU permits are also issued to vehicles registered in Botswana for entry into South
Africa.
69. Freight rates are market determined.  The Government does not regulate entry, except for
setting safety standards.
70. All passenger vehicles (e.g. combies and buses) require a route-specific (P) permit.  Taxis
also require a permit; their area of operation is not defined, only their location.  The Government
controls passenger bus fares and, in the case of long-distance services, prescribes time schedules.
Government subsidies, limited to two return trips per week per customer,  are paid on a performance
basis to bus operators to encourage operators to provide rural services.  For passenger transport, theGovernment restricts entry by new operators to safeguard the interests of existing firms and to avoid
"unhealthy competition" in the thin transport market.
71. Botswana has transport agreements with South Africa and Zimbabwe.  An agreement with
Zambia is due to be concluded in 2003.  Botswana, Namibia, and South Africa are negotiating a
trilateral agreement covering the Trans-Kalahari Highway Corridor, which is scheduled to be signedin mid-2003.
(b) Rail
72. The main rail network is the line between Ramalabama and Vakaranga, with its various
branch lines that service predominantly mining ope rations at Selebi-Phikwe, Morupule, and Sua Pan.
The parastatal, Botswana Railways (BR), established in 1987, was substantially restructured during
                                                     
110 Financial entities pay the general company tax rate of 25%.  Specified CIUs and the BBSs are
exempt from company tax.WT/TPR/S/114/BWA Trade Policy Review
Page A1-102
the late 1990s following operational and financial difficulties.  A Regional Rolling Stock Information
System is being implemented to improve freight services.  BR continues to operate under adverse
commercial conditions, including uneconomical traffi c volumes, especially following the diversion of
north-south-bound transit traffic to Zimbabwe in 1999.  To provide an alternative route for north-
south-bound transit traffic, BR is examining the feasibility of constructing a railway line from
Mosetse to Kazungulato, to link with Zambia.  It has established two dry container ports, in Gaboroneand Francistown.
73. Botswana Railways is keen to create an enabling environment for private-sector participation
in the railway subsector.  It is reviewing the legislative and regulatory framework to establish clear
guidelines for reform, expected to start after May 2003.  The current Botswana Railways Act of 1986
does not allow private operators unless clearly agreed with Botswana Railways, which is recognizedas the statutory monopolist.  Users, such as mining companies, are prohibited from building and
operating their own rail services.  Botswana railways has standing arrangements on a haulage basis
with Blue Train and Roves Rail from South Africa to use lines in Botswana.
74. Freight rates set by Botswana Railways require ministerial approval.  Discount rates are
periodically negotiated with major customers.
(c) Air
75. The Department of Civil Aviation regulates air transport, including air safety, aviation
infrastructure, including airports, and licensing of  private aerodromes.  There are six government-
operated international airports, and 28 licensed private aerodromes.  Aviation policy is directed
towards increased cost recovery and providing safe and efficient services.  The Government has
approved the Department's restructuring into a parastatal semi-autonomous Civil Aviation Authority,
and draft legislation is being prepared.  It is proposed to upgrade Francistown, Kasane, Maun and SirSeretse Kharma Airports, starting in April 2003.
76. The national carrier, Air Botswana, is to be privatized; its privatization was deferred in 2001
due to the depressed global aviation industry.  The Government is currently finalizing the necessary
legislative instruments for this to proceed.  Air Botswana operates scheduled air services from
Gaborone to Maun, Francistown, Kasane, and Mahatu (through Johannesburg), as well as to Harareand Johannesburg.  A few regional carriers, mainly South African Express and Air Namibia, operate
international services to Botswana under bilateral air service agreements.  These allow only single
entry into Botswana.  However, according to authorities, the Yamoussoukro Decision of SADC
members will transform the bilateral regime into an open skies policy.
(iv) Tourism
77. Tourism is Botswana’s second largest foreign exchange earner, after minerals, accounting for
an estimated 5% of total exports of goods and services in 1996/97.  Tourism is currently estimated to
contribute 5% of GDP.  Visitor expenditure in 2001 was estimated at P 3.8 billion, of which 40% was
spent in Botswana, compared with P1.1 billion in 1997.
111  The lack of international flights servicing
Botswana constrains tourist development.  Tourism development has been Government led andprivate-sector driven.
78. The Department of Tourism, within the Ministry of Environment, Wildlife and Tourism,
oversees tourism development.  Its primary object ive is to maximize the sustainable use of the
                                                     
111 Department of Tourism, Visitor Expenditure Survey 2001.SACU-Botswana WT/TPR/S/114/BWA
Page A1-103
country’s tourism resources and to promote tourism.  The Government’s tourism policy was
enunciated in 1990.  The National Advisory Council of Tourism advises the Government on all
matters relating to the formulation, planning, development, and administration of tourism policy.  The
Tourism Industry Licensing Board licences, grades, and regulates facilities (Tourist Act, 1992 and
Tourism Regulations, 1996).  A training levy on tourist facilities finances the Tourism Industry
Training Fund (Finance (Tourism Industry Training Fund) Order, 1996), which is aimed at improving
the skills of tourism employees.  Following the two-year Botswana Development Tourism
Programme, in February 1999 the Government released an Outline of Marketing and Promotion Plan
and Strategy, and a Tourism Master Plan in May 2000.  A National Ecotourism Strategy
supplemented this in March 2002 to support product diversification and community involvement.  A
Tourism Board is planned, to promote tourism, as well as a Tourism Development Fund to providetechnical and financial support to community and citizen-owned projects.
79. The Master Plan shifted the emphasis from "low volume, high cost" to "modified high
volume, mixed price" tourist development.  Net foreign exchange earnings are projected to increase
from P 495 million in 1996/97 to P 800 million in 2010, and formal employment from approximately
10,000 to almost 17,000 employees.  Bed numbers are projected to rise from 4,000 to 8,000, andoccupancy rates from 40% in 1997 to 57% in 2010.  Tourist arrivals increased by 15% in 2000 to
969,497.  Most came from South Africa (46%), Zimbabwe (30%), Zambia (3%) and Namibia (2%).
Non-African visitors were mainly from the EU (in particular the United Kingdom, 2%) and the
United States (2%).  Total number of beds was 3,972 in 2000; bed occupancy rates fell sharply in
2000 from 51.4% to 29.4%.
80. Tourism became eligible for government support under the Financial Assistance Policy (FAP)
in 1996 (Financial Assistance Policy (FAP-Tourism), 1996). However, this scheme has recently beendiscontinued and replaced by the Citizen Entrepreneurship Development Agency (CEDA), which also
covers tourism.SACU-Botswana WT/TPR/S/114/BWA
Page A1-105
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