Transcript How Botswana & the Botswana IFSC can facilitate Chinese

Building an Institutional Framework for
Private Equity – The Botswana Experience
19- 20 October 2010
Gaborone International
Convention Centre (GICC)
Mr. Alan P. Boshwaen – CEO
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Botswana’s fundamentals as a Financial Gateway
Botswana IFSC – Introduction
A Hub for Pan-African Investment Funds
Opportunity for PE in Africa
Investment Funds Value Proposition
Double Tax Avoidance Treaties
Investment Funds Case Studies
Way forward
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Pre-requisites for a competitive Financial Centre
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Internationally acceptable regulation
Efficient, transparent business facilitation processes
Benign tax regime
Fundamentals for cross-border financial services
◦ Highest sovereign credit rating in Africa
◦ Possibility of attracting co-financing
◦ Ranked 3rd in Africa in terms of Global Competitiveness and Doing Business (World Bank
Doing Business Indicators, 2009)
◦ No exchange controls since 1999
◦ No withholding tax on externally remitted dividends, management fees, interest and
royalties
◦ Foreign tax relief is granted (unilateral credit of up to 15%) for WHT levied in other
countries where no DTA exists
◦ Ability to denominate share capital in major convertible currency of choice (i.e. US$ )
◦ Access to Botswana’s Growing Double Tax Treaty network
◦ Minimum establishment criteria evaluated by a Certification Committee
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Initiative to establish Botswana as a significant regional financial and
business services location;
◦ Accelerate business activity in international services exports and create high-value
employment and skills transfer
◦ Encourage skills transfer to develop sophistication of Botswana’s financial sector.
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An African ‘onshore’ domicile to facilitate capital flows
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The enabling legislation contained in the Income Tax Act (CAP 52:01) Part XVI - Sections 137 - 142
◦ Legislative review competed by Clifford Chance LLP, UK as part of a holistic
improvement of the framework
 Improvement in service standards
 An Act to allow Investment Funds to operate according to Internationally recognised
and compatible legal structures
 Framework provides for opportunity for International Business Companies to operate
 Broadens the definition of permissible activities
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Brazil
DFI FDI Inflows
DFI FDI Inflows
Property
Generalist
Infrastructure
“African countries continually
seek the much coveted FDI from
international investors and indeed
investments in Africa are driven
and dominated by international
investors without little or no
participation by capital from
Africa. Africa is sitting on
considerable capital held by
pension funds, long term savings
and other institutional funds and
this African based capital is
now being challenged to start
playing a more significant role in
investing into Africa.”
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High PE returns in Africa;
Mobilising Institutional Funds;
Geographic proximity to underlying investee
companies;
Deal origination & due diligence
Post investment support
Some DFI’s require funds domiciled in Africa
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Registered as a company under the Companies Act of 2003 and are
licensed and regulated by the Non-Bank Financial Institutions
Regulatory Authority (“NBFIRA”) - No Foreign Ownership Restrictions
◦ Investment Company with Variable Capital
◦ Unit Trust
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Particularly attractive for Pan African infrastructure, venture and
private equity funds focused on the Africa region
Qualifying funds are wholly tax exempt
◦ Not liable to withhold on distributions to non-resident investors
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Subject to meeting minimum establishment requirements
◦ Management Company to be established in Botswana under IFSC
◦ Perform min activities in Botswana – Section 28 of CIU Regulations
◦ Local Management Company not prohibited from sourcing advisory services
internationally
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Ability to access domestic capital
Active - Africa
South Africa
Zimbabwe
Mauritius
Seychelles
Mozambique
Namibia
Lesotho
Swaziland
Sweden
India
France
Tanzania
Belgium
Uganda
Angola
Active – Other
UK
Barbados
Awaiting to be signed or ratified
Malawi
Zambia
Luxembourg
Russia
Discussions initiated
Kenya
Nigeria
Japan
China
Target Capital Commitment: US$400 million;
The only independent mezzanine fund advisor in Africa
established as a an IFSC Fund and Management Company;
Investing in companies with stable cash flows and strong
defensive characteristics in a diverse range of industrial and
service sectors;
Target markets include Egypt, Kenya, Nigeria, Algeria, Tunisia
and Morocco.
Target Capital Commitment: US$100 million;
Management Company for a Sub-Saharan Africa fund that will
invest in Micro-finance companies, Clean Energy and
Technology and Telecommunications;
Target investors for the fund include DFIs, Pension funds with
private equity and sustainable investment allocations;
Target Capital Commitment: US$100million;
SAMSTAR
Capital
Management
Management Company registered in the IFSC;
Promoted by Southern African Media Development Fund
(SAMDEF) and partners that will manage the Southern Africa
Media and Technology Fund;
Focus on media ventures that seek expansion capital in the
SADC region some of which had previously received seed
funding from SAMDEF
Target Capital Commitment: US$125million;
Investment Holding company that looks to invest in African
financial institutions and build value by applying a
transformation methodology and a market focus on the
Missing Middle;
Target investors include European based DFI’s
Already has approval for investments of US$25million by
AfDB;
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Proposed legislative amendments include creation
of new structures – consistent with leading funds
legislation in other IFC’s
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A single piece of legislation to codify obligations of
entities setting up IFSC Investment Funds in Botswana
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Using internationally recognised and compatible legal
structures
◦ Limited Partnership
◦ Limited Liability Partnerships
◦ Investment Trust
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The framework for a rigorous regulatory regime