Botswana - Regional Financial Services Hub

1. Botswana - Regional Financial Services Hub Dr. Thapelo Matsheka Botswana Conference & Exhibition Centre 20 November 2013

2. Times are changing… 2010 5.8% 5.5% 1970-1980 Phase 1: 1970’s – 1980’s: poor growth; Cold War Client States, poor governance, weak economic policies, structural adjustment and liberalisation programmes. Phase 2: 1990’s: economic recovery starts and escalates; economic growth in Sub Sahara Africa was 7% in 2007, 5.5% in 2008 and 4.5% in 2009 Phase 3: 2010’s: impact of global economic crisis is less dramatic, global race for commodities, improved macroeconomic conditions & political stability. GROWTH: 5.5% in 2010, 7% in 2011, 5.8% in 2012, 1/3rd have growth rates of more than 6% 1990

3. Times are changing… Barclays: “Africa now represents 20% of Group profits (£ 1,3bn pounds)” May 2000 December2011 November2013 March2013 “After decades of slow growth, Africa has a real chance to follow in the footsteps of Asia” “… the world’s fastest-growing continent”

4. Africa Beauty in Numbers 54 1B $2T $400B $93B 20% 5.9% 54 Sovereign states 1B People living in Africa, a ninth of the world’s population 1 (Nigeria 164M, nr.7 globally) $2TAfrica’s collective GDP (more than India, less than Brazil) 2 being just 1.1% of global GDP 1 ~85% Of total global chromium/platinum reserves held in Africa (40% gold, 15% oil) 20% Compound growth in FDI projects 2007 to 2011 2 7Number of African countries among the fastest growing economies in the world 2010 to 2015 $400BValue of South Africa’s infrastructure program 2 $93B Funds required p.a. from 2010-2020 to close the infrastructure gap with other developing regions 5.9%Average real GDP growth p.a. from 2000 to 2011 1 500M People in Africa with one or more cell phone (and rapidly increasing) >50% Of the total population living in cities by 2030 500M • Sources: • Swiss Re; Insurance in Sub Saharan Africa: Gearing Up for Strong Growth; 2012 • Ernst & Young; 2012 attractiveness survey – Africa • Deloitte; Deloitte on Africa, The Rise and Rise of the African Middleclass

5. FDI into Africa Total value slightly decreasing but number of (smaller) projects increasing, mostly in manufacturing, extraction & infrastructure Growingdiversification Source: FDi Intelligence, data as of 3 February 2012; Ernst & Young 5

6. Botswana in Numbers Botswana has, uniquely in Africa, all the essential ingredients for a thriving financial services sector. These include:

7. Botswana IFSC… • Core activities: • Banking and financing operations transacted in foreign currency; • The broking and trading of securities denominated in foreign currency; • Investment advice; • Management and custodial functions in relation to collective investment schemes • Insurance and related activities (captive insurance and administration thereof); e.g. Aon Risk Management which has done work in Mali, Ghana, Uganda • Registrar and transfer agency services; • Exploitation of intellectual property; • Development and supply of computer software for use in the services described above; • Cross border leasing; • Capital raising

8. The Botswana IFSC Through the Botswana IFSC, accredited Companies have access to Botswana’s expanding Double TaxationTreatynetwork Source: http://www.botswanaifsc.com/index.php

9. Requirements for Regional Role

10. Requirements for Regional Role… • The country should increase its importance as a ‘gateway’ from South Africa to continental African markets. • Creating closer ties with South Africa will create synergies and opportunities for both nations and will allow Botswana to benefit from South Africa’s position in the region. Both of these can lead to foreign firms increasing their presence in Botswana thereby creating a regional financial hub. Once a regional hub is established, individual companies will have greater relevance to compete throughout the African continent. • The challenge for policy is therefore how best to support the synergies between Gaborone and Johannesburg through co-operative cross-border governance. • The platform created between the two countries bodes well for regionalism. • Removal of visa requirements is a key factor given the historical ties of Botswana & RSA- from SACU in 1910.

11. Financial Secrecy Perception Botswana’s 73% secrecy score in the 2013 Financial Secrecy Index (FSI) shows that it must make major progress in offering satisfactory financial transparency. If Botswana wishes to play a meaningful part in the modern financial community and to impede and deter illicit financial flows, including flows originating from tax evasion, aggressive tax avoidance practices, corrupt practices and criminal activities, it should take action and do away with any laws deemed as “Secrecy Bills” that regulate the classification, protection and dissemination of information. Source: http://www.financialsecrecyindex.com/

12. Transparency and Investor Perceptions • Secrecy has led to corruption in the African continent as evidenced by the Corruption Index Perception • This African problem hinders regional approach to IFSC. A step required for clearer perceptions.

13. Ease of Doing Business Ease of Doing Business Report presents quantitative indicators on business regulations and the protection of property rights that can be compared across 189 economies. Botswana, currently ranked 56, continues to improve its score, but as for most of Africa, it’s a different story.

14. Economic Diversification Botswana is less diversified than South Africa, Namibia and Morocco

15. Employment Opportunities IFSCs do provide opportunities to diversify the economy but historically, the are known to generate less employment opportunities.

16. E-Legislation Electronic Commerce • Data Protection- new legislation required • Electronic commerce- new legislation required • Electronic signature- new legislation required • Cybercrime and Computer Related Crimes Act – review Act • Electronic Evidence Bill – review existing Bill These legal challenges must be addressed, hence; • The development of simple, consistent and technology-neutral legislation which recognizes all ICT processes and transactions. • Should include recognition of electronic transactions as valid and legal transactions, with the same force and effect as paper based transactions. This will give confidence to consumers and the business community and in many ways enhance economic development of the countryand a confidence builder for regionalism.

17. Conclusion • Greater integration of physical and economic infrastructure systems (friendship bridges) • Encourage comparative advantages to entrench synergies between JHB and GBE • A skilled labour force and flexible labour and immigration policy • No single country possesses all the attributes for regional leadership • Address the infrastructure gap to further boost economic growth and foster integration, not only across the region, but as well as in Africa • Liberal immigration policy to attract the best skills in the continent and globally • As long as Africa continues to have problems of governance, the challenge for performers like Botswana remain great. A regional hub requires a regional platform to tap into the opportunities

18. Thank you