International Financial Service Centre (IFSC) is a worldwide phenomenon based on attracting financial services companies to a certain jurisdiction for creation of employment and contribute to the economy of that country. Such institutions include investment banks, business process outsourcing (BPOs) services firms and others such as accounting and technology service providers.
Located at the heart of Southern Africa, Botswana established an IFSC regime to take advantage of the 250 million population in the Southern African region. The establishment of Botswana Innovation Hub and the Transport Hub unit were among initiatives to boost the IFSC regime as infrastructure like airports, railways and road networks are important factors in building a successful IFSC regime.
The country also wanted to leverage on the ratings from international agencies on corruption and governance as one of the value propositions to investors. Tax is another element that is common among all IFSC regimes across the world. Though important aspect of a successful IFSC it should be noted that it is not the only ingredient in building a successful IFSC and should be complemented by other factors.
Those are, good and reliable infrastructure (water, power, connectivity etc.) and a good visa system for ease of access by investors. The IFSC companies in Botswana like in other countries like Ireland enjoy special tax incentives. They are taxed at a rate of 15% instead of the normal 22%. Apart from a reduced rate, the IFSC companies also enjoy exemption from tax on dividends received from a “qualifying foreign participation”.
The exemption also covers any income arising from property representing a “qualifying foreign participation”. Income from properties such as shares, and property normally results in capital gains tax but where a local company has income from these sources such income will be exempt from tax.
The income Tax Act defines “qualifying foreign participation” as a participation held by an international financial services centre company in a company which is not resident in Botswana, where the international financial services centre company controls either directly or indirectly, alone or with connected persons, 25 per cent or more of the share capital including 25 per cent or more of the voting rights of the non-resident company”.
Another incentive is in relation to withholding taxes on payments such as interest, royalties and management fees, unlike other companies IFSC entities are under no obligation to deduct withholding taxes when making these payments. These IFSC incentives are meant to encourage companies to have investments outside the country and bring more capital into the country from returns made offshore.
For companies wishing to benefit from these incentives they’ll have to apply for an IFSC certificate at the Ministry of Finance and Economic Development. The assessment for a taxpayer to be granted this certificate normally considers factors such as number of citizens to be employed, training and skills transfer to local employees and proposed facilities among others.
The Ministry of Finance officials are mandated by the Income Tax Act inspect dealings of companies provided with the IFSC certificate to check if there are any breaches of the conditions set by the Minister. Some of those conditions may be employment of Batswana and skills transfer including absorption into management positions.
Moses returns to Egypt to reclaim the Pharaonic throne
When Moses was deposed as Pharaoh Akhenaten of Egypt in 1352 BC, General Atiku, he was not officially banished from Egypt: he was obliged to flee Egypt as he was not hundred percent sure of his safety.
Ideally, the place he should have headed to was Harran, in modern-day Turkey. Harran was apt in that not only was it the place of his ancestry but it was the major domicile of the Hykso-Hebrews. There, the Hykso-Hebrews abounded more than in any other place on the globe, including Canaan.
Monday the 27th Parliament will resume its July meeting. What is specifically on the agenda of Parliament in this coming meeting? A lot! There will be government and Private Bills, policy proposals, questions, themes and motions.
The meeting is also likely to be punctuated by statements from ministers on a variety of issues. Some statements may come as preemptive strikes to prevent the opposition from either making speeches on the subjects ahead of the government or to simply forestall questions on same. The House is expected to be active for five weeks nonstop. It is obviously a very short time considering the agenda.
Before its adjournment sine die in March, Parliament was supposed to discuss the National Development Plan 11 Midterm Review. This is what will become a priority of the government in its order of Business or scheduling. The government is expected to table an addendum to the already tabled review document.
The reason is simple, COVID-19 has not only gobbled funds from the fiscus, but has also resulted in a sharp decline in government revenue. The mainstay of the economy is mining, particularly diamonds revenue. These germs are mainly luxury commodities which are prone to international market changes.
Diamonds and other precious goods are seldom needed in large quantities during turbulent times such as these. Those countries that depend on them, such as Botswana, are always at high risk of external shocks. Southern African Customs Union revenue is also likely to decline because of slump in trade.
Tax collection has gone down due to many obvious reasons. Tourism has been shattered. Non-mining sector has also been negatively affected. Therefore, the estimated revenue has declined, necessitating a serious review of the development plan.
Which Bills are likely to be debated in this coming meeting? Two Botswana Defence Force Amendment Bills have been Gazetted; one is Private and the other a government proposal.
The private Bill is proposing to rectify the injustice of not fully paying soldiers who are on indictments or suspensions. The government Bill is a minor amendment relating to the BDF Court Marshall Judge Advocate General position.
Other government Bills include Income Tax Amendment, BURS Amendment, Citizenship Amendment, Legal Practitioners Bill, Environment Assessment Amendment, Financial Reporting Amendment, Accountants Amendment, Citizen Economic Empowerment Bill and a controversial one on Floor Crossing.
More interest will be on the anti-defection Bill and perhaps the citizen economic empowerment proposal. Other Private Bills to be tabled include Police and Prisons Amendment and the Media Practitioners Repeal Bill. Parliament will also debate the following policies; Climate Change, Tourism, National Energy and Minerals.
Whilst there is nothing on COVID-19, MPs are likely to ask questions on the pandemic. So many things come to mind as possibilities of issues likely to be raised. MPs are likely to ask the Ministry of Health, Office of the President and the Ministry of Finance and Economic Development about the whole pandemic fighting strategy.
There may be questions on the capacity and reliability of COVID-19 testing. Questions may be asked on positive cases that quickly become negative and or false alarms cases etcetera.
More focus may be on the budget and procurement. Some controversial tenders are likely to be questioned by MPs. It is expected that given the chance, MPs will likely lament the stoppage of food rations distribution by the Ministry of Local Government and Rural Development.
MPs will raise other miscellaneous issues on corona virus related policy decisions. These include the terms of engagement of the COVID Task Force and enlisting of the public relations private persons team from outside the government to help.
There may be questions by MPs on the business dealings of the President and his intention to acquire a government ranch, Banyana Farm. Clarity may be vehemently sought on these issues. Corruption related issues may be on the agenda of Private Business. So many issues have been reported; direct appointment of the 100KM NSC water pipe tender and other controversies may crop up.
There may be clarification required from the ministry responsible for international relations on the implications of the engagement of an Advocate working for Afri-Forum white supremacist organisation. The consequent and seeming tension between South Africa and Botswana will probably be on the agenda of MPs.
Recently the country has experienced serious fuel shortages. It is likely that parliament will raise issues on this matter and get the Minister to explain further.
Whilst this issue has been all over the media with clarifications offered by the Minister and the Permanent Secretary, parliament is likely to engage on the matter to get assurances into the record.
Answers will be demanded on the exact cause of the shortage, policy failures to predict the crisis and to avert it as well as the way forward.
Power issues have also irked MPs, particularly the recent tariff increases and recent threats to increase them even. All is definitely not well at Botswana Power Corporation, so MPs are probably going to probe these matters further. It is clear that there is a lot that Parliament will deal with.
The disheartening fact to note is that most of the Government Business will be expected, by the executive, to pass through parliament rather than be passed by it. There is condescension for free and adequate debate as well as ostensible intolerance of alternative views from the backbench and the opposition by the frontbench.
The ruling party caucus will discuss all these matters and once explained fully by technocrats, the expectation will be for MPs to swiftly rubberstamp executive ideas without raising controversial issues or simply reasoning on the floor.
There will be no time to reason! There is likely to be limited time allocation, in terms of minutes allocated to individual MPs per debate, on all these matters aforementioned. The Speakership, which traditionally is the gatekeeper of the executive, is likely to fully cooperate and not protect the MPs against the executive wrath.
The executive will reason that five weeks is too short and that all business must be dispensed with before time elapses. Whilst the backbench will be unhappy with these decisions, there’s nothing it will do, it is numerically weak in the caucus.
The opposition will face the whole ruling party bench and be defeated in their protest for adequate debate time. That’s just how things work in Botswana parliament. The legislature is a governing tool of the executive; it is used to pass through policies, laws and budgets for the ruling party’s own political ends.
It is not an independent institution which can hold the executive accountable effectively. If Bills or policies are not completed and there’s about week remaining, everything could be squeezed into that one last week. It has happened before; the House can pass many Bills in one sitting, even if it means staying up until late night or wee hours of the morning.
There are private motions which if not withdrawn and replaced with new ones, may not address topical issues that arose as a result of or during COVID-19. These are motions which may seek accountability of the government on corona virus related policies.
One of the likely motions is the motion touted by one of the opposition parties; motion of no confidence on the government. If this motion comes on urgency, it may die on arrival.
The ruling party MPs will be under strict instructions to kill it the moment a question is put on whether the agenda should be changed to allow a debate on it.
The only way it can be debated is if it comes in through the normal process. Even that way there is no guarantee; the ruling party MPs may stay outside to kill the quorum like they do with motions they don’t want debated.
They may also debate it and unleash their ‘attack dogs’ and put their views across before defeating it. Other motions which may be tabled include COVID-19 related motions. Expectations of the general public should be managed; the next meeting may be the usual ruling party show to do as they please.