Gaborone: Botswana has emerged as one of the fastest implementers of a key protocol aimed at integrating SADC's finance and investment systems to boost Foreign Direct Investment inflows and enhance industrial capacity. Former president, Festus Mogae, signed the Finance and Investment Protocol (FIP) in 2006, binding the country to wide-ranging as well as sector specific reforms to modernise and upgrade financial and investment regimes.
The FIP envisages SADC member states exchanging information, engaging in joint capacity building and boosting coordination across their financial and investment sectors.
The FIP is expected to gradually lead to integration banking and bank processes, regulatory and licensing institutions, harmonised standards, systems and policies leading ultimately to a regional bond market, stock exchange and monetary union, presenting SADC as a single market.
Yesterday, FIP experts presented a study indicating that Botswana was among the countries that have taken the greatest strides in implementing the FIP. The study, conducted last year, measured 54 indicators of countries' compliance and another 21 indicators of their contribution to the achievement of regional FIP milestones.
According to the study, Botswana had progressed 62.5 percent by 2011 in achieving the country level FPI indicators, being slightly behind South Africa, Mauritius, Zambia and Malawi in the 14-member group.
The study noted that under the cooperation in investment indicator, Botswana has strong legislation for investor protection, robust investment promotion agencies and is also a member of globally recognised oversight bodies and agreements. Botswana also scored well in its exchange controls, payments systems and macroeconomic convergence, the latter being an assessment of factors such as inflation, public debt and the national budget.
The country also scored well on the taxation indicator, where it has signed 12 Double Taxation Avoidance Agreements (DTAAs), eight of these being with SADC members.
However, researchers noted loopholes in this indicator. "Botswana is currently unable to participate in information exchange because the legislation does not allow for such cooperation," FIP's researchers said in their report on Botswana.
"BURS struggles to access information, both regarding domestic banks and regarding banks in the rest of SADC, because legislation makes it very difficult to exchange information across jurisdictions. BURS has met with the Bank of Botswana to convince them to change the laws regarding access to banking sector information."
However, earlier this year, finance minister, Kenneth Matambo revealed that legislative reviews were due in Parliament, empowering the BURS to obtain and provide information requested by foreign tax authorities from local banks. Other areas of concern for the FIP's researchers include banking supervision, payments systems, legal and operational framework for the Bank of Botswana, cross-border coordination between development finance institutions.
The study's over-arching conclusion was that while Botswana is progressing well in achieving the FIP's indicators, coordination between various players and policies domestically could be "Botswana should take a more coordinated approach to FIP implementation," the researchers said.
"A coherent platform will allow stakeholders from Botswana's institutions to be united and progress more rapidly as a country. In some instances, there appeared to be a disconnect between some of the institutions - in particular, there seemed to be issues between BEDIA as the investment promotion agency, BURS, the tax policy division of the finance ministry and the trade and industry ministry."
The finance ministry's deputy Secretary for financial policy, Ellen Richard-Madisa said Botswana was committed to implementing the FIP at national level.
"More efficient financial markets will raise capital availability, reduce its costs and boost international and intraregional investment, leading to diversification of economies and the increase in their competitiveness," she told an FIP sensitisation workshop yesterday.
SADC's annual output was measured at US$379 million in 2006 from a population of 248 million, lending weight to attempts by members to harmonise the region into a single, highly integrated and standardised market.