Geert Bekaert and Campbell R. Harvey's


Chronology of Economic, Political and Financial Events in Emerging Markets




Major Political and Economic Events


The minimum grade period on external borrowing was reduced from two years to three months. The debt-to-equity ratio for local borrowing by nonresident-controlled companies exceeding P 100,000 was changed to 3:1.a3(first entry)


The initial tranche of local financial support that a non-resident-controlled business entity may borrow in Botswana was increased from P100,000 to P250,000. Parastatals were advised that they should not borrow from outside Botswana until they were convinced that equivalent facilities were not available locally. The limit up to which the authorized dealers may approve emigration allowances for permanent residents was increased to P150,000 a family.a3


(1)Authorized Depositors were permitted to effect transactions relating to purchase and sale of securities of a portfolio investment nature involving nonresidents; (2) the Bank of Botswana allowed immediate repatriation of the proceeds of any disinvestment by foreign investors, up to a max of P 50 million. Repatriation of amounts exceeding this limit were permitted on deferred terms.a3


Nonresident-controlled companies were allowed to invest their funds in pula that were generated in the country as well as those from external sources in any securities issued by the Bank of Bostwana.a3


(1)Nonreident-controlled companies were permitted to invest in the securities of companies listed in the Botswana Share Market with funds not originating from a nonresident source; (2)the maximum limit for aggregate portfolio investments by nonresidents and nonresident-controlled companies was increased from 25% to 49% of the "free stock"; (3)the eligibility of nonresident-controlled companies to borrow locally would be determined by applying the 4:1 debt-to-equity limitation.a3


Effective 01/01/1994, the limit on remittance for self-employed temporary residents would be increased to P50,000 or 65% of the previous year's taxable income, whichever is greater. Remittances for imports and external debt service may be made without reference to the Bank of Botswana.a3


Companies operating in Bostwana were permitted to open foreign currency accounts with commercial banks in deutsche mark, pounds sterling, South African rand, and U.S. dollars. An annual consolidated allowance to meet personal foreign payments-travel, subscriptions, and other payments-was set at an indicative limit of P 100,000 an adult and P 50,000 a child under 18 years of age. An annual consolidated business allowance was set at an indicative limit of P 1 million to cover business travel, royalties, and management fees, and other payments (excluding imports). Individuals and businesses were permitted to make direct or portfolio investments abroad up to P 100,000 and P 1 million, respectively. However, a qualifying company must have been operational for the previous two years and registered with the Department of Taxes.a3


Commercial banks were authorized to open foreign currency accounts for individual permamant and temporary residents, nonresident individuals, and incorporated entities. The accounts are to facilitate foreign receipts and payments for approved transactions, without having to convert foreign currency receipts into pula and vice versa, and to protect against changes in exchange rates. The restriction on specified foreign currencies was removed and commercial banks were allowed to open foreign currency accounts in any currency at their discretion. a3


Botswana accepted the obligations of Article VIII, Sections 2, 3, and 4 of the IMF Articles of Agreement. a3


(Controls on capital and money market instruments) The dual-listing of scripts of international companies listed on reputable recognized international stock markets was permitted on an "open register basis," subject to meeting the requirements of the Botswana Stock Exchange. The restriction of nonresidents to the 5% share holding of a listed company and the aggregate of 49% holding of the "free stock" of any listed company does not apply to share holding in a foreign dual-listed company in Botswana. (Controls on credit operations) The local financing of corporate bodies and branches resident in Botswana that are controlled by nonresidents increased to P 1 million from P 500,000. (Controls on direct investment) Banks were authorized to sell foreign currency to residents who wish to invest outside Botswana up to a limit of P 10 million ( up from P 1 million) for companies and other corporate bodies a calendar year. Amounts exceeding these limits must be referred to the Bank of Botswana. Income from such investments must be reported to the Commissioner of Texas and sale proceeds on financial liquidation, if not reinvested, must be repatriated to Botswana. (Provisions specific to commercial banks and other credit institutions) The initial tranche (an amount that a nonresident-controlled entity can borrow without having brought capital from external sources) was increased to P 1 million. The 4:1 debt-to-equity ratio will apply after the initial tranche of P 1 million. Any application for local financing support in excess of the prescribed limit requires prior approval from the Bank of Botswana. (Provisions specific to institutional investors) The maximum limit for portfolio investment by institutional investment offshore increased to 70% from 65% of the total asset portfolio.a3


The Bank of Botswana announced a further liberalization of exchange controls: individual non-residents could purchase up to 10% of the free float of listed companies (up from 5%) without central bank approval, and aggregate shareholding of free float for non-resident investors increased from 49% to 55%. Inflation rate dipped to 7.8% in December 1997, the lowest level in almost 10 years.


(Controls on capital and money market instruments) Participation in any pula bond issue by nonresidents will not be restricted by nonresidents by exchange controls. Nonresidents, however, will not be permitted to buy instrument of money market for the purpose of absorbing excess liquidity from the domestic financial system. Nonresidents are now permitted to issue pula-denominated bonds, provided such instruments are listed on the Botswana Stock Exchange and are long-term instruments with an original maturity in excess of one year, subject to prior approval of the Bank of Botswana and the Botswana Stock Exchange. The maximum holding by a nonresident portfolio investor in any equity securities listed on the Botswana Stock Exchange was increased to 10% of total issued and paid-up shares of a company. The cumulative aggregate shareholding for all nonresident portfolio investors or their nominees thereof was also increased to 55% of the free stock of a locally incorporated company. (Controls on credit operations) The amount that residents of Botswana may borrow from external sources was increased to P 200,000 from P 100,000 for individuals, and to P 2 million from P 1 million for companies and other corporate entities. (Controls on direct investment) Banks were authorized to sell foreign currency to residents who wish to invest outside Botswana up to a limit of P 30 million (up from P 10 million) for companies and other corporate entities, and up to a million of P 1 million (up from P 100,000) for individuals a calendar year. Income from such investment must be reported to the Commissioner of Taxes and sale proceeds on final liquidation, if not reinvested, must be repatriated to Botswana. (Controls on liquidation of direct investment) The immediate repatriation of disinvestment proceeds was increased to P 100 million from P 50 million with any excess being repatriated in tranches at the Bank of Botswana's approval. (Provisions specific to institutional investors) While the initial tranche (an amount that a nonresident-controlled entity can borrow without having brought capital from external sources) remained at P 1 million, the debt-to-entity ratio was increased to 10:1 from 4:1. Prior approval of the Bank of Botswana is required for any amounts in excess of this limit.a3


U.S. President Bill Clinton visited Botswana. The Bank of Botswana cut its key bank lending rate for the second time in 1998.


Festus Mogae was elected Botswana's present. He promised that the country would remain committed to a free market economy.


In the third quarter, the government surprisingly increased minimum salary to civil servants by 25% to increase private sector savings and consumer spending.


The first new domestic listing on the Botswana Stock Exchange, MRI Botswana, was well oversubscribed.


The government released the1999/2000 budget, including the abolition of exchange controls and a preferential tax rate of 15% for companies locating in the proposed international financial services center.


Barclays became the first listed company in Botswana to have a market value of over one billion pula ($216 million) and moved the value of DCI (the local Domestic Company Index) constituents past 4 billion pula for the first time.


Shares of Chobe Holdings, one of the most successful, high quality eco-tourism operations in Botswana were 2.5 times over-subscribed.


Botswana Democratic Party won its eighth consecutive general election, with an increased majority win over the opposition. Botswana's dominant information technology player, RPC Data Ltd, was traded for the first time on the exchange.


Hyundai Motor Distributors of Botswana was liquidated.


The Bank of Botswana published its monetary policy, clearly aimed to achieve price stability by targeting inflation.


The minister of finance proposed a new privatization policy that would restructure nearly 30 state enterprises.


In the second quarter, Volvo shifted its operations to South Africa, following the collapse of Wheels of Africa and the Motor Company of Botswana. Botswana was ranked the third-most competitive African economy among 24 countries according to the 2000 Africa Competitiveness Report from the World Economic Forum. A U.N. report said that Botswana had the highest incidence of HIV/AIDS in the world, with nearly 33% of all adults infected.


Botswana was ranked as the least corrupt country in Africa in Transparency International's Corruption Perception Index.


The Bank of Botswana again increased its benchmark bank rate by 0.5%.


A South African consortium acquired the Motor Company of Botswana for US$7.2 million. The subsequent layoffs pushed Botswana's unemployment rate above 19.5%.


The government decided to stop the export of natural gas until 50 years of reserves were located.


The Botswana Stock Exchange (BSE) ranked one of the best-performing emerging stock markets that month. Botswana's diamond producer reported a 9% rise in profits. Salary was increased and a new Contribution Pension Scheme Fund for civil servants was defined.


S&P issued a stable outlook for Botswana and assigned an 'A' rating to the country's long-term foreign currency debt and an 'A+' rating to local-currency debt.


Inflationary pressures eased further.


Tight monetary control led to an inflation rate of 5.9%, the lowest in two years. Interest rate was maintained at 14.3%.


A flood of refugees from Zimbabee and the global recession began to take a toll on the markets.


The economic recession and the South African rand's decline made the pula depreciate 22%. Tourism and diamond exports declined after the terrorist attacks in the U.S.


Bushmen from the Kalahari desert announce they are taking the government to court, in an attempt to retain their right to stay as nomads on the land. b6


value-added tax (VAT) at 10% was introduced.


Botswana, Lesotho, Namibia, South Africa and Swaziland signed the new Southern African Customs Union (SACU) revenue-sharing agreement. The most important difference from the old agreement is that the current agreement guarantees an effective duty rate of around 17% to Botswana, Lesotho, Namibia and Swaziland. a17


The Bank of Botswana raised interest rate by 50 basis points, and by 50 basis points again on November 5th, to 15.25%.


In the 2003/04 budget speech, it was announced that the foreign investment code (which sets minimum investment levels by foreign investors) was to be withdrawn. a17


The first round of government, pula-denominated bond issues, which began in March, was completed in May, with a total issue of P1.75bn (US$328m).


The World Economic Forum says Botswana has the best standards of governance in Africa.


Botswana begins erecting a fence along its north-eastern border with Zimbabwe in response to an influx of illegal Zimbabwean immigrants.


Botswana's parliament has amended the legislation that governs income tax collection, in order to facilitate improved tax compliance as well as clarify certain provisions.b1


The government is proceeding with plans to establish the Botswana Unified Revenue Service (BURS), which will operate as a parastatal body with responsibility for revenue assessment and collection, as well as making revenue forecasts and recommendations for changes in relevant laws. a17


The number of people infected with HIV falls to 37.5%, Botswana no longer has the highest incidence rate in the world.


The Debt Participation Capital Funding Limited (DPCF), established in March, made available seven bonds for public auction. The notes had a combined nominal value of P1bn (US$209m) and maturities of between three and 21 years. a17


Regulations on Foreign Investors


Restrictions: Permission from the exchange is required for more than 5% ownership of a particular company. Without further reference to the Bank of Botswana, non-resident cannot own more than 49% of the capital of a public company not in the hands of a controlling shareholder

Taxation: Interest earned by non-residents is charged at a 15% withholding tax, double taxation is avoided with some countries. No capital-gains tax. a6


Restrictions: There are no restrictions on the ownership of listed companies by foreigners as exchange controls were fully abolished in February 1999.

Taxation: No change.a7


Restrictions: 1. Foreign investment is restricted in a number of areas, including manufacture of school furniture, welding and bricklaying, hawkers and vendors, butchery and produce, petrol filling stations, bars and liquor stores, supermarkets, and retail, but these restrictions are easily circumvented in most cases. 2. Most utilities, telecommunications, postal services, water, railways, and agriculture are closed to private investment, but the U.S. Department of State reports that “these restrictions are not a meaningful impediment to serious foreign investment.” 3. Botswana permits 100 percent foreign ownership of other businesses. 4. Minimum investment levels by foreign investors was introduced in May.  a17, b3

Taxation: Both resident and non-resident company corporate tax rate is 25%. Manufacturing company tax rate is 15%. 50% of capital gains is taxable in the case of shares or debentures. VAT tax is introduced at 10%.  a17, b5


Restrictions: Minimum investment levels by foreign investors introduced in May 2002 was withdrawn.  a17

Taxation: Interest tax rate is set at 15% as February, 2003. b1