FATF Status

Botswana is no longer on the FATF List of Countries that have been identified as having strategic AML deficiencies

Latest FATF Statement  -  21 October 2021

The FATF welcomes Botswana's significant progress in improving its AML/CFT regime. Botswana has strengthened the effectiveness of its AML/CFT regime and addressed related technical deficiencies to meet the commitments in its action plan regarding the strategic deficiencies that the FATF identified in October 2018. Botswana is therefore no longer subject to the FATF’s increased monitoring process. Botswana will continue to work with ESAAMLG to improve further its AML/CFT system.

Compliance with FATF Recommendations

The last follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Botswana was undertaken in 2022. According to that Evaluation, Botswana was deemed Compliant for 7 and Largely Compliant for 25 of the FATF 40 Recommendations. It was deemed Highly Effective for 0 and Substantially Effective for 0 of the Effectiveness & Technical Compliance ratings.

US Department of State Money Laundering assessment (INCSR)

Botswana was deemed a ‘Monitored’ Jurisdiction by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR). Key Findings from the report are as follows: -

Botswana aspires to be a regional financial center under its national Economic Diversification Drive strategy. Although money laundering in Botswana is not primarily related to narcotics, there has been an increase in drug trafficking in recent years, as well as in the sophistication and level of organization of cross-border crime.  The presence of organized criminal groups continues to grow as does the trade in second-hand cars, which present certain risks related to money laundering. Fraud perpetrated against large organizations, e.g., banks or government departments, typically with the collusion of an employee, continues, and money laundering prosecutions have centered on these types of criminal activity. Law enforcement officials report an upsurge of cigarette smuggling in 2015. Botswana is a cash-based society and has an insufficient framework for addressing money laundering and terrorism financing.

Botswana supplies many of the world’s diamonds. The stringent institutional framework for the mining and processing of diamonds affords limited opportunity for organized diamond smuggling. The smuggling that does occur is not believed to be linked to terrorism financing or the laundering of criminal proceeds. The DeBeers’ diamond trading facility relocated from London to Gaborone in 2013, and the Government of Botswana continues to pursue expansion of its downstream diamond manufacturing.  The growth of this industry presents an increased risk of money laundering and illicit financing activity.

Botswana operates the International Financial Service Center (IFSC), an organization authorizing entities to provide offshore financial services. IFSC-accredited companies provide a range of financial services, including fund management, banking, international insurance, and intermediary services. Those services must be provided to clients outside Botswana and in currencies other than the pula. The supervisory standards applied to domestic financial service providers are also applicable to IFSC-authorized entities. Shell companies and anonymous directors are prohibited.

The Botswana Authorities believe there is a low risk of terrorist activity in the country, but they remain concerned about the potential for terrorists to focus on Botswana as a soft target.

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           59

World Governance Indicator – Control of Corruption             74

Corruption is a moderate risk in Botswana. The country is considered to be the least corrupt country on the African continent, and petty corruption is not a risk for businesses. Nevertheless, nepotism and patronage pervade the government sector, which makes corruption a very high risk for public tenders. The Penal Code and the Corruption and Economic Crime Act criminalize active and passive bribery in the public and private sector. The maximum penalties include imprisonment for up to ten years, or a fine of BWP 500,000, or both, and corporations as well as individuals can be held liable. For further information - GAN Integrity Business Anti-Corruption Portal

Botswana has the best credit rating in mainland Sub-Saharan Africa. Botswana is a stable, democratic country with an independent judiciary system.  It maintains a sound macroeconomic environment, fiscal discipline, a well-capitalized banking system, and a crawling peg exchange rate system.  On September 16, 2022, Standard & Poor’s (S&P) maintained Botswana’s sovereign credit rating for long and short-term foreign and domestic currency bonds at “BBB+/A-2” with a stable outlook and projected that the demand for Botswana diamonds will remain strong despite weakening global activity. In November 2021, Moody’s revised its credit rating for Botswana from A2 to A3 with a stable outlook.  These agencies’ ratings are highly influenced by Botswana’s continued dependence on diamonds, which contribute to nearly 90 percent of foreign exchange earnings and are susceptible to external shocks in global consumer spending.

Botswana’s population of 2.59 million (World Bank, 2021) is small relative to the country’s large land area of 581,730 km2, approximately the size of the U.S. state of Texas. Botswana is nestled among South Africa, Namibia, Zimbabwe, and Zambia.  Its central location in southern Africa positions it to serve as a gateway to the region, particularly for industries that align with Botswana’s mining, highway, and water infrastructure investments. The World Bank classifies Botswana as an upper middle-income country based on its per capita income of $6,805.20 in 2021. Botswana’s national Vision 2036 outlines Botswana’s plans to grow from upper middle-income to high-income status by 2036.

Botswana’s economic recovery trajectory has been strong following the peak of the COVID-19 pandemic. In 2021, Botswana’s 11.8 percent GDP growth rate was the highest in Sub-Saharan Africa. GDP growth estimates for Botswana were 6.7 percent at the end of 2022, based on the recorded 6.5 percent year-on-year growth in the first three quarters of 2022. The strength of Botswana’s economic recovery is also evidenced by the continued downward trend of inflation, which fell from its highest recorded inflation (14.6 percent in August 2022) since 2008 to 9.3 percent in January 2023. The Bank of Botswana’s medium-term objective range is three to six percent inflation. Botswana’s central bank forecasts inflation will return to this target range by the third quarter of 2023. Unemployment rates fell slightly from 26 percent in 2021 to 25.4 percent in the fourth quarter of 2022.

Development in Botswana is driven mainly by revenue from diamond mining, which has enabled Botswana to develop infrastructure and fund social investments for the broader population. Additionally, in 2023, the Government of Botswana (GoB) introduced a wealth creation program that consolidates existing economic empowerment loans and grant programs for citizens to facilitate job creation projects that build livelihoods and reduce poverty.

COVID-19 is now a manageable disease in Botswana, but Botswana’s continued economic recovery is still threatened by global challenges posed by Russia’s war on Ukraine and its effect on food, fuel, and fertilizer prices. Compounding some concerns about cost of living and food security, Botswana – as a self-sufficiency measure – banned the importation of certain fruits and vegetables in January 2022. Domestic agricultural production has generally not filled all supply gaps, causing episodic shortages of staple vegetables. Botswana’s Special Economic Zones Authority (SEZA) partnered with the Ministry of Agriculture to develop the value chain for sunflower oil to reduce imports of cooking oil; SEZA will also seek to identify similar opportunities in other sectors.

Botswana has minimal labor strife.  Industrial courts exist for labor related matters. Botswana is a member state of the International Centre for Settlement of Investment Disputes (ICSID) Convention and of the 1958 New York Convention.  Corruption in Botswana is relatively lower than in other African countries; nevertheless, foreign, and domestic companies – and Government of Botswana officials – report increasing perceptions of corruption related to public procurement processes.  Minister of Finance Peggy Serame cited this increasing perception of corruption in Botswana in the Budget Speech in February 2023. Botswana has however improved slightly in the Transparency International’s Corruption Perceptions Index from a 2021 score of 5.5 and a ranking of 45 out of 180 countries to a 2022 score of 6.0 and a ranking of 35 out of 180.

The Botswana Investment and Trade Centre (BITC) is Botswana’s trade promotion agency to attract investment and assist foreign investors with doing business in Botswana.  Botswana offers low tax rates and has no foreign exchange controls.  The BITC’s topline economic goals are to promote export-led growth, ensure efficient government spending and financing, build human capital, and ensure the provision of appropriate infrastructure.  GoB entities, including BITC, use these criteria to determine the level of support to give foreign investors.

In Gaborone, from July 11 to July 14, 2023, the GoB – led by the Ministry of Trade and Industry and BITC – will co-host U.S.-Africa Business Summit focused on U.S. investment opportunities in Africa.

The GoB has committed to streamlining business-related procedures and removing bureaucratic impediments based on World Bank recommendations in a business reform roadmap.  Under this framework, Botswana introduced electronic tax and customs processes in 2016 and 2017.  The Companies and Intellectual Property Authority (CIPA) built and successfully integrated the Online Business Registration System (OBRS) with Botswana Unified Revenue Services (BURS) and the Immigration Office.  OBRS is designed to reduce the business registration process by more than 10 days.  In March 2022, Parliament passed the Intellectual Property Policy to leverage Botswana’s intellectual property potential for inclusive and sustainable economic growth and development.

The GoB released a new National Investment Strategy (NIS) for 2023-2030. This builds upon the previous 2009-2016 NIS. The strategy outlines ways the government can partner, leverage, and incentivize the private sector to accelerate private sector investment in the economy and enhance productivity and competitiveness in a sustainable way.

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