Botswana’s Economic Growth Hinges on FDI, But Risks of Money Laundering and Terrorism Remain

As Botswana faces economic diversification challenges and stiff international business competition from other SADC economies, the country has had to soften restrictions on doing business with a view to attracting Foreign Direct Investment (FDI). While this strategy may yield short-term benefits, it also poses significant risks of money laundering and terrorism.

Vulnerability to Money Laundering and Terrorism Financing

A recent assessment by the Institute for Security Studies (ISS) highlights Botswana’s vulnerability to money laundering and terrorism financing. Despite having a few prosecutions for money laundering, but no terrorism-related prosecution in Botswana at all, the country has never conducted an assessment of risk vis-à-vis money laundering and terrorism/financing of terrorism.

Risk Factors

• Al-Qaeda agents believed to be operating in Botswana have used the country’s boom in imported second-hand cars as a cover for their activities.
• Investigations have linked company directorships to Kenya, where terrorist activities are understood to be taking place.
• Botswana is considered a soft target due to its lack of regulations and weak vetting mechanism for foreign individuals.

Ease of Doing Business

The World Bank’s “Doing Business” report lists Botswana’s ease of doing business ranking as 38 out of 181 economies assessed, with significant improvements in registering a company and starting a business. However, this liberal dispensation is a major loophole in the system, subject to abuse by persons and groups that may have sinister intentions.

Government Strategy

The government’s strategy to attract FDI is coupled with lucrative and easily accessible subsidies, grants, loans, and tax breaks for establishing businesses that propose to employ Batswana. While this may bring short-term benefits, it also poses significant risks of money laundering and terrorism financing.

Recommendations

• The ISS report calls for a comprehensive review of Botswana’s regulatory framework to address these risks and ensure that the country’s economic growth is not compromised by illicit activities.
• The government must implement robust measures to verify the integrity of persons forming companies or registering business names as sole proprietorships or partnerships, and to cover professions such as lawyers and accountants acting as company secretaries or nominee directors and shareholders.

Conclusion

Botswana’s economic future hangs in the balance, and it is imperative that the government prioritizes transparency, accountability, and due diligence to ensure that FDI yields long-term benefits for the country’s growth and development.