The New Botswana Order

We are now living in a new Botswana.  This Botswana is different, of course for better.  The country has changed in response to regional and global legal and economic climate.  We all, particularly those in business whether in entrepreneurial business world or corporate business world or Not-for-Profit industry, need to change.  This may look like a change making a big shift in paradigm.

First is anti-money laundering.  AML.  Botswana business community needs to quickly respond to the serious warning from the international community in terms of stepping up our standards and business practices on managing movement of money in and out of the country.  Whoever receives money in Botswana or sends money from Botswana and whoever seeing the money so received or paid, whether citizen or non-citizens resident or non-resident should now be more alert about the source of funds, the people involved in order to ensure that due taxes are paid on that money in appropriate tax jurisdictions.  It is our joint responsibility.  At RSM we have enhanced our procedures and processes to intensify our alertness to AML.  Does your risk management or corporate governance or operational or accounting or finance or even HR processes consider AML risks?  Please add the AML perspective to strategic, administrative and operational management.

Second is the Trust Laws: Trust legislation is a boon.  It is advantageous in the sense that it capacitates any investor or asset owner to use it wisely and distribute the income according to investor's wishes - all based on the trust he or she imposes on the trustee.  While it is a capacity builder, business ownership or management transition facilitator, fair income distributor, efficient tax vehilce, equally the trust set up can be misused.  It is a double edged weapon.  Trust forms of organisations are used extensively in alternative investments - neither bank funds, a sector controlled by Bank of Botswana, nor sometimes sectors controlled by NBFIRA - meaning a private investment in a property or unlisted shares.  These arrangements undoubtedly come under the purview of Financial Intelligence Act.  The true purpose of Trust is to give it a regulatory framework for productive investments - traditional or alternative and never money laundering or non-compliance of laws and regulations or legalising something that would be illegal otherwise. At RSM we not only understand this, we practice this and profess this all the time to our clients.

Third is pricing related company transactions: Some wrongly beleive that companies are created to reduce tax.  This is an old and a forgotten belief now.  Companies are growth vehicles for investors where ownership and management can be seggregated, with owners expecting returns and managers building organisations and delivering stakeholder (not just shareholder) expectations, while limiting shareholder liability. Yet, companies can be created or bought or sold or operated to evade or postpone tax that is due to the appropriate tax jurisdiction.  Company managements will have to be careful about transfer pricing.  Lower tax jurisdisction should get due share of tax.  Tax laws thus have been revised to make sure that connected or related companies buy, sell and otherwise transact using princing as if they are not related.  This is the key.  Check with us if your transfer pricing does not amount to Base Erosion and Profit Shifting (BEPS). 

Fourth, stop aggressive gearing.  You may be a very clever and shrewd businessman capable of generating profits that can return all your capital in perhaps one or two or three years and your profit-making formula or expertise may really be impressive.  Yet, it does not mean that you should borrow heavily.  You have to have equity.  If you are poor, please scale down the business or find employment.  By being aggressive, you may be putting other fellow citizens at risk, particularly when bank borrows funds getting it from a depositor's hard earned money.  Equity is equitable, justificable and hence should be put in place in each and every business.  It is an economic crime to do a business with negative equity.  If you don't have equity, find a lender to contribute equity.  BDC or CEDA can give equity.  Taking undue risks is not only unhealthy to you but can affect the economy badly over time.  It has a snowball effect.  In the business world, equity should be given the due share of respect because it measures the risk taken by a responsible entrepreneur and absorbed or borne by the wider society.

Fifth, every large entrepreneur has a corporate responsibility.  This is the new coporate ethics that applies to Botswana perhaps more than other economic jurisdictions.  Ultimately and in the final analysis, the funds raised are from pension and insurance funds whether you are listed or not.  In current times, foreign direct investment is difficult, for all the reasons stated above.  A very high order of business ethics is fact the order of the day.  Good corporate governanace, risk management, manuals, procedures and other practices to inculcate an ethical organisational culture applies to every business - whether listed or not.  Unlisted entities should note is evern more carefully.  Most business people have high moral values.  However we can never afford an exception even by iota of a percentage.  At RSM we put ethics right on top of the list.  We understand that businesses have to make money, yet ethics should get its due rank number 1 in our view.  Money can still be getting Rank 1 and it is fine. 

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