GLOBAL PRACTICE GUIDE

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Banking
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Botswana
Desai Law Group

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 BOTSWANA

LAW AND PRACTICE: p.3

Contributed by Desai Law Group

The ‘Law & Practice’ sections provide easily accessible information on

navigating the legal system when conducting business in the jurisdic-
tion. Leading lawyers explain local law and practice at key transactional
stages and for crucial aspects of doing business.

Law and Practice
Contributed by Desai Law Group
Contents
1. Loan Market Panorama p.4
1.1 The Impact of Recent Economic Cycles and
the Regulatory Environment p.4
1.2 The High-yield Market p.4
1.3 Alternative Credit Providers p.4
1.4 Evolution of Banking and Finance Techniques p.4
1.5 Recent or Expected Legal, Tax, Regulatory or
Other Developments p.5
2. Authorisation p.5
2.1 Requirements for Authorisation to Provide
Financing to a Company p.5
3. Structuring and Documentation Considerations p.5
3.1 Restrictions on Foreign Lenders Granting
Loans p.5
3.2 Restrictions on Foreign Lenders Granting
Security p.5
3.3 Restrictions and Controls on Foreign
Currency Exchange p.5
3.4 Restrictions on the Borrower’s Use of Proceeds p.5
3.5 Agent and Trust Concepts p.5
3.6 Loan Transfer Mechanisms p.6
3.7 Debt Buy-back p.6
3.8 Public Acquisition Finance p.6
4. Tax p.6
4.1 Withholding Tax p.6
4.2 Other Taxes, Duties, Charges or Tax
Considerations p.7
4.3 Usury Laws p.7
5. Guarantees and Security p.7
5.1 Assets Typically Available and Forms of
Security p.7
5.2 Floating Charges or Other Universal or
Similar Security Interests p.7
5.3 Downstream, Upstream and Cross-stream
Guarantees p.7
5.4 Restrictions on Target p.7
5.5 Other Restrictions p.8
5.6 Release of Typical Forms of Security p.8
5.7 Rules Governing the Priority of Competing
Security Interests p.8
Law and Practice BOTSWANA
6. Enforcement p.9
6.1 Circumstances in Which a Secured Lender
Can Enforce Its Collateral p.9
6.2 Foreign Law and Jurisdiction p.9
6.3 A Judgment Given by a Foreign Court p.9
6.4 A Foreign Lender’s Ability to Enforce Its Rights p.9
7. Bankruptcy and Insolvency p.9
7.1 Company Rescue or Reorganisation
Procedures Outside of Insolvency p.9
7.2 Impact of Insolvency Processes p.9
7.3 The Order Creditors Are Paid on Insolvency p.10
7.4 Concept of Equitable Subordination p.10
7.5 Risk Areas for Lenders p.10
8. Project Finance p.10
8.1 Introduction to Project Finance p.10
8.2 Overview of Public-private Partnership
Transactions p.10
8.3 Government Approvals, Taxes, Fees or Other
Charges p.10
8.4 The Responsible Government Body p.11
8.5 The Main Issues When Structuring Deals p.11
8.6 Typical Financing Sources and Structures for
Project Financings p.11
8.7 The Acquisition and Export of Natural
Resources p.11
8.8 Environmental, Health and Safety Laws p.11
9. Islamic Finance p.12
9.1 Overview of the Development of Islamic
Finance p.12
9.2 Regulatory and Tax Framework for the
Provision of Islamic Finance p.12
9.3 Main Shari’a-compliant Products p.12
9.4 Claims of Sukuk Holders in Insolvency or
Restructuring Proceedings p.12
9.5 Recent Notable Cases p.13
3
BOTSWANA Law and Practice
Desai Law Group has a staff complement of 64 employees,
20 of whom are attorneys. The firm – founded in 2016 and
designed to operate in line with the best practices of major
international law firms – is located in Gaborone, Botswana,
and represents leading corporates, banking and financial
institutions, government parastatals and regulators and
high net worth entrepreneurs. The firm’s legal professionals
Authors
Rizwan Desai is founding and managing
partner at the Desai Law Group and Head
of Corporate Commercial. His key
practice areas are capital markets, mergers
& acquisitions, banking, financial services,
private equity and securities; telecommu-
nications are a further area of expertise. Rizwan has been
the lead lawyer on many ground-breaking corporate
transactions in Botswana and represents many blue chip
companies. He is not only qualified as an attorney in
Botswana, but also in New York; additionally, he is
qualified as a solicitor in England and Wales and in
Scotland. He is a former chairman of the Botswana Stock
Exchange and Barclays Bank of Botswana.
1. Loan Market Panorama
1.1 The Impact of Recent Economic Cycles and the
Regulatory Environment
Although the economy of Botswana has recovered from the
effects of the global recession, economic growth rates have
still not yet reached their pre-recession levels. Owing to the
low levels of inflation that the country has experienced in the
recent past, as part of the monetary policy framework, the
Central Bank has significantly reduced interest rates in the
market, with the prime lending rate declining from 11% per
annum in 2010 to 6.5% currently. The low interest rate envi-
ronment has, however, had minimal impact on the direction
and trends of the loan market in Botswana. Additionally,
growth in the lending activities of financial institutions has
declined, despite the lower borrowing costs.
1.2 The High-yield Market
The profitability of the banking sector has experienced de-
clining growth rates in the recent past, as a result of a com-
bination of narrowing interest margins and an increase in
operating expenses. These structural changes have, however,
had minimal impact on financing terms and structures. As
an example, the bulk of financing from banks is still dispro-
portionately skewed towards the household sector, as com-
pared to the corporate and public sectors. Some banks have
significantly increased limits placed on unsecured lending,
however. There is also some gravitation towards longer-term
4
have experience in various areas of banking, finance and fi-
nancial services, including, but not limited to: drafting and
advising on finance agreements; securitisation; financial
markets law and legislation including banking regulation;
asset management; asset finance; capital markets and de-
rivatives; collective investment schemes; and private equity.
Angelica Bojosi is a partner in the Desai
Law Group’s Corporate Commercial
Department. Her key practice areas are
capital markets, mergers and acquisitions,
and banking and finance. She is not only
qualified as an attorney in Botswana, but
also as a solicitor in England and Wales, where she worked
as in-house counsel for a multinational organisation for a
number of years.
financing, unlike previously, where banks mostly preferred
advancing loans on relatively shorter terms.
1.3 Alternative Credit Providers
There has been growth in alternative credit providers, par-
ticularly within the non-bank financial sector. These include
statutory financial institutions and asset managers, acting
on behalf of pension funds and insurance companies, who
decide to place more funds in the economy to comply with
the Non-Bank Financial Institutions Regulatory Authority
(NBFIRA) regulations on funds invested offshore. Currently,
asset managers are allowed to invest only up to 70% of the
funds under management offshore. As a result, pension and
insurance funds are availing more funds for investment in
infrastructure development projects, corporate lending and
private equity. As indicated in 1.2 The High-yield Market,
however, there have been minimal changes with respect to
financing terms and structures.
The bond market has also experienced some level of activity,
although the sector is still relatively subdued when compared
to the equity market. There has been significant growth in
micro lenders, on the other hand, who mainly target small
enterprises and the consumer market.
1.4 Evolution of Banking and Finance Techniques
Due to subdued domestic demand, the economy has experi-
enced low levels of inflation, leading to a decline in interest
rates over the last couple of years. In turn, banks have had

to adjust their strategies to provide finance to various sec-
tors, while still being mindful of risk. Banks have introduced
more technologies, such as online banking, which cater for
the retail and corporate sectors. In addition, commercial
banks have launched products with enhanced security fea-
tures and improved functionality (for example, chip-based
debit cards and security-enhanced cheque books). Total
advances-to-deposits ratios have also increased steadily
over the last couple of years, as a result of a liquidity crunch
within the banking sector.
1.5 Recent or Expected Legal, Tax, Regulatory or
Other Developments
No legal, tax or other regulatory developments are expect-
ed to impact the loan market significantly, apart from the
amendment of the Non-Bank Financial Institutions Regula-
tory Authority Act of 2016 (NBFIRA Act, CAP 46:08), which
is aimed at bringing the regulatory and supervisory structure
of non-bank financial institutions in line with international
standards. This includes ensuring that all non-bank finan-
cial institutions are subject to NBFIRA, particularly in con-
sideration of the fact that some previously posed a serious
financial risk to the economy. In addition, the Act provides
for NBFIRA to be self-reliant in terms of funding, and thus
ensures the regulatory authority’s independence from the
government.
2. Authorisation
2.1 Requirements for Authorisation to Provide
Financing to a Company
A bank is required to be licensed in terms of the Banking
Act (CAP 46:04) in order to provide banking services. An
applicant for a banking licence must be incorporated as a
company limited by shares. Furthermore, the Bank of Bot-
swana imposes other requirements, in relation to being a fit
and proper recipient of a banking licence, which include, but
are not limited to, compliance in relation to capital adequacy
and the operating model.
The central bank is conferred with the power to set or de-
termine different minimum prudential requirements for
different classes of banks and shall impose such restrictions
as it may deem necessary on the business structures, opera-
tions and banking services to be provided by any such class
of banks. The minimum required capital for commercial
banks is currently the greater of BWP5 million or 15% of
the risk-weighted assets and other risk-weighted exposures
of the bank.
An application for a banking licence is made in writing to
the Bank of Botswana and must be accompanied by certified
copies of the applicant’s certificate of incorporation in Bot-
swana, the constitution of the company, any other relevant
corporate documents, financial documents and data, as well
as the prescribed application fee. Before issuing the licence,
Law and Practice BOTSWANA
the central bank may request supplementary information.
The Bank of Botswana is further empowered to conduct
any investigations it may deem necessary for the purpose of
ascertaining compliance with all applicable laws and regula-
tions.
Non-banks – particularly micro lenders, finance and leasing
companies that are not licensed banks – are licensed under
the NBFIRA Act. An application for a licence under the NB-
FIRA Act depends on the proposed line of business of the
applicant. An application is made to the regulatory author-
ity in the prescribed form, accompanied by the prescribed
documents, statements and fees. The regulatory authority
may still require the applicant to provide further information
in connection with the application where necessary.
In addition, there are statutory financing institutions, which
obtain the mandate to provide financing from their found-
ing legislation.
3. Structuring and Documentation
Considerations
3.1 Restrictions on Foreign Lenders Granting
Loans
Foreign lenders are not restricted in granting loans.
3.2 Restrictions on Foreign Lenders Granting
Security
There are no impediments on the granting of security or
guarantees to foreign lenders.
3.3 Restrictions and Controls on Foreign Currency
Exchange
Restrictions and controls regarding foreign currency ex-
change apply in relation to engaging in the business of for-
eign exchange. A business must be licensed under the Bank
of Botswana Act to transact in foreign exchange.
3.4 Restrictions on the Borrower’s Use of Proceeds
There are no legal restrictions on the use of proceeds from
loans or debt securities. However, a lender may impose cer-
tain restrictions in a contract concluded with a borrower in
relation to the borrower’s use of proceeds from a loan.
3.5 Agent and Trust Concepts
The agent and trust concepts are recognised in Botswana.
Although it is possible for an agent or trustee to enforce loan
documentation, the same cannot be said in relation to en-
forcement of security. The Deeds Registry Act (CAP 32:02)
prevents the registration of a bond in favour of any person
as the agent of a principal. This provision effectively makes
it impossible to pass security in the form of a mortgage bond
over immovable property, or notarial bonds to a security
trustee. In terms of common law, other types of security,
such as a pledge or cession in security, require the presence
5
BOTSWANA Law and Practice
of an underlying legally valid and primary obligation owed
by the grantor of the security to the recipient. A security
trustee would, therefore, lack this nexus with the grantor of
the security.
On the other hand, the Companies Act (CAP 42:02), which
came into effect after the Deeds Registry Act, specifically
permits the issue of debentures and the provision of security
for repayment of debentures by way of a mortgage bond,
and the holding of that security by a trustee for debenture
holders. The definition of “debenture” in the Companies Act
includes, inter alia, a written acknowledgement of indebted-
ness issued by a company in respect of a loan made or to be
made to it and is wide enough to cover profit finance facility
agreements. On the basis that later legislation can be inter-
preted to amend earlier legislation, use of the provisions of
the Companies Act may allow a corporate entity trustee to
hold security. The provision does not, however, extend to a
corporate entity agent.
A security SPV can be utilised as an alternative to a trust
structure. The structure allows for the transfer of security to
an SPV, which would then issue guarantees and indemni-
ties to the various lenders on the basis that such claims be
limited to the value of the security held and the particular
lender’s relative exposure to the borrower from time to time.
The SPV’s obligation to the lender is in turn guaranteed and
indemnified by the borrower. The SPV is usually managed
by one of the members of the lending group or consortium,
as the case may be. The security SPV structure has not been
tested in the courts of Botswana.
3.6 Loan Transfer Mechanisms
The most common loan transfer mechanisms are novation,
assignment and sub-participation. Under novation, the ex-
isting agreement between the original lender and the bor-
rower is dissolved and replaced by a new agreement. The
loan agreement should include the form of transfer certifi-
cate used to effect the novation and a provision stating that
the borrower has no objection to the original lender selling
his or her interest in the loan agreement to a new lender. If
the loan is secured, the security is discharged and needs to
be renewed each time a novation is executed, which may
adversely affect the priority of the security.
Another mechanism that may be utilised is assignment,
which involves the transfer of the rights of the lender to an-
other party, while retaining the obligations under the loan
agreement. The process does not require the registration of
new security because the original lender retains his or her
obligations under the agreement.
Under sub-participation, an existing lender enters into a
sub-participation agreement with a sub-participant on the
same terms as the contract between the existing lender and
the borrower. The existing lender effectively becomes an in-
termediary between the borrower and the sub-participant.
6
There is, therefore, no transfer of existing rights and the bor-
rower need not be aware of the sub-participation arrange-
ment.
3.7 Debt Buy-back
There are no restrictions on debt buy-back by the borrower,
except as may be provided by the contractual undertakings
of the parties.
3.8 Public Acquisition Finance
Botswana is yet to develop regulations relating to takeovers.
The Botswana Stock Exchange (BSE) defers to the South
African Takeover Regulations (now contained in the South
African Companies Regulations 2011) for guidance in rela-
tion to takeovers. The relevant regulation in this regard is
Regulation 111(4) of the South African Takeover Regula-
tions. When applied in Botswana, it is required that when
an offer is wholly or partly in cash, the offer circular must
include:
(a) an irrevocable unconditional guarantee issued by a reg-
istered bank; or
(b) irrevocable unconditional confirmation from a third
party that sufficient cash is held in escrow,
in favour of the holders of relevant securities, for the sole
purpose of fully satisfying the cash-offer commitments. A
copy of the above documentation must be provided to the
BSE.
These regulations only apply in relation to listed entities
engaged in a takeover and are therefore not standard provi-
sions you would typically find in other acquisition finance
transactions.
There is no standard form of documentation for these types
of transactions. However, short-form documentation is
commonly used. The documentation would be filed at the
company’s transfer office and would be available for all in-
terested parties to view.
4. Tax
4.1 Withholding Tax
The current withholding tax rates applicable to interest pay-
ments are 10% for residents and 15% for non-residents.
Withholding tax is not applicable in relation to payments of
interest to an International Financial Services Centre Com-
pany, a banking company or a financial institution receiving
such interest in its ordinary course of business.

4.2 Other Taxes, Duties, Charges or Tax
Considerations
The only other tax consideration is corporate tax, which is
levied on income generated in Botswana at a rate of 22%.
4.3 Usury Laws
Botswana does not have a law on usury or any other rules
limiting the amount of interest that can be charged.
5. Guarantees and Security
5.1 Assets Typically Available and Forms of
Security
A wide range of assets may be used as collateral to lenders,
including immovable and movable property, intangible as-
sets such as shares, receivables, and cash held in bank ac-
counts, stock in trade, machinery, etc.
Immovable property, which may comprise freehold land and
land held by way of long-term lease (exceeding ten years)
which is registered in the Deeds Registry, including all the
improvements made thereon, can be secured by way of a
mortgage bond, which grants a real right of security in the
insolvency/bankruptcy of the borrower. A mortgage bond is
perfected by registration with the Registrar of Deeds, must
be prepared by a conveyancer and is subject to prescribed
conveyancing fees.
Movable property and receivables may be secured by a gen-
eral notarial bond, a deed of hypothecation in terms of the
Hypothecation Act (CAP 46:01), or a pledge.
A general notarial bond is a mortgage by a borrower of all its
tangible movable property in favour of a lender, as security
for a debt or other obligation. The main shortcoming of a
general notarial bond is that it does not (in the absence of at-
tachment of the property before insolvency) make the lender
a secured creditor of the borrower. Instead, a general notarial
bond only provides the creditor with limited statutory pref-
erence above the claims of concurrent creditors in respect of
the free residue of the debtor’s estate on insolvency. A general
notarial bond must be registered with the Deeds Registry.
Furthermore, it must be prepared by a notary public and is
subject to prescribed notarial fees.
A deed of hypothecation is a form of statutory pledge and
must be effected in the form prescribed by the Hypotheca-
tion Act. The deed of hypothecation must be prepared by a
notary or conveyancer and must be registered at the Deeds
Registry in order to be effective. To be able to use the deed
of hypothecation, a lender must be an authorised creditor.
Application is made to the Minister of Finance and Eco-
nomic Development for the lender to be designated as an
authorised creditor, the approval of which is published in the
Government Gazette. The deed of hypothecation is subject
to prescribed notarial fees.
Law and Practice BOTSWANA
A pledge is a charge or mortgage over movable property
given by a borrower in favour of a lender. For a pledge to be
valid and effective, the pledged movable must be transferred
to, and controlled by, the lender. There are no registration
requirements for a pledge.
IP, receivables, cash in bank and other rights may be secured
by way of a cession over such assets in the creditor’s favour.
Botswana law recognises two types of cession, an out-and-
out cession and a cession in security (cession in securitatem
debiti). In terms of an out-and-out cession, title to the prop-
erty is transferred to the cessionary (chargor), subject to the
cedant’s right to have the property transferred back to it by
the cessionary once the debt owed to the cessionary has been
discharged. The cession does not require registration and is
not subject to conveyancing or notarial fees.
Under a cession in securitatem debiti, on the other hand, the
title to the property remains with the cedant and the cession-
ary would not be free to collect the receivables in the absence
of default by the cedant. A cession in securitatem debiti that
is granted in respect of receivables (book debts, rentals, etc)
does not require registration and does require delivery for its
perfection. Such delivery has in case law been interpreted to
mean delivery of documents evidencing the debt.
5.2 Floating Charges or Other Universal or Similar
Security Interests
The laws of Botswana recognise a universal or similar secu-
rity interest over all present or future assets of a company.
This can be done in the form of a general notarial bond or a
deed of hypothecation.
5.3 Downstream, Upstream and Cross-stream
Guarantees
It is possible to give downstream, upstream and cross-stream
guarantees in Botswana, subject to restrictions relating to the
provision of assistance by the company for the acquisition
of its shares.
5.4 Restrictions on Target
A target company is permitted to provide guarantees or se-
curity for the acquisition of its shares, provided that it com-
plies with the provisions of the Companies Act in relation to
provision of financial assistance. In terms of Section 76(2) of
the Companies Act, a company may give financial assistance
for the purpose of, or in connection with, the acquisition of
its own shares only if the board has previously resolved that
giving the assistance is in the interests of the company, the
terms and conditions on which the assistance is given are fair
and reasonable to the company and to any shareholders not
receiving that assistance, and immediately after giving the
assistance, the company is able to satisfy the solvency test.
Further, if the amount of any financial assistance approved
by the board together with the amount of any other finan-
cial assistance given by the company that is still outstanding
7
BOTSWANA Law and Practice
exceeds 10% of the company’s stated capital, the company
shall not give the assistance, unless it first obtains from its
auditor or, if it does not have an auditor, from a person quali-
fied to act as its auditor, a certificate confirming that the
person has inquired into the state of affairs of the company
and is not aware of anything to indicate that the opinion of
the board in relation to the provision of financial assistance
is unreasonable.
The Companies Act considers financial assistance to include
“giving a loan or guarantee, or the provision of security.”
5.5 Other Restrictions
There are no statutory restrictions, save for those set out in
the Companies Act in relation to financial assistance, as out-
lined above in 5.4 Restrictions on Target.
5.6 Release of Typical Forms of Security
In the Case of the Secured Creditor
In terms of mortgage bonds and general notarial bonds, the
secured creditor must obtain a court order directing the
sheriff of the High Court to attach the relevant property.
The secured creditor can then obtain a sale of the attached
assets and apply the proceeds of the sale towards discharging
the principal obligation.
With respect to a pledge, the pledgee realises his or her se-
curity by obtaining a court order authorising the sale and
execution of the secured asset.
To realise the security in the form of a deed of hypotheca-
tion, the secured creditor files a statement with the Registrar
of the High Court, as outlined in the Hypothecation Act,
setting out the breach and describing the pledged asset(s), to
which statement he or she must attach the deed of hypoth-
ecation. A copy of the statement must be sent to the debtor
by registered post. Once filed with the Registrar of the High
Court, the statement has the effect of a civil judgment. A
notice is thereafter issued to the debtor notifying him or her
that a writ of execution is to be issued by the court unless
he or she can demonstrate that he or she is not in breach.
Following the expiry of 14 days after the lodging of the state-
ment, a writ of execution may be issued, unless the debtor
has demonstrated that he/she is not in breach.
A cession in securitatem debiti requires a court order au-
thorising the realisation of the security.
In the Case of the Debtor
A debtor with a bond or a deed of hypothecation with a
bank or financial institution who has settled their loan in
full, would need to inform the bank to release the security
documents to its lawyers for the cancellation process. If the
debtor wants to sell the property and there is an unsettled
balance to be paid on the property, then the buyer’s bank will
provide an undertaking to the seller’s bank that the balance
will be settled. Once the undertaking is received, the bank
8
will release the security documents to the lawyers handling
the transfer.
To cancel the mortgage bond, the following documents must
be lodged with the Deeds Registry office:
• a board resolution of the mortgagor authorising its direc-
tors to sign a consent for the cancellation of the mortgage
bond;
• a consent letter from the mortgagor authorising cancella-
tion of the security;
• the title deed relating to the mortgaged property; and
• the security document which will be endorsed as cancelled.
In relation to cancellation of a deed of hypothecation, the
following documents must be lodged with the Deeds Reg-
istry office:
• a board resolution of the authorised creditor authorising its
directors to sign a consent for the cancellation of the deed
of hypothecation;
• a consent letter from the authorised creditor to the hy-
pothecator consenting to the cancellation of the deed of
hypothecation and instructing a conveyancer to effect the
cancellation;
• a letter from the conveyancer to the Deeds Registry office
instructing them to cancel the deed of hypothecation;
• the original deed of hypothecation which will be endorsed
as cancelled.
A pledge or cession is not registered in the Deeds Registry
office. This type of security is generally released once the
principal obligation of the borrower is discharged. Any fur-
ther formalities will be dependent on the contractual agree-
ment between the parties to the security documents.
5.7 Rules Governing the Priority of Competing
Security Interests
Where the registration of securities is a requirement, priority
is given to the first registered security, or otherwise to the
first effected security, unless the security was subsequently
subordinated. Deeds of subordination are commonly used
and there are no restrictions on contractually varying the
priority of security interests. Contractual subordination pro-
visions do not survive the insolvency of a borrower, how-
ever. Insolvency in Botswana is regulated by the Companies
Act and the Insolvency Act, which prescribes the order of
preference of creditors. Any subordination provisions that
are contrary to the regulations will not be upheld unless the
creditors whose rights will be affected by the subordination
provisions agree.

6. Enforcement
6.1 Circumstances in Which a Secured Lender Can
Enforce Its Collateral
In terms of Botswana laws, outside the context of insolvency
proceedings, all real security must be enforced through the
courts. The court must be approached for an order author-
ising the attachment and sale (usually by public auction) of
the security interests. The proceeds of the sale may then be
utilised towards discharging the debt or existing obligation.
Botswana laws do not recognise self-help or parate executie
as a way of enforcing security interests, unless this was spe-
cifically agreed by the parties.
6.2 Foreign Law and Jurisdiction
The courts of Botswana will uphold choice of foreign law,
jurisdiction and waiver of immunity clauses in contracts.
However, where the law of a foreign jurisdiction is chosen,
the court will require expert evidence on the foreign law to
be applied. In the event that no expert evidence is adduced
before the court as to the effect of the foreign law, the court
will determine the dispute between the parties in terms of
Botswana law.
6.3 A Judgment Given by a Foreign Court
Botswana courts will, in general, accept and enforce a judg-
ment of a foreign court through a registration process un-
der the Judgments (International Enforcement) Act (CAP
11:04). The Judgments (International Enforcement) Act
extends to countries that are recognised by the president
though a statutory instrument. Section 4(1) provides that the
Act extends to every country to which the United Kingdom
Judgments Act applied immediately before the commence-
ment of the Judgments Act in Botswana (in 1981).
Under the Judgments (International Enforcement) Act, reg-
istration by the court is subject to the following conditions:
• the foreign court that issued the judgment must be the su-
perior court of the relevant country;
• the judgment must be final and must be for a sum of mon-
ey;
• substantial reciprocity must exist between the country in
which the judgment was pronounced and Botswana;
• the judgment must not have been obtained through fraud-
ulent means; and
• the judgment must not be contrary to Botswana’s public
policy.
Additionally, certain minimum standards must be complied
with, such as the impartiality of the court, reasonable notice
and opportunity having been afforded to the affected per-
sons to defend the action.
The enforcement of foreign judgments through the process
of registration under the Foreign Judgments (International
Enforcement) Act has been found to be not very effective,
Law and Practice BOTSWANA
however (due to administrative inefficiencies of the court).
Botswana courts recognise a common law system whereby
the enforcement of foreign judgments is carried out by way
of a fresh action instituted through provisional sentence or
summary judgment.
Where the judgment emanates from a country that does not
have the necessary reciprocity arrangement with Botswana,
the judgment can be enforced through an original action by
way of summons, with the judgment as the cause of action.
In relation to foreign arbitral awards, Botswana is a party to
the New York Convention on the Recognition and Enforce-
ment of Foreign Arbitral Awards, and, to this effect, it has
passed the Foreign Arbitral Awards Act (CAP 06:02). The
Act provides that an arbitral award made in any country
that is a party to the Convention shall be binding and may
be enforced in Botswana in accordance with the Convention
and in such a manner as an award may be enforced under
the provisions of the Arbitration Act. This means that on ap-
plication to the High Court, a foreign arbitral award, as is the
case with a local award, may be made an order of the court.
6.4 A Foreign Lender’s Ability to Enforce Its Rights
There are no other matters besides those already discussed
that might affect a foreign lender’s ability to enforce its rights.
7. Bankruptcy and Insolvency
7.1 Company Rescue or Reorganisation Procedures
Outside of Insolvency
Company rescue or reorganisation outside insolvency pro-
ceedings includes judicial management and compromise
agreements with creditors. Judicial management commences
with an application being made to the High Court, which
will place the company under judicial management if it is
of the view that, notwithstanding any present inability of
the company to meet its obligations, or the existence of any
other fact or circumstance alleged in the application, there
is a reasonable probability that if the company is placed un-
der judicial management, it will be enabled to meet such
obligations and to remove the occasion for liquidation or
dissolution.
In terms of the Companies Act, the board, a liquidator or
creditor of a company may propose a compromise if the per-
son or entity has reason to believe that the company is, or
will be, unable to pay its debts. A company may enter into
a compromise agreement or arrangement with its creditors,
and provided that this is accepted by at least 75% of the vot-
ing creditors or class of creditors to whom the compromise
is proposed, the compromise will be binding.
7.2 Impact of Insolvency Processes
Once winding-up or judicial management proceedings have
commenced, a secured creditor cannot commence enforce-
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BOTSWANA Law and Practice
ment or attachment proceedings and a creditor holding
movable or immovable property as security cannot realise
that security itself, but must deliver it to the liquidator for
realisation. Secured creditors are paid before other creditors
and will be paid in respect of the realisation proceeds of the
sale of the asset that is the subject of the security, after the
deduction of liquidation costs. The creditor is responsible for
those costs, which represent the costs of maintaining, con-
serving and realising the property. Where secured creditors
have security over the same asset, the creditor granted secu-
rity earlier has a higher-ranking claim in respect of that asset.
Secured creditors include holders of a mortgage bond, deed
of hypothecation, cession in security and pledge. A notarial
bond does not afford secured creditor status, but merely a
preference in respect of the free residue.
7.3 The Order Creditors Are Paid on Insolvency
After the payment of the liquidation costs, the order of pref-
erence in which creditors rank is as follows. First to be paid
are secured creditors, who are paid from the proceeds of the
sale of the secured assets. Where a secured creditor’s claim is
not secured in full, the unpaid balance is treated as a concur-
rent claim. Next to be paid are preference creditors, who do
not hold security for their claim, but rank above the claims
of concurrent creditors. Preference creditors are paid from
the proceeds of unencumbered assets in a pre-determined
order. Among preference creditors are company employees
and the Botswana Unified Revenue Service. Finally, concur-
rent creditors may be paid from the free residue, if any, from
unencumbered assets. Concurrent creditors are paid in pro-
portion to the amounts owed to them.
7.4 Concept of Equitable Subordination
There is no concept of equitable subordination in Botswana.
7.5 Risk Areas for Lenders
The main risk area for lenders if a borrower, security pro-
vider or guarantor becomes insolvent is that the security
may be realised at a value that is not sufficient to cover the
whole amount of the debt or principal obligation. Addition-
ally, competing security interests may arise, where the same
security is passed in favour of more than one creditor.
8. Project Finance
8.1 Introduction to Project Finance
Project finance in Botswana is mainly associated with the
development of commercial properties, infrastructure, and
the mining and energy sectors, particularly in relation to
coal mining and electricity generation projects. Some of the
major projects that have been undertaken in the recent past
include the Morupule B Power Plant, the Academic Hos-
pital at the University of Botswana, the Kazungula Bridge
project, roads and infrastructure projects, as well as the new
central business district in Gaborone. There is no legislation
10
that specifically regulates the project finance sector in the
country.
8.2 Overview of Public-private Partnership
Transactions
The government of Botswana adopted a Public Private Part-
nerships (PPP) Policy and Implementation Framework in
2009. The policy is based on National Development Plan 9,
through which the government announced that PPP would
be used extensively as a form of procuring and financing
infrastructure projects in the public sector, with the goal
of ensuring sustainable investment in infrastructure and
building strong public finances. The PPP Policy considers
PPP to be a specialised form of procurement; albeit one that
involves a detailed procurement process and substantial fi-
nancial commitment on the part of the government over
a longer timeframe. The procurement process is therefore
regulated in terms of the Public Procurement and Asset Dis-
posal (PPAD) Act (CAP 42:08). Greenfield and brownfield
projects are permitted depending on the acquisition of the
requisite ministerial or governmental authorisation.
The main objective of the PPAD Act is to regulate the pro-
cess of awarding tenders for the delivery of works, services
and supply-related services to central government and any
other institutions specified under the Act. Furthermore, the
Act provides for the registration and grading of contractors
who wish to do business with the government, which is in-
tended to ensure that projects are prudentially managed in
order to obtain value for money in the procurement and
disposal of government assets. Through the Act, contactors
are classified in terms of their capacity to undertake differ-
ent types of contracts, which places some restrictions on the
eligibility of contractors to tender for government contracts.
The main challenge in relation to the PPAD Act is the slow
turnaround times in obtaining relevant approvals and the
consequent delays and cost overruns associated with most
government projects.
Some of the projects constructed through the PPP Model
include the Office of the Ombudsman and Land Tribunal,
as well as the Southern African Development Community
(SADC) Headquarters. A PPP Unit has also been established
in the Ministry of Finance and Economic Development to
co-ordinate the implementation of PPP.
8.3 Government Approvals, Taxes, Fees or Other
Charges
No government approval is required in relation to the fi-
nancing of a project unless the project involves some form of
public procurement or financing, which is regulated under
the PPAD Act as outlined above in 8.2 Overview of Public-
private Partnership Transactions. Development projects
are, however, expected to comply with building control laws
and, where applicable, environmental laws. Building control
laws require that development projects and plans should be
approved by the relevant local authorities, while the Envi-

ronmental Assessment Act (CAP 65:07) and the regulations
thereto outline which projects requirean environmental im-
pact assessment (EIA) before the project or activity may be
undertaken. Taxes are payable on any income generated by
the project within the borders of Botswana.
8.4 The Responsible Government Body
The oil, power and mining sectors fall under the care of the
Ministry of Mineral Resources, Green Technology and En-
ergy Security. The ministry is divided into different depart-
ments, with oil and power being the responsibility of the
Department of Energy, and mining being the responsibility
of the Department of Mines. The Botswana Power Corpora-
tion (BPC) has been established for the purpose of generat-
ing and supplying electricity.
Botswana does not currently produce any oil or gas prod-
ucts. There is, however, a Petroleum (Exploration and Pro-
duction) Act (CAP 67:01) which makes provision for the
exploration and exploitation (in the event that there is a
discovery) of petroleum resources.
Power is regulated under the Electricity Supply Act (CAP
73:01). Regulations promulgated under the Electricity
Supply Act are Electricity (Supply) Regulations, 1988 and
Electricity Supply (Licensing) Regulations, 1993. The BPC
is regulated under the Botswana Power Corporation Act
(CAP 74:01).
The key legislation relating to the mining sector is firstly,
the Mines and Minerals Act (CAP 66:01) and secondly, the
Mines, Quarries, Works and Machinery Act (CAP 44:02).
Regulations under the Mines and Minerals Act include:
• Mines and Minerals (Demarcation of Mining Lease Areas)
Regulation;
• Mines and Minerals (Health, Mortality and Labour Re-
turns) Regulations;
• Mines and Minerals (Prospecting and Leasing Charges)
Regulations; and
• Mines and Minerals (Restriction of Prospecting Activity
for Coal) Order.
8.5 The Main Issues When Structuring Deals
Sector ministries are primarily responsible for the initiation
of projects within their sectors. However, a PPP Unit has
been established in the Ministry of Finance and Economic
Development, which has been tasked with the overall co-
ordination of the implementation of PPP projects, project
planning, approval of financing and processes of PPP pro-
jects. The government has a history of owning most of the
infrastructure developments, and PPPs are fairly new in
Botswana. The government has, in the past, mostly been
inclined towards normal procurement of works.
Law and Practice BOTSWANA
8.6 Typical Financing Sources and Structures for
Project Financings
Financing sources may include:
• commercial banks (whether local, international, or both);
• the Botswana Development Corporation – a development
finance institution founded by the government of Bot-
swana (as its sole shareholder) which provides both debt
and equity financing in all sectors of the economy, except
large-scale mining;
• the National Development Bank – a development finance
institution established under the National Development
Bank Act (CAP 74:05) which funds individuals (Botswana
citizens) and companies registered in Botswana within the
agriculture, property, education, retail, commerce and in-
dustry sectors;
• the Citizen Entrepreneurial Development Agency – a
company established by the government of Botswana to
provide financial and technical support for citizen-owned
businesses;
• Regional and international development banks such as the
African Development Bank and the World Bank; and
• Grants and loans from other governments – for example,
the Kazungula Bridge project referred to in 8.1 Introduc-
tion to Project Finance above, has been financed by the
Japanese International Cooperation Agency (JICA) and an
EU – Africa Infrastructure Trust Fund grant (the African
Development Bank being the third financier).
8.7 The Acquisition and Export of Natural
Resources
The main issues that need to be considered when structuring
a project finance deal include the purpose of the project, the
availability of funding, the parties involved and, particularly,
the availability of the project offtaker. The most common
structure of the project company is an SPV, which is usually
established as a limited liability company. Funding is usually
in the form of a combination of debt and equity. Depending
on the objectives, the common project finance structure is
the engineering, procurement, construction (EPC) contract.
There are no restrictions on foreign investment in project
finance, and there are no relevant treaties.
The acquisition and exportation of most natural resources
requires a permit or licence from the relevant authorities.
As an example, a rough diamond export permit must be
obtained from the Ministry of Mineral Resources, Green
Technology and Energy Security to allow non-producing
diamond-dealing companies to export rough diamonds to
other countries.
8.8 Environmental, Health and Safety Laws
Various environmental, health and safety laws apply to pro-
jects. The Environmental Assessment Act and its regulations
specify situations where an EIA must be carried out before
any project or activity may be undertaken. The Department
of Environmental Affairs in the Ministry of Environment,
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BOTSWANA Law and Practice
Wildlife and Tourism is mandated to ensure compliance
with the Act in that regard.
The Factories Act provides for the regulation of conditions
of employment in relation to the safety, health and welfare of
workers, and makes provision for the safety and inspection
of plants and machinery. The Act applies to various work
environments, such as places where there is construction,
reconstruction or repairs of locomotives or vehicles; where
mechanical power is used in connection with sewage works;
where solids, liquids or gases, or any combination thereof,
are made, altered, repaired, ornamented, finished, cleaned,
washed, broken up, demolished or adapted for sale; where
persons are employed in connection with the generation
of electricity or supply of water, or any railway line or sid-
ing used in connection with or for the purpose of a factory;
where any railway line or siding is being constructed, and
the construction, structural alteration or repair (including
repainting) or the demolition of any tunnel, bridge, viaduct,
waterworks, reservoir, pipeline, aqueduct, sewer, sewage
works, or gas holder; or where there is some hoisting and
lifting in non-factory premises, other than private dwellings.
The Department of Occupational Health and Safety in the
Ministry of Labour and Social Security is mandated to over-
see the implementation of the requirements of the Factories
Act and, among other things, the department is tasked with
assessing the suitability of designs of factories, the registra-
tion of factories, the inspection of factories and other places
of work, as well as the registration and inspection of plants
and machinery.
The Mines, Quarries, Works and Machinery Act (CAP
44:02) provides for the safety, health and welfare of persons
engaged in prospecting, mining and quarrying operations,
including any works that are part of, and ancillary to, the
aforementioned operations. The Department of Mines in
the Ministry of Mineral Resources, Green Technology and
Energy Security is responsible for enforcing the provisions
of the Act.
9. Islamic Finance
9.1 Overview of the Development of Islamic
Finance
The Islamic finance industry in Botswana is relatively new
and quite underdeveloped, which is due to a number of fac-
tors, including a small Muslim population and a general lack
of understanding of Shari’a-compliant banking and finance
principles amongst the general public. This lack of under-
standing of Islamic finance products causes some people to
regard them with a certain degree of scepticism and opt to
use more familiar, conventionalbanking products for their
finance solutions.
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There are no government policies dealing particularly with
Islamic finance products or the development of the Islamic
finance industry. Islamic finance products are, however, reg-
ulated in Botswana in much the same way as conventional
banking products (and along the same guidelines). The Bank
of Botswana and the Non-Bank Financial Institutions Reg-
ulatory Authority (NBFIRA) are the regulators of banking
and insurance products in Botswana and they engage with
entities wishing to introduce Islamic finance products to the
market, to ensure that these products are compliant with the
prevalent local standards.
9.2 Regulatory and Tax Framework for the
Provision of Islamic Finance
The Banking Act (CAP 46:04) provides for the licensing,
control and regulation of banks. It is the practice that infor-
mation relating to any products offered by a bank licensed by
the Bank of Botswana is provided to the Bank of Botswana.
Additionally, in terms of the NBFIRA Act (CAP 46:08), all
non-bank financial institutions are regulated by NBFIRA;
accordingly, practices such as takaful insurance are regulated
by NBFIRA.
No tax framework is specifically targeted at Islamic banking.
Value Added Tax (VAT) does, however, apply to the purchase
of a vehicle or asset from a VAT-registered service provider
in Botswana. Furthermore, in terms of the Income Tax Act
(CAP 52:01), all income that is generated by a company in
Botswana, including from Islamic finance products, is tax-
able.
9.3 Main Shari’a-compliant Products
Due to the low levels of interest in Islamic finance in Bot-
swana, there are only two local institutions which offer their
clients limited Islamic finance solutions, First National Bank
Botswana (FNBB) and Botswana Life Insurance Limited
(BLIL). FNBB’s product offering is limited to vehicle and
asset finance, and BLIL provides Shari’a-compliant insur-
ance products.
FNBB and BLIL are still testing the Botswana market to
determine whether there is scope for the introduction of a
more comprehensive Islamic finance offering. Outside these
institutions, there has been little interest from local banks
and financial institutions in the development of Botswana’s
fledgling Islamic finance industry.
9.4 Claims of Sukuk Holders in Insolvency or
Restructuring Proceedings
In Botswana, claims in insolvency proceedings are dealt with
in accordance with the Insolvency Act CAP 42:02.
According to the Insolvency Act, after the payment of certain
expenses, the proceeds of the estate are paid out to secured
creditors first. A secured creditor is one who holds security
for his or her claim in the form of a special mortgage, legal
hypothec, pledge, or right of retention.
 Law and Practice BOTSWANA

If the sukuk holder holds security (over the underlying asset

of the sukuk) in the form of a mortgage or a legal hypothec,
the sukuk holder will be regarded as a secured creditor, and
will receive payment from the proceeds of the sale of the as-
set by the liquidator before the unsecured creditors.

In Botswana, sukuk instruments would be regarded as an

equity instrument.

9.5 Recent Notable Cases

There have been no recent notable cases on jurisdictional is-
sues, the applicability of Shari’a or the conflict of Shari’a and
local law relevant to the banking and finance sector.

Desai Law Group

3rd Floor, North Wing
Central Square
Central Business District (CBD)
Gaborone
Botswana

Tel: +267 3162727

Fax: +267 3162737
Email: info@desailawgroup.co.bw
Web: www.desailawgroup.co.bw

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