Botswana: Overview

RENTAL YIELDS

Lack of supply has led to high yields in Botswana

Residential property prices in Gaborone and Francistown had rental yields ranging from 6.55% to 9.4% in December 2005, according to Global Property Guide research. Yields are now estimated to be between 7% and 10% by Seeff Properties. Knight Frank estimate that upper-end residential yields in Gabarone are around 15%, but this estimate is generally held to be not credible. Francistown yields are generally higher.

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TAXES AND COSTS

Rental income tax is surprising low in Botswana

Effective Tax Rate on Rental Income
Monthly Income	US$1,500	US$6,000	US$12,000
Tax Rate	4.2%	15.5%	19.8%
Click here to see a worked example
Source: Disclaimer

Rental Income: Rental income gained is taxed at progressive rates of 5%, 10%, 15%, 20% and 25%.

Capital Gains: Gains from the disposal of immovable property are taxed as income but the first BWP12,500 (US$2,019) are exempt.

Inheritance: Capital Transfer Tax is levied on the gratuitous transfer of property by way of inheritance and donations.

Residents: A withholding tax of 10% is levied on the rental income of residents.

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BUYING GUIDE

Roundtrip transaction costs in Botswana

Research in this field is ongoing.

LANDLORD AND TENANT

Botswana has pro-landlord laws

The law in Botswana is pro-landlord, but the force of the law is weakened by slow enforcement in the courts.

Rent: Landlord and tenant are free to agree the rent; rent control only applies to commercial properties in urban areas. The parties may also freely agree a mechanism for increasing the rent during the tenancy term.

Rent Arrears: Although the landlord’s rights are strong, the law can be slow. For example, if rent due has not been paid, the landlord has a residual “hypothec” over any movable goods the lessee has on the leased premises. But if opposed, an action to seize the goods can take 2 to 3 years to enforce.

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ECONOMIC GROWTH

Africa's success story

Botswana is a small-landlocked state, dominated largely by desert, savannas, wetlands, and salt pans. Nonetheless, it is home to a wide variety of wildlife that has attracted adventure-seekers from around the world. The tightly controlled tourism industry is developing into the country’s second most important industry after mining. Botswana’s population of 1.6 million is concentrated mainly on the eastern corridor where the land is more suitable for agriculture

A former British protectorate, Botswana gained independence in 1966. It has been Africa’s longest running multi-party democracy since then, and stability continues up to present. There are three major political parties: Botswana Democratic Party (BDP), Botswana National Front (BNF), and Botswana Congress Party (BCP). Although the BDP has dominated the political landscape, competition is tolerated. President Festus Mogae was granted a second term in 2004. The next elections are scheduled for 2009.

Botswana is one of Africa’s success stories. A few years after independence, three of the world’s richest diamond mines were discovered within its territory. Botswana experienced the world’s highest average growth rate from 1966 to 1999, transforming itself into a middle-income country with a per capita GDP of US$15,692 in 2006.

The economy is mainly dependent on mining; it is the world’s biggest diamond producer by value. Diamond mining accounts for about a third of GDP and 75% of all exports. The export of diamond and other minerals such as copper, nickel and gold have made Botswana one of the most prosperous African countries.

Real GDP per capita grew by more than 240% from 1980 to 2005, the highest in Africa and one of the highest in the world. Sound macroeconomic policies enforced by the government have sustained this momentum; the 2006 Index of Economic Freedom labels the country as Africa’s freest economy. It is relatively free of corruption and has a good human rights record.

However, as a landlocked state, it remains vulnerable to developments in neighboring countries. The influx of immigrants fleeing the economic crisis in Zimbabwe exemplifies this problem.

Despite a stable political and economic atmosphere, HIV/Aids infection remains a foremost social concern and a major setback. It is estimated that more than one in three adults is infected with the virus. But with government efforts, the epidemic is slowly being controlled. The death rate has dropped dramatically with one of the most-advance treatment programs in Africa. Anti-retroviral drugs are readily available.