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Newsflash: The Economic Inclusion Bill, 2021

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The Economic Inclusion Bill, 2021 (the Bill) was published on the 8th of July 2021. The object of the Bill is to promote effective participation of targeted citizens in the economic growth and development of the economy. Currently Botswana does not have standalone citizen economic inclusion legislation, instead citizen economic empowerment provisions are captured across various statutes, policies, initiatives and directives. Through the Economic Empowerment Office, the Bill aims to facilitate enforcement of the economic empowerment laws and initiatives, ensure compliance, foster accountability and the monitoring and evaluation of implementation and compliance. The intention is to develop empowerment programmes that are non-homogenous but target specific.

The Bill applies to all sectors of the economy, public bodies and any private sector employer that plays a significant role in economic empowerment. The Bill proposes the development of an integrated, coordinated and uniform approach to economic transformation and empowerment.

At this juncture, it is unclear if the Bill will have overriding powers in respect of conflicting legislation.

NOTABLE DEFINITIONS

 

Citizen Owned Enterprise: means an enterprise wholly owned by a targeted citizen or jointly by targeted citizens.

Economic Empowerment: means the capacitation of a targeted person to participate, contribute and benefit from economic growth processes.

Empowerment: means any practice, scheme or programme aimed at enhancing and promoting economic empowerment.

Fronting: means obtaining an economic empowerment initiative, programme or scheme benefit to enable another person, who would otherwise not qualify to obtain such an empowerment benefit.

Public Body: means any office, organisation, establishment or body created by or under any enactment or under powers conferred by any enactment; and includes any enterprise in which government has equity shares or any organisation or body where public moneys are used.

Non-State Actor: means any other entity other than that owned by the State.

Professional body: means an organisation with individual members practising a profession or occupation in which the organisation maintains an oversight over the knowledge, skills, conduct and practice of that profession or occupation.

Targeted citizen: means a citizen whose access to economic resources has been constrained by such various factors as may be determined.

NOTABLE PROVISIONS

In addition to existing provisions relating to reservation of trades, preferential treatment and localisation requirements, some of the proposed provisions in the Bill include the following:-

Ownership of land and property: A public body shall enable ownership of land and property by targeted citizens. This shall include, inter alia:- 

  • providing opportunities to own productive land and assets including businesses; and
  • providing specific measures and criteria for access to commercial, industrial, civic and community land.

Investment Opportunities: A public body shall create investment opportunities for targeted citizens through, inter alia:- 

  • making assets in the public sector accessible by accelerating the process of privatisation of public institutions and increasing participation in shareholding in Botswana Stock Exchange listed companies; and
  • prohibiting the allotting, issuing, or transferring of any portion of a private sector enterprise that is owned and controlled by a targeted citizen to a non-citizen or a citizen that is not targeted.

Empowerment Programmes: A public body shall implement economic empowerment programmes to empower targeted citizens through, inter alia:- 

  • promoting economic empowerment investment programmes that lead to inclusiveness and meaningful participation in the economy; and
  • encouraging partnership between targeted citizens and foreign enterprises at a percentage to be determined from time to time.

Representation of Target Citizens: A public body shall create an enabling environment for representation of targeted citizens in the work force through:- 

  • entrenching assumption of a leadership position for a targeted citizen where there is partnership with foreign investors; and
  • ensuring that where a targeted citizen qualifies and is available, such citizen is equitably represented at Board and management level in the workforce.

Representation in Professional Bodies: A professional body shall ensure that there is a minimum representation of 50% of citizens in its executive 

Capacity Development: A public body shall create an environment that re-focuses the capacity development of targeted citizens towards production of quality products. 

Combating Fronting: A public body shall implement economic empowerment laws, policies, initiatives and programmes to combat fronting or corruption, and create capacity to investigate fronting.

Role of Private Sector: A private sector enterprise that is non-citizen owned or non- targeted citizen owned shall, inter alia:- 

  • mentor and share knowledge and technology regarding business development and market penetration with a targeted citizen;
  • partake in activities that build capacity of targeted citizens; and 
  • develop sector codes and codes of good practice for economic empowerment. 

Foreign Investors: Foreign investors shall empower targeted citizens through participation in the value chain and through other measures as the Minister may prescribe.

Economic Empowerment Standards: A public body shall apply economic empowerment standards as may be prescribed, including −

  • determining qualification criteria for the issuing of licenses, concessions or other authorisations; and
  • applying preferential treatment to private sector enterprises that achieve applicable economic empowerment of targeted citizens.

Offences and Penalties: A person committing an offence in terms of the Bill may be subjected to a fine not of not less than P5 000 but not exceeding P1 000 000, or to imprisonment for a term of not less than six months, and not exceeding 10 years. A public body, enterprise, member of the private sector or any relevant party committing an offence in terms of the Bill may be subjected to a fine of not less than P5 000 and not exceeding P10 000 000 for organisations. In instances of breach of compliance, the organisation or individual may be blacklisted from bidding for government tenders.

 

Should you require any assistance with the implications and application of the proposed Bill please feel free to contact us on info@peolegal.co.bw or +267 3975779.

The information contained in this newsflash was intended for our clients and correct to the best of the authors knowledge at the time of publication. Before making any decision or taking any action, you should consult the contacts listed here.

 

Newsflash: Taxpayers in Botswana granted Tax Amnesty for the year 2021-22

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Tax amnesty is a temporary scheme undertaken by the Government in order to relieve the taxpayer from the burden of paying tax penalties and interests for a specified period.

In terms of Section 112 (2) of the Income Tax Act [CAP 52:01] (Income Tax Act), as read with Section 77 of the Value Added Tax Act [CAP 50:03] (VAT Act), the Ministry of Finance and Economic Development has granted tax amnesty to eligible tax payers for the period 1 July 2021 to 31 December 2021 (the Amnesty Period).

During the Amnesty Period, tax payers are relieved of all accrued interest and penalties  under the VAT Act and Income Tax Act on condition that the principal tax amount (or any portion owing thereof) is paid in full. Subject to the eligibility of a tax payer, once the principal amount is paid all penalties and interest are written off.

Tax Periods Covered 

For purposes of  the Income Tax Act, the Amnesty  Period applies to tax years prior to and including the 2020/21 tax year.

For purposes of the VAT Act, the Amnesty Period applies to tax periods prior to 1st July 2020.

Scope of the Tax Amnesty

The tax amnesty covers income tax including corporate, PAYE, and other withholding taxes but excludes penalties levied due to a failure to furnish transfer pricing documentation. Under the Value Added Tax Act, the tax amnesty applies to all penalties and interest charged in respect of overdue amounts.

In order to benefit under the tax amnesty scheme, a tax payer must:

  • be an eligible person;
  • have paid the total principal tax and had a penalty and/ interest liability or had no principal tax but had a penalty and interest liability; and
  • have notified the Commissioner General of payment of the principal tax liability within 7 days of payment.

Eligible Persons

The tax amnesty scheme shall apply to any person that:

  • has an outstanding principal tax debt that has a penalty or interest liability
  • has paid a portion of her tax liability, but has not paid all or part of her penalties or interest
  • has paid the principal tax but has not paid his liabilities or interest
  • has outstanding interest and/ or penalties only
  • has not filed a tax return for a period covered by the amnesty
  • has not registered for any relevant taxes (they will not be charged penalties for late registration)
  • has lodged an objection against  any assessment with the Commissioner General
  • has lodged an appeal to the Board of Adjudicators, the High Court or the Court of Appeal

For more detailed information, visit this link: PDF: 2021 INCOME TAX AND VALUE ADDED TAX AMNESTY GUIDELINES

Please do not hesitate to contact us on info@peolegal.co.bw or +267 3975779 for all your tax law related needs.

The information contained in this newsflash was intended for our clients and correct to the best of the authors knowledge at the time of publication. Before making any decision or taking any action, you should consult the contacts listed here.

Newsflash: Bamalete Tribe prevail over Land Board

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The development of the land tenure system in Botswana can be classified under three periods- pre-colonial, colonial and post-independence. Under the pre-colonial system land was administered by traditional chiefs/ Dikgosi in accordance with customary laws.  During the colonial era, land was demarcated into three categories: crown land, native reserves, and freehold. Native reserves remained under the control of the Dikgosi, crown land was under the control of the state, while freehold land was under the control of the colonial administrators. Post-independence we have what is now known as tribal land, freehold and state land. In 1968, with the intention of improving tribal land tenure, the Tribal Land Act was enacted, the effect of which was to vest all tribal land in the newly created Land Boards .

In 1925, by deed of transfer and private treaty, the Bamalete Tribe (Bamalete) acquired Farm Forest Hill 9-KO (freehold land) (the Farm). On enactment of the Tribal Land Act, the Farm did not fall within the Bamalete tribal territory. The Farm was later incorporated into the Bamalete tribal territory by amendment of the Tribal Territories Act in 1973 (1973 Amendment), though the Bamalete had acquired the Farm.

On 22 March 2021 the High Court of Botswana heard a dispute stemming from the 1973 Amendment.  The Malete Land Board (the Land Board) sought the cancellation of the deed of transfer in terms of which the Bamalete owned the Farm.  In opposition, the Bamalete sought an order removing the provision in the Tribal Territories Act which includes the Farm as Bamalete Tribal Territory and an order declaring ownership of the  Farm by the Bamalete.

The Court found that the intention of the Tribal Land Act and the Tribal Territories Act was to incorporate the Farm into the Bamalete Tribal Territory despite the fact that the Farm is freehold and held by the Bamalete under title deed. This means that the Farm is owned by the Land Board in trust.  The issue before the Court was whether the Farm lawfully vests in the Land Board. The Court held that, in order to determine this issue, they had to determine whether the Bamalete had been unconstitutionally deprived of their property.

In terms of  the Constitution private property can only be acquired by the state where the property is required for public purposes and upon prompt compensation for the property. Additionally, there should be a law that enables those affected by the acquisition to get prompt and adequate compensation and to further have access to the High Court if they dispute the acquisition of the property and/or the compensation.

The Court determined that the provisions relating to compulsory acquisition of property were not followed when the Farm was acquired by the Land Board; accordingly, the Bamalete had been unconstitutionally deprived of their property. The Court determined that Section 7 of the Tribal Territories Act was inconsistent with the Constitution and that the Farm vests in the Bamalete.

Following the Court’s ruling, the Farm is the private property of the Bamalete and falls outside the control of the Land Board.

The information contained in this newsflash was intended for our clients and correct to the best of the authors knowledge at the time of publication. Before making any decision or taking any action, you should consult the contacts listed here.

For any assistance with your property and land transactions please contact us at  info@peolegal.co.bw or +267 3975779

Legal Compliance: Is Your Business Susceptible to Money Laundering?

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Botswana was recently blacklisted by the European Union (EU) due to its shortfalls in anti-money laundering and terrorist financing prevention. The effect of the blacklisting may be that:

  • Botswana is deemed a high-risk country;
  • investors may opt to de-risk and terminate business relations with Botswana and related entities; and
  • all businesses in Botswana are subjected to enhanced customer due diligence processes before they can participate in international investments.

Botswana enacted the Financial Intelligence Act of 2019 (FIA) for purposes of compliance with the Financial Action Task Force Recommendations of 2012. Though FIA is robust and progressive, the challenge has been implementation and adoption of FIA requirements across sectors.

FIA requires non-banking financial institutions, societies, banks, professional practitioners and all entities registered, incorporated or licenced under any law to conduct Customer Due Diligence (CDD) on potential clients, an aspect of which is commonly known as ‘Know-Your-Customer’ (KYC). KYC is an integral component of anti-money laundering (AML) measures recommended in terms of FIA. KYC is the means of identifying and verifying the identity of a customer/client and their source of funds. At minimum, businesses are required to:

  • establish and verify the identity of a customer;
  • establish and verify the identity of the beneficial owner;
  • enquire and understand the anticipated purpose and intended nature of the transaction; and
  • obtain approval of senior management especially when dealing with a high-risk customer/client.

All businesses in Botswana must develop a KYC process which allows them to identify and report all suspicious transactions to the Financial Intelligence Agency. The KYC process must be conducted when a business:

  • establishes a new business relationship or concludes a transaction with a customer;
  • carries out a transaction in excess of BWP10 000.00;
  • when there is doubt about the veracity or adequacy of previously obtained customer identification data; or
  • where there is a suspicion of a commission of a financial offence.

KYC process must be undertaken on a continuous basis. An AML policy and the KYC process are crucial for effective risk management and compliance with anti-money laundering and combating of financial crimes as prescribed by FIA. Any business that fails to conduct CDD is liable to a fine of BWP1 000 000.00.

If you have any questions on the above and need assistance in reviewing your KYC process, CDD protocols, AML policy and / or creating a one, please feel free to contact Olorato Plaatjie at olorato@peolegal.co.bw or alternatively call +267 3975779.

Corona-virus (Covid-19) Legal Updates – Variation of Terms and Conditions of Employment

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Following the declaration by the World Health Organisation of the Covid-19 pandemic as a public health emergency the Government has implemented a six-month state of emergency effective 2nd April 2020 (the SOE). During the SOE a national lockdown has been declared and this has had an impact on Botswana’s economy. Economist Dr. Keith Jeffries, has opined that as a result of the lockdown, Botswana’s economy has lost BWP10.8 Billion and this economic slowdown has affected households, businesses and Government. Businesses ability to fully operate and generate revenue is under strain. Under normal circumstances, most businesses would reduce their workforce through either terminations or retrenchment. However, in terms of the Emergency Powers Covid-19 Regulations 2020 (Emergency Powers Regulations) employers are not allowed to terminate or retrench employees under the SOE.

In terms of the Emergency Powers Regulations movement of persons has been restricted resulting in the suspension of business operations and/or reduced revenues. To counter the adverse economic effects, businesses have amongst other things:

  • reduced employee salaries;
  • forced employees to take unpaid leave; and
  • reduced working hours and/or implemented shift working hours.
All of the above and/or related examples where the employer has unilaterally amended the essential nature of a contract of employment is a variation of terms and conditions of employment. In order for such variation to be valid the variation must be done lawfully.  In terms of the law, an employer is not allowed to unilaterally amend an employee’s terms and conditions of employment unless:
 
  • there are sound commercial reasons for doing so; and
  • the employer has negotiated the matter in good faith through a fair procedure, which requires prior consultation with employees.

If an employer changes terms and conditions unilaterally and without following the above procedure, the employee has an election either to resile from the contract or to sue for damages in terms of the contract. Subject to complying with the above, management retains the prerogative to make the final decision as regards to changes to terms and conditions of employment if the parties cannot agree to such changes.

Considering the impact the SOE will have on a business’s ability to normally function we recommend that you seek legal advice on how to effectively and lawfully vary an employee’s terms and conditions of employment.

Feel free to contact me on tebogo@peolegal.co.bw or alternatively call +267 397 5779 if you any questions on the above.