International property experts, Knight Frank say Botswana’s increasingly inward looking policies are beginning to strangle investment in the property sector.
In their Africa Report 2017, researchers at the UK-based real estate group say investors looking to invest in retail property market will be dissuaded by the recently adopted stance by government not to issue trading licences to foreign retailers that are seen not to be effectively participating in citizen economic empowerment.
On the other hand, the report also warns that the residential middle to high-end market has been severely affected by the reduced demand due to the high number of expatriates who are denied work permits.
Historically, mall developers had targeted South African chains, which were able to easily obtain exemptions to legislation that limits the granting of certain trading licences to local businesses.
“However, a hardening of the government’s stance meant that South African retailers were unable to obtain exemptions throughout 2016. If this situation persists, it will deter the development of new malls and landlords will have to target Botswana-based tenants, who generally occupy smaller shops of less than 200 square metres,” reads the report.
Some of these reserved business activities that foreign retailers have to get exemptions for include general dealer, general clothing, fresh produce, take away, hair and beauty among others.
Minister of Investment Trade and Industry, Vincent Seretse recently told Parliament that the reservation policy in the retail sector has opened opportunities for citizens to participate in sectors such as bakery, fresh produce that have been in the domain of foreign-owned chain stores.
The minister also said the profits generated from the reserved business activities are re-injected into the economy hence reduce the leakages
Knight Frank also highlight that the residential property market has been affected by Botswana’s rejection of work permit renewals for expatriates with the high-end market the worst affected.
“Many residential buy-to-let investors are struggling to find tenants, particularly as expatriate workers have found it difficult to renew work permits.
Sales at the high end of the market are far less frequent and likely to stay muted for some time,” reads the report.
According to the 2016 IPD Property index, the residential sector was the lowest performing segment of the market in the year with a total return of 6.4% against retail, (22.5%) and office at 8.1%.
Renowned economist and former central bank deputy governor, Keith Jefferis also recently expressed the same sentiment about Botswana business environment, which he said, appears to be increasingly deteriorating.
Central to the deterioration of the business climate, according to Jefferis, has been the immigration and visa system.
“The system is illiberal, totally non-transparent and subjective, and has been used to make it far more difficult for investors to come to Botswana and for companies to recruit foreigners when they have a scarcity of skills.
Totally contrary to the original intention of the system, it has even been used to force investors out of the country when they have been operating businesses for years or decades – leading to job losses in the process. No reasons are given for refusals or withdrawals of permits.
Arbitrary additional requirements are introduced on a whim,” lamented Jefferis in a quarterly economic review.