Botswana's Financial Assistance Policy (FAP) was launched some years ago in order to:
encourage diversification of the economy away from the traditional mining and
create employment for Batswana; encourage foreign investors.
FAP is available to businesses which:
produce or process goods in Botswana which are presently imported;
produce goods for export or tourist industry;
provide a marketing or collection function for such businesses.
FAP is not available to service industries, bankers or brewers or to sectors:
- appearing on the "overtraded list".
For the purposes of FAP grants, business is divided into three categories, gauged by the level of investment in fixed assets within Botswana. The categories are:
small scale business - investment of P75,000 or less;
medium scale business - investment between P75,000 and P2,000,000;
large scale business - investment in excess of P2,000,000.
SMALL SCALE BUSINESS
To successful applicants, the Government will contribute up to a maximum of 90% of the first P50,000 of total initial investment and thereafter at the rate of 40%. The maximum grant is P50,000.
The grantee is required to source a minimum contribution of 10% of the total investment.
The quantum of assistance is calculated according to the formula
FAP Grant = Total investment x (location factor + gender factor + basic factor (35%) + job creation factor x number of jobs created)
Gender factor = 15% for females and 0% for males
Location factor = 0% for urban area; 10% for most non-urban
(e.g. Kanye, Molepolole etc); 20% for Maun, Sowa, Selebi-Phikwe and rural areas in the East; 30% for rural areas in the West;
Job creation factor = 5% per job created.
Ownership of the fixed assets purchased through the scheme vests in the Government for two years.
Expansion grants can only be applied for after 12 months (to a maximum of two expansion grants) and the total of grants to a business is limited to P150,000.
MEDIUM & LARGE SCALE BUSINESS
To qualify for FAP, the project must be able to yield a minimum 6% real economic rate of return.
Assistance can fall under three headings:
1. Capital grant
P1,000 per job created for non-citizen owned or joint venture projects and
P1,500 per job for 100% citizen owned projects.
Total capital grant limited to not more than 40% of total investment in urban areas; 50% in peri-urban areas; 55% in non-urban primary areas; 65% in rural areas East; 85% in rural areas West.
2. Unskilled labour grant
Unskilled labour is defined as citizen labour earning between the minimum wage and double that wage (as provided in the Employment Act).
The grant comprises 80% reimbursement of unskilled labour wage bill in the first two years; 60% in the third year; 40% in the fourth and 20% in the fifth.
Reimbursement is paid quarterly.
3. Training grant
Prior approval must be obtained to the incurring of training costs if they are to be considered under a grant.
The grant comprises reimbursement of 50% of training costs incurred during the first 5 years of business.
The content of this article is intended to provide general information on the subject matter. It is not therefor a substitute for specialist advice.
Minchin & Kelly (Botswana) - Gaborone +267 312734
Business Monitor 1996 Tel +44 (0) 171 820 7733.
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