Building an Institutional Framework for Private Equity – The Botswana Experience October 2010 Gaborone International Convention Centre (GICC) Mr. Alan P. Boshwaen – CEO

 Botswana’s fundamentals as a Financial Gateway  Botswana IFSC – Introduction  A Hub for Pan-African Investment Funds  Opportunity for PE in Africa  Investment Funds Value Proposition  Double Tax Avoidance Treaties  Investment Funds Case Studies  Way forward

 Fundamentals for cross-border financial services ◦ Highest sovereign credit rating in Africa ◦ Possibility of attracting co-financing ◦ Ranked 3 rd in Africa in terms of Global Competitiveness and Doing Business (World Bank Doing Business Indicators, 2009) ◦ No exchange controls since 1999 ◦ No withholding tax on externally remitted dividends, management fees, interest and royalties ◦ Foreign tax relief is granted (unilateral credit of up to 15%) for WHT levied in other countries where no DTA exists ◦ Ability to denominate share capital in major convertible currency of choice (i.e. US$ ) ◦ Access to Botswana’s Growing Double Tax Treaty network ◦ Minimum establishment criteria evaluated by a Certification Committee  Pre-requisites for a competitive Financial Centre Internationally acceptable regulation Efficient, transparent business facilitation processes Benign tax regime

 Initiative to establish Botswana as a significant regional financial and business services location; ◦ Accelerate business activity in international services exports and create high-value employment and skills transfer ◦ Encourage skills transfer to develop sophistication of Botswana’s financial sector.  An African ‘onshore’ domicile to facilitate capital flows  The enabling legislation contained in the Income Tax Act (CAP 52:01) - Part XVI - Sections ◦ Legislative review competed by Clifford Chance LLP, UK as part of a ho listic improvement of the framework  Improvement in service standards  An Act to allow Investment Funds to operate according to Internationally recognised and compatible legal structures  Framework provides for opportunity for International Business Companies to operate  Broadens the definition of permissible activities

 “African countries continually seek the much coveted FDI from international investors and indeed investments in Africa are driven and dominated by international investors without little or no participation by capital from Africa. Africa is sitting on considerable capital held by pension funds, long term savings and other institutional funds and this African based capital is now being challenged to start playing a more significant role in investing into Africa.” Property Generalist Infrastructure Brazil DFI FDI Inflows

 High PE returns in Africa;  Mobilising Institutional Funds;  Geographic proximity to underlying investee companies;  Deal origination & due diligence  Post investment support  Some DFI’s require funds domiciled in Africa

 Registered as a company under the Companies Act of 2003 and are licensed and regulated by the Non-Bank Financial Institutions Regulatory Authority (“NBFIRA”) - No Foreign Ownership Restrictions ◦ Investment Company with Variable Capital ◦ Unit Trust  Particularly attractive for Pan African infrastructure, venture and private equity funds focused on the Africa region  Qualifying funds are wholly tax exempt ◦ Not liable to withhold on distributions to non-resident investors  Subject to meeting minimum establishment requirements ◦ Management Company to be established in Botswana under IFSC ◦ Perform min activities in Botswana – Section 28 of CIU Regulations ◦ Local Management Company not prohibited from sourcing advisory services internationally  Ability to access domestic capital

Active - Africa South AfricaZimbabweMauritiusSeychelles MozambiqueNamibiaLesothoSwaziland Active – Other UKSwedenIndiaFrance Barbados Awaiting to be signed or ratified MalawiZambiaTanzaniaBelgium LuxembourgRussia Discussions initiated KenyaNigeriaUgandaAngola JapanChina

Target Capital Commitment: US$400 million; The only independent mezzanine fund advisor in Africa established as a an IFSC Fund and Management Company; Investing in companies with stable cash flows and strong defensive characteristics in a diverse range of industrial and service sectors; Target markets include Egypt, Kenya, Nigeria, Algeria, Tunisia and Morocco. Target Capital Commitment: US$100 million; Management Company for a Sub-Saharan Africa fund that will invest in Micro-finance companies, Clean Energy and Technology and Telecommunications; Target investors for the fund include DFIs, Pension funds with private equity and sustainable investment allocations;

Target Capital Commitment: US$100million; Management Company registered in the IFSC; Promoted by Southern African Media Development Fund (SAMDEF) and partners that will manage the Southern Africa Media and Technology Fund; Focus on media ventures that seek expansion capital in the SADC region some of which had previously received seed funding from SAMDEF Target Capital Commitment: US$125million; Investment Holding company that looks to invest in African financial institutions and build value by applying a transformation methodology and a market focus on the Missing Middle; Target investors include European based DFI’s Already has approval for investments of US$25million by AfDB; SAMSTAR Capital Management

 Proposed legislative amendments include creation of new structures – consistent with leading funds legislation in other IFC’s  A single piece of legislation to codify obligations of entities setting up IFSC Investment Funds in Botswana  Using internationally recognised and compatible legal structures ◦ Limited Partnership ◦ Limited Liability Partnerships ◦ Investment Trust  The framework for a rigorous regulatory regime