AGRO-industrial concern Seed Co says low interest rates in Botswana helped the business grow its regional footprint and more than double revenue in just over a decade at a time the domestic Zimbabwean market was in doldrums.
Seed Co group chief executive Morgan Nzwere told delegates attending the Botswana-Zimbabwe International Financial Services Centre (IFSC) Business Forum held in Harare this week that the business had over the past two decades grown beyond Zimbabwe, on the back of the Botswana balance sheet.
The forum, which was organised by the Botswana Investment and Trade Centre and local advisory firm Coronation Solutions, was attended by business executives, heads of local firms with operations in Botswana and several asset managers.
Nzwere said after Seed Co hit 85% of the domestic market, the company decided to go beyond the country’s borders. He said revenue for the regional business grew from US$35 million in 2009 to about US$100 million currently.
“We started in earnest in 1998 but one of the big challenges that we had then was we are a Zimbabwean business trying to go into the region, you are trying to tell your story, the risk perception was really bad at that time — the perception was really bad in terms of raising funding in the region,” he said.
“What we then decided to do was to say we have a very strong business in Zimbabwe; how do we leverage on it and how do we go into the region? What we then decided to do was to create another strong balance sheet in the region…So we went to Botswana —we obviously did the usual of compare-and-contrast various jurisdictions in terms of friendliness to investors and so on and, after our due diligence, Botswana came tops. We decided to go and set up an operation in Botswana and we basically started bankrolling our regional activities from Botswana.”
“One of the major attractions was that in Botswana there is a very advanced financial system. We were able to go there and borrow from the local banks at interest rates around 4-5% and be able to deploy that money into the region, Nzwere said.
“One of the fundamental advantages of Botswana is because of zero exchange controls — you can move US$20 million today to Tanzania or Malawi without having to wait for regulatory approvals. We went there in 2000 and from 2000 and to about 2018, we started opening up in almost all the markets that are neighbouring us —wherever people eat, people need to plant seed, we saw an opportunity and we started opening up businesses in these markets.”
In 2018, Seed Co unbundled regional operations. Before that, all operations used to be under Seed Co Limited, which is the Zimbabwe Stock Exchange-listed business. The regional business —Seed Co International — is listed on the Botswana Stock Exchange with a secondary listing on the Victoria Falls Stock Exchange.
“We also found Botswana as safe to register our IP, so for our IP that is being developed outside Zimbabwe, we are also registering in Botswana again because of those exchange control issues and strong legislation,” Nzwere.
“People ask us: Why Botswana vs Mauritius, why prefer Botswana? For us Botswana is really the issue of proximity and the fact that we are a seed business, there are real farmers in Botswana who farm our products.”
The government of Botswana established Botswana’s IFSC regime in 2003 to position the country as a regional financial hub following a successful a study conducted by Deloitte to investigate the feasibility of the centre.
Botswana’s IFSC offers incentives for investors such as exemptions from capital gains tax, unilateral tax credit of up to 15% for withholding tax suffered in countries with whom there is no Double Taxation Avoidance treaty. The country also offers competitive corporate tax for investors granted the IFSC certificate.