Botswana rolling out the red carpet for investors

The recession was a nasty
reminder to the government
and business in Botswana that
the country is over-reliant on income
from the diamond industry.
Mining currently accounts for
around 39% of gross domestic
product, with “general government”
being the next-biggest sector at
around 17%, followed by tourism
and leisure at 11%. Transport
and communication accounts for
around 4% of GDP, according to the
Botswana Export Development and
Investment Authority (Bedea).
Revenues from diamonds dropped
by an estimated 67% at the height of
the recession, with some diamond
mines shutting down altogether.
The good news for the economy is
that they have recovered.
In August, diamond exports
hit $290.9 million, an increase of
360.3% from August 2009, according
to the Bank of Botswana. It says
Botswana’s diamond exports for the
first eight months of 2010 comprised
US$1,83-billion, over 60% more than
the corresponding period last year,
despite lower exports in June and
July 2010.
With the balance of payments
recovering, Botswana is offering
incentives to investors.
According to Bedea, Botswana
offers investors a five to 10-year
tax holiday, and has a number
of incentives aimed at boosting
manufacturing.
They include corporate tax of 15%
for manufacturing companies “which
is among the lowest in Africa,”
deduction of 200% on training costs,
duty-free importation of most capital
equipment, duty-free importation of
raw materials for exporters, and a
duty drawback scheme for exporters
who do not qualify for 100% export
status.
In addition personal income tax is
capped at 25%.
Areas identified by Bedea for
investment include glass, leather
pharmaceuticals and “non-diamond”
mining.
A new “versatile” tannery has
been opened to process some of the
300 000 hides a year produced by
Botswana’s meat industry. Bedea
says it has identified opportunities
for suppliers of upholstery leather,
garment leather and shoe uppers.
The tannery can process 1 000
bovine and 400 goat/sheep/game
hides a day.
With a new plate glass factory
already established, Botswana’s
focus on this industry is already
bearing fruit.
The “non-diamond” mining
opportunities include gold copper,
nickel, and coal.
One of the incentives for
investment in new mines is that the
government has abolished its right to
a 15% free share in any new mining
operation, and has replaced it with
“an option to acquire up to a 15%
shareholding on mutually agreed
commercial terms,” according to
Bedea.
In the pharmaceutical industry,
“opportunities exist for repackaging
of pharmaceutical and manufacturing
drugs and formation of joint ventures
for these activities,” says Bedea.