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.