Botswana To Use Diamond Revenues To Diversify

by Robert Lee, Tax-News.com, London

23 July 2003

As the world's largest producer of diamonds, some 77% of Botswana's income is derived from the sale of the precious stones, which accounted for 45% of its GDP last year. However, the government wishes to end the country's over-reliance on the gem by using diamond revenues to fund economic diversification.

The industry in Botswana has been operated since 1969 by an entity known as Debswana, which is a partnership between the Botswana government and De Beers, and though it is theoretically an equal partnership, Botswana imposes a 25% tax on the profits of De Beers. Nevertheless, as Finance Minister Baledzi Gaolathe said recently "Diamonds have developed Botswana, but now we want to diversify and get revenue from other sources."

Consequently, Debswana is spearheading diversification projects within the country, and one such venture has been the creation of a business development project known as Peo Holdings which aims to provide budding entrepreneurs with training and capital to get their ideas off the ground.

According to Mmasekgoa Masire-Mwamba, the CEO of the Botswana Export Development and Investment Authority, 90% of Botswana's foreign direct investment is contributed from the mining industry, a fact that the country wants to change. Still, Botswana has one of the lowest rates of corporate tax in Africa at 15%, no exchange controls and the continent's most educated workforce with a literacy rate of 80%, which should ease the transition somewhat.

"Botswana may have a small market, but is perfectly located to become a financial hub for the Southern Africa Development Community," Masire-Mwamba commented.

Recommended