The government is in the process of passing new tax laws, which experts warn could affect Botswana’s mining industry.
In December, Minister of Finance and Vice President Ndaba Gaolathe gazetted several new tax bills, including the Income Tax Bill. Among its proposed changes is the removal of the 100 percent capital expenditure allowance currently enjoyed by mining companies.
Analysts argue that the amendments could result in mining companies facing an effective income tax rate of up to 55 percent, an outcome that could reduce Botswana’s appeal as a mining investment destination.
Tax specialist Jonathan Hore said the move could make mining projects less attractive, particularly during profitable periods when companies could be subjected to what he described as a “super tax” rate of 55 percent.
“It would definitely dampen investors’ interest in mining,” Hore said.
“Those who have already invested may be seriously affected in terms of their returns because it is a drastic change. It will lower profits, yet they still won’t be able to claim 100 percent capital allowances on the billions of pula spent on development.”
Nigel Dixon-Warren, Director at Dixon-Warren & Associates, said the changes would mean that mining development expenses will be capitalised until production or commissioning, after which deductions would be spread over the lifespan of the mine or 10 years, whichever is shorter.
He argued that the proposed tax reforms would primarily affect cash flow rather than overall profitability.
“The impact is primarily a cash flow one in that mining companies can expect, if they are profitable, to pay taxes sooner than under the current system,” Dixon-Warren explained.
“This will definitely influence feasibility studies, as this needs to be considered to ensure the project remains viable.”
Dixon-Warren added that while taxable income may be declared earlier under the new structure, long-term profitability may not be significantly affected. He believes the changes are unlikely to damage Botswana’s standing on mining investment attractiveness rankings.
“Botswana remains, even with these changes, very competitive in the resource taxes sector,” he said.
Government’s Position
The government, however, has defended the Income Tax Bill 2025, stating that it introduces deduction rules for mining operations aligned with profitability and structured around three phases of mining: prospecting, development, and rehabilitation.
Director of Tax Policy at the Ministry of Finance, Boitshoko Keabofe-Medupe, said the rationale is that the three stages carry different levels of risk and profitability.
“The current Act does not split mining operations into phases for purposes of allocation of mining expenditure and does not consider the profitability and risks of the mining business,” Keabofe-Medupe told the Business Weekly & Review.
She explained that prospecting is a high-risk phase, during which large sums are spent searching for mineral resources. Many of these costs, she noted, can become sunk costs and may never be recovered, making the stage “tax sensitive.”
“Issuance of tax incentives is justifiable at this stage to promote prospecting, for example, accelerated depreciation,” she said.
Keabofe-Medupe stated that mining companies at the exploration stage will continue to receive a 100 percent deduction for capital assets in the year of acquisition. Companies in the development phase will still receive capital deductions, but spread over a period not exceeding 10 years.
“This development does not take away the allowance on capital expenditure but spreads it over a period not exceeding 10 years,” she said.
The Bill also introduces a variable income tax rate for diamond mining companies in which the government does not hold an equity stake. Under the current law, mining companies, except diamond firms, are already subject to a variable income tax rate of up to 55 percent, aimed at capturing supernormal profits during favourable years.
Keabofe-Medupe said the proposed Bill seeks to ensure equity in the taxation of mining companies and to expand mineral revenue from diamond mining companies where the government has no ownership interest.
She said the amendments are unlikely to affect Botswana’s status as a preferred mining destination and may instead encourage investment by maintaining incentives during the prospecting stage.
“Aligning capital allowances to development stages of mining seeks to strike a balance between the need of government to raise revenue and maintaining attractiveness, particularly during risky stages such as prospecting,” she said.
“This treatment will allow mining businesses to pay their fair share of tax on their profits without loading expenditure across the phases.”
She added that mining companies will still benefit from unlimited carry-forward of losses, enabling them to offset losses against future tax liabilities and improve cash flow.
Keabofe-Medupe further argued that tax expenditures are rarely the main deciding factor for investors.
“Prominent surveys of investors rank tax expenditures second lowest amongst many factors used in consideration of making business location decisions,” she said.
She cited factors such as market size, income levels, skills availability, infrastructure, trade policies, and political and macroeconomic stability as more influential considerations.
Botswana’s Ranking
Despite the proposed amendments, she said Botswana’s mining tax framework remains attractive through features such as loss carry-forward provisions, capital allowances, competitive corporate tax rates, deductions for royalty payments, and liberalised exchange controls.
Botswana has consistently ranked among Africa’s top mining jurisdictions. In 2024, the Fraser Institute’s Investment Attractiveness Index ranked Botswana highest among African jurisdictions in policy perception, placing it 14th globally out of 82 jurisdictions. The previous year, Botswana was ranked fourth out of 86.
However, the Fraser Institute noted that Botswana’s decline in its Policy Perception Index score—by 7.82 points—reflected growing concerns about regulatory duplication, inconsistencies, security, and the legal system.
During the same period, Botswana fell in the overall Investment Attractiveness Index, ranking 20th out of 82 in 2024, after being 15th out of 86 the previous year.
In the 2024 survey, Morocco was identified as Africa’s most attractive mining jurisdiction, though its Policy Perception Index score declined sharply by 15.69 points, placing it 28th out of 82 in 2024 after ranking 12th out of 86 in 2023.
The Fraser Institute’s Policy Perception Index provides an assessment of a region’s mining policies and is often regarded as a report card on how attractive jurisdictions are to exploration managers.
Industry Weighs In
Meanwhile, Botswana’s mining industry has expressed concern about the proposed changes. Charles Siwawa, President of the Botswana Chamber of Mines (BCM), said the removal of capital allowances could create challenges for the sector.
“If capital allowances are removed completely, then there will be challenges within the mining industry, particularly affecting the ability of mines to pay taxes as goods are received,” Siwawa said.
He also criticised the lack of consultation prior to publication of the Bill.
“It could have been that certain sections of the industry were engaged, but I am not aware of our office being informed about the proposed changes,” he said.
Although he acknowledged that overall profitability may not be significantly affected, Siwawa warned that timing issues around taxation could still arise.
“Perceived rapid changes to the financial landscape could have negative consequences for potential investors and even existing ones considering expansion,” he noted.
He added that while the reforms may influence mining companies’ financial outlook, they could also create negative perceptions about Botswana’s economic environment.
Lucara Botswana acknowledged the proposed amendments, saying it was still engaged in discussions with authorities.
“Please be advised that we are aware of the changes as an industry, but we are still in communication with the Ministry, and further details or updates can be expected later,” said Tshegofatso Molosiwa, Lucara Botswana’s communications officer.
FDI
Mining and energy remain priority investment sectors promoted by the Botswana Investment and Trade Centre (BITC), as it supports other sectors. BITC’s foreign direct investment (FDI) strategy prioritises greenfield investments in key sectors such as health, mining, manufacturing, and agribusiness.
According to BITC’s 2024 annual report, key success stories included Giyani Metals and Barloworld Equipment Botswana, both of which reportedly made substantial contributions to Botswana’s economic landscape. BITC said Giyani Metals reached critical milestones, strengthening Botswana’s positioning as a hub for mining and resource development, while Barloworld Equipment Botswana made advancements reinforcing its growth ambitions in the country.
In 2024, BITC recorded total FDI of P2.49 billion, exceeding its target of P2.4 billion by four percent. Key sectors contributing to the growth included services, mining, and energy. Mining also emerged as one of the leading sectors for FDI in the previous year.
FDI flows from BITC-assisted companies rose to P3.177 billion from 47 companies, surpassing the target of P2.415 billion. Mining and financial services led the conversion pipeline.
One of BITC’s assisted companies, Canadian Premium Nickel Resources Limited, successfully closed a USD34 million financing transaction with Edgepoint Investment Group Inc. Another notable investment was Australian firm Sandfire Resources through its Motheo Mine copper project in the Kalahari Copperbelt.
KGK Diamonds Botswana continues to contribute to the growth of Botswana’s diamond sector, beneficiation, and value chain diversification. The company has leveraged KGK Group’s decades-long experience in the jewellery business by establishing a manufacturing facility in Gaborone.
In March 2024, MMG Limited—whose majority shareholder is China Minmetals Corporation—completed the acquisition of the Khoemacau Copper Mine for US$1.9 billion. MMG has since embarked on an expansion plan to grow production from 60 kilotonnes per annum (ktpa) to an envisaged 130ktpa.
Minerals Revenues
Despite difficulties in the diamond sector over the past three years, mining remains a key source of government revenue. As of September 2025, total revenue and grants reached P35.06 billion, accounting for 46 percent of the 2025/26 financial year budget estimate.
Mineral revenue contributed P7 billion, representing 20 percent of total revenue and grants, against a target of P15.7 billion. Of this P7 billion, P2.5 billion came from mineral tax while P4.5 billion came from mineral royalties and dividends.
Botswana’s mineral revenue has experienced mixed fortunes over the past five years. In the 2021/2022 financial year, mineral revenue reached P23.20 billion, accounting for 36.33 percent of total revenues, significantly higher than the revised 2020/2021 budget estimate of P6.56 billion.
In the 2022/2023 financial year, mineral revenue stood at P24.08 billion, representing 35 percent of total government revenue of P67.87 billion.
Bank of Botswana data shows that in the 2023/2024 financial year, mineral tax amounted to P4.77 billion, while royalties and dividends amounted to P17.08 billion. Total mineral receipts were recorded at P17.08 billion.
For the 2024/2025 financial year, mineral revenue dropped to P7.4 billion, the lowest level recorded in the last five years.
Galeboi Sennanyana, Head of Treasury Markets at Standard Chartered Botswana, said that to address persistent budget deficits and achieve a balanced budget, government should strengthen tax collection and broaden the tax base.
She added that tax reforms should aim to raise revenue without undermining economic growth.
