The Botswana government’s proposed amendments to its mining laws have generated both optimism and caution among legal experts and stakeholders. The changes are designed to enhance the benefits that citizens derive from the country’s mineral resources by increasing the government’s share in mining operations and boosting local participation. While the government frames these amendments as a move towards economic empowerment and alignment with global best practices, experts from the multinational law firm Pinsent Masons have raised concerns about potential legal and corruption-related risks.
The proposed amendments aim to boost the government’s stake in mining ventures, thereby increasing public revenues and improving local ownership in the mining sector. Currently, under the existing Act, the government can acquire a 15 percent shareholding in any mining project upon the granting of a license. However, this option has not been exercised in several recent transactions.
The new proposal intends to increase local ownership by requiring mining companies to use their “best endeavors” to transfer 24 percent of their shares to citizens or citizen-owned companies if the government opts not to exercise its right. While many view this as a step towards greater economic empowerment, Pinsent Masons lawyers caution that it may introduce several risks.
Edward James, an anti-corruption and bribery law expert at Pinsent Masons, noted that while Botswana is historically considered one of the least corrupt countries in Africa, the new law could still pose corruption risks. “Botswana is not immune to corruption risk, and companies will need to tread carefully if the new law is introduced,” James said. He warned that rent-seeking officials or corrupt individuals might attempt to manipulate the process to benefit specific people or companies.
James also highlighted that if the law passes, mining rights holders should be vigilant for “red flags,” such as government officials pressuring them to transfer shares to specific individuals or companies. He mentioned that the involvement of local pension funds in funding these acquisitions might create opportunities for corrupt practices.
Sylvia Tonova, an international arbitration expert at Pinsent Masons, raised concerns about potential litigation risks. She pointed out that if the new law is applied retroactively or if the interpretation of “best endeavors” is contentious, it could lead to disputes. International investors might challenge the requirement to sell 24 percent of their holdings to local investors, potentially invoking investment treaty claims if they believe their legitimate expectations of protection against arbitrary or discriminatory treatment have been violated.
The law firm’s analysis also notes that Botswana’s move is part of a broader trend across Africa, where governments are revising regulations to ensure local communities and businesses benefit more from mineral wealth. James advised that companies involved in mining investments in Africa should stay informed about legal risks, monitor potential regulatory changes, and maintain robust governance and compliance frameworks to address emerging risks.
