Botswana Investment Guide

Contents

Investment Climate

Opportunities

Facts and Figures

Economy

Manufacturing

Mining

Agriculture

Services Sector

International Market Access

BEDIA

This guide is provided by the Botswana Export Development & Investment Authority (BEDIA) to
assist companies wishing to invest or conduct business in Botswana.

Investment Climate

Strategically located at the heart of Southern Africa, Botswana offers unique business
opportunities in the mining, textiles and apparel, leather, beef and food processing, jewellery,
pharmaceutical, printing and publishing, plastics, packaging, automotive and other key sectors,
particularly to export-oriented manufacturers.

Over the last 24 years, Botswana has consistently been one of the worlds best-performing
economies. This success can be attributed to high quality mineral, tourism and agricultural
resources, modern transport and communications infrastructure and a combination of prudent
macroeconomic management, consistent policies, political stability and good governance. With a
literacy rate of 85%, Botswana offers investors a literate and trainable workforce.

The Lome, Cotonou, AGOA and other trade agreements ensure that export-oriented businesses
operating from Botswana can trade duty and quota free with some of the most lucrative markets
in Europe and North America. In Southern Africa, trading is greatly enhanced by Botswanas
membership of the Southern Africa Customs Union (SACU) and SADC, a nearby market of 150
million consumers which includes neighbouring South Africa, Africas most sophisticated
economy.

Based on its impressive performance, Botswana is highly rated by international organizations on
a number of indicators. The Economic Commission for Africa (ECA), in its 2003 Economic Report
on Africa, places Botswana ahead of five other African countries that have made most progress in
developing policies that promote economic growth, with the aim of reducing poverty. Consistent
with the findings of the ECA report entitled Accelerating the Pace of Development, Botswana
continues to focus on achieving growth rates necessary to attain its fundamental development
goals.

Botswana has also been rated by Transparency International for three consecutive years as the
least corrupt country in Africa, and among the least corrupt in the world. This clearly shows that
our Government institutions are efficient, effective and transparent, creating an environment
conducive for the smooth operations of the private sector. Highly significant too are the rankings
of Standard and Poor and Moodys Investor Services, which awarded Botswana the highest credit
rating in Africa and among the highest in the world.

Botswana acknowledges the important role that foreign direct investment plays in economic
development, and encourages international firms to choose the country as the location for foreign
direct investment. With no exchange controls, free movement of capital is permitted and
companies are able to bring in key expatriate personnel, both managerial and specialist, needed
to establish operations in Botswana, provided the requisite skills are not available locally.

The countrys policy of low taxes on dividends and profits, including a 15% cap on corporate tax,
and the fact that it has the most stable and strongest currency in Africa, makes Botswana the
ideal location for your mining or manufacturing operation. Botswanas high economic growth rate
has resulted in the accumulation of substantial foreign reserves, the development of human
resources and very low foreign debt. In addition, Botswana has extensive reserves of diamonds
and other minerals and a flourishing cattle industry exporting beef to the world

One of Botswanas fundamental guidelines is the policy document Vision 2016: towards
Prosperity for All, which articulates national aspirations for the country fifty years after
independence. The vision clearly illustrates the Governments commitment to stimulating and
supporting business and entrepreneurial activities by facilitating and fostering partnership with the
private sector. The objective is sustainable growth and diversification through coordinated efforts
and contributions from various sectors of the economy, including manufacturing, agriculture,
services and others.

Attracting foreign investment and encouraging joint venture enterprises between local and foreign
investors are some of the key issues that will assist in the transfer of skills and ensure that the
private sector plays a pivotal role in the development process. To achieve this, a continuous
review of the investment climate is imperative to ensure that Botswana fully exploits its potential
as an investment location of choice, and attracts a sizeable share of foreign investment flows.

The economy has, by and large, been liberalized by minimizing bureaucratic procedures and
processes that impede private investment and enterprise development. The countrys economic
policies promote free market enterprise to allow efficient allocation of resources.

So, take full advantage of Botswanas positive investment climate!


Opportunities

Botswana is a country rich with business opportunities. A number of sectors have been prioritised
by the Botswana government as likely to give competitive advantage to investors.

Jewellery

J oin the privileged few and make it in Botswanas sparkling diamond industry. Botswana is the
worlds largest diamond producer by value. Botswanas production consists of gem quality stones
which provide the single largest source of supply to the global cutting and diamond jewellery
industries.

For jewellers and cutters, downstream opportunities exist in jewellery production, cutting and
polishing of diamonds and semi-precious stones. So why dont you move your business closer to
the source and reap the benefits?

Automotive Components

If you are in the automotive industry and not in Botswana, you might just be missing out. Swedish
Motor Company Volvo assembles Scania trucks and Volvo buses and trucks in Botswana for
export to neighbouring countries and opportunities exist to produce components and supply this
assembly plant.

The Lome, Cotonou, AGOA and other trade agreements ensure that businesses operating from
Botswana can trade duty and quota free with some of the most lucrative markets in Europe and
North America. The trade agreements Botswana has with key markets around the world could be
just what you need to access the global market.

Leather Goods

As you drive off comfortably in your luxury car remember that parts of it probably originate right
here in Africa. Botswana leather ends up in, amongst other countries, the products of the Italian
and South African car seat and leather industries.

Botswana also produces some 350 000 cattle hides per annum that are used by furniture
manufacturers in Europe and Africa.

Processed Meat

Imagine the South African rugby season without biltong. Unthinkable isnt it? Thats because
Botswana supplies approximately 40 tonnes of beef products every month to South Africa.
Botswana also supplies prime beef to the EU generating extensive foreign exchange for the local
economy.

As an investor, opportunities await you in downstream beef processing.

Pharmaceuticals

Consider this: Botswana spends millions of dollars every year to provide free health care to its
citizens, yet the bulk of the drugs and medication used in Botswanas health care system is
imported. Strategically located companies can leverage opportunities in Botswanas advanced
health care system.

Currently, a large part of Botswanas health care budget is spent on financing medical imports.
However, if you think about it, it makes business sense to start manufacturing pharmaceutical
products in Botswana, because the country is committed to reducing the amount of
pharmaceutical products it imports.

High End Printing

If you are in the high-end printing and publishing sector, we suggest you take another look at
opportunities in Botswanas printing and publishing industry. Some of Botswanas high profile
companies are known to do their high-end printing in countries outside Botswana, which means
there is an existing need for local facilities.

By way of business incentives, corporate tax is capped at 15% for manufacturers in this category.
As an investor in Botswana, you will also enjoy low taxes on dividends and profits and no foreign
exchange controls.

With an investment climate this positive, why set up your printing and publishing business
anywhere else?

Textiles and Fabrics

Botswana has an investment climate cut out for you as a manufacturer of high-end quality
apparel.

To start with, Botswana has no foreign exchange controls and offers you free repatriation of
profits and dividends. This is ideal for you in the apparel industry as you rely on imported raw
materials.

Botswanas Least Developed Country (LDC) status under the Africa Growth and Opportunity Act
(AGOA) allows locally based manufacturers to source raw materials from anywhere in the world
including Asia and export to the EU and USA duty free and quota free.

Botswanas Southern African Customs Union (SACU) membership allows duty free and quota
free shipment of apparel to the largest market in the region, South Africa.

Packaging

One of Southern Africas strongest economies, Botswana, offers investment opportunities for you
in the packaging industry including cans and bottles for the brewing, meat and other industries.

Botswana occupies a strategic location in the region with trade agreements, such as SACU, that
allow for duty free and quota free movement of goods to Lesotho, Namibia, Swaziland and South
Africa. The Trans-Kalahari highway between South Africa and Namibias Atlantic coast provides
new opportunities for Botswana based producers to access global markets through an alternative
and quicker shipment route.

Plastics

An opportunity exists for you to invest in one of Africas strongest and most stable economies,
Botswana. This is a strategic location in Southern Africa with trade agreements such as SACU
that allow for duty free and quota free movement of goods to Lesotho, Namibia, Swaziland and
South Africa.

Botswana is also centrally located to access SADCs total market of 150 million consumers. The
Trans-Kalahari highway between South Africa and Namibias Atlantic coast provides new
opportunities for Botswana based producers to access global markets through an alternative and
quicker shipment route.

Mining

In Botswana, government policy encourages prospecting and new mine development together
with further opportunities for linkages to the rest of the economy and to expand into value-added
activities.

As a mining prospector, Botswanas new retention licence policy allows you, upon confirmed
discovery of mineral deposits, to retain rights even when prevailing market conditions make
immediate exploitation un-economic. Botswana has a well-established mining infrastructure with
all the skills and services you need to help you find your fortune.

With an investment climate this positive, why start your mining venture anywhere else?


Facts and Figures

Geographic location

Botswana is centrally located in Southern Africa, sharing borders with Zambia in the north,
Namibia in the north and west, Zimbabwe in the north-east and South Africa in the south and
south-east.

Size

Botswana is 581 730 square kilometers in area, roughly the size of France or Texas. Botswana
extends over 1,100 km from north to south and 960km from east to west. The capital city is
Gaborone, which is in the south-east near the border with South Africa.

Climate

Botswana straddles the Tropic of Capricorn, located in the southern hemisphere. It is within the
high-pressure belt in the southern African interior, away from oceanic influences. In consequence,
the rainfall is low and the temperatures are high.

The climate is semi-arid to arid. The average daily maximum temperature is 33-40C in summer,
from September to April, and 22-30C in winter, from May to August. The average minimum
temperature is about 19C in summer and 5C in winter.

Topography

Most of Botswana is at an average elevation of 1,000 metres, with much of the country
comprising a vast, and nearly level, sand-filled basin characterised by scrub-covered savannah.
Some 85% of the country (including the entire central and south-west regions) is covered by
Kalahari (Kgalagadi), a semi-arid expanse of wind-blown sand deposits.

In the northwest the Okavango river flows in from Namibia, soaking into the sands and forming
the 15,000 sq km of convoluted channels and islands comprising the Okovango Delta. In the
lower elevations of the northeast are the large salty clay expanses of the Makgadikgadi Pans.

Due to the predominantly semi-arid land, most rivers and streams inside the country are
ephemeral with most valleys usually dry, except during the wettest months which are normally
J anuary and February. Perennial rivers, including the Chobe and the Okavango, have their
source outside the country.

Over half the country supports scrub and tree savannah, with most vegetation subject to long, dry
period of low rainfall and poor soil. This is especially the case in the Kalahari where the rangeland
supports low-density livestock and wildlife. The best soils are in the south-east and east of the
country while the northern Chobe district has relatively high rainfall and sustains belts of
indigenous forest and dense bush with some exploitable hardwood resources.

Population

The 2001 census showed a population of 1.7 million people. The annual growth rate during 1991
to 2001 was 2.4% and the population density is 2.9 persons per km. The urban population,
including those in proclaimed towns and urban villages is 54%. Most of the population resides in
the south-eastern region of the country as it provides more favourable climatic and soil conditions
for arable agricultural production.

Population Structure

All indigenous citizens are known as Batswana (single Motswana). The majority of the population
are Setswana, of which there are eight recognized sub-groups: Bamangwaro, Batawana,
Bakgatla, Bakwena, Bangwakests, Barmalete, Barolong and Batlokwa. In Setswana the names of
all indigenous communities (whether Tswana or non-Tswana) have the prefix Ba added at the
beginning of the word.

The largest non-Tswana community are the Bakalanga of the north-east. Other minority
communities include the Baherero (related to Namibias Herero community), Bakhalagadi,
Bayeyi, Basubiya, Batswapong, Babira, and Basarwa (Bushmen / San).

Languages

Languages include Setswana, English and a variety of minority languages. However, English is
the official language for education, business and government and is widely spoken by the general
population.

Political System

Botswana is a multi-party democracy with three arms of Government the Executive, the
Legislature and the J udiciary which are independent of each other. Elections have been
conducted freely and fairly every five years since independence from Britain was attained in
1966.

Natural resources

The country is rich in natural resources, which include diamonds, copper, nickel, coal, salt, soda
ash, gold, granite, cattle, wildlife and outstanding natural attractions.

Currency

One pula (BWP) is made up of 100 thebe. The average exchange rate in 2003 was BWP 4.95 to
the US$. The pula is pegged to a basket of currencies and was devalued by 7.5 percent on
February 6, 2004.

Time

Two hours ahead of GIMT

Measurements

Metric system.

Public Holidays

J anuary 1, J anuary 2, April 9 (Good Friday), April 10, April 12 (Easter Monday), May 1 (Labour
Day), May 20 (Ascension Day), J uly 1 (Sir Seretse Khama Day), J uly 21 (Presidents Day), J uly
22, September 30 (Botswana Day), December 25 (Christmas Day), December 26 (Boxing Day).

Economy

Botswana continues to be Africas great success story, both in terms of economic growth and the
institutionalization of democratic principles. Government commitment to promoting new industries
is reflected in the theme of National Development Plan 9 2003/2008 Towards Realisation of
Vision 2016: Sustainable and Diversified Development through Competitiveness in Global
Markets underpinning the importance of the diversification progress. Botswana has enjoyed the
benefits of social and political stability and a truly non-racial, multiparty participatory democracy
since independence in 1966. The economic success of the country is attributable to the
successful exploitation of its mineral resources, especially diamonds, which contribute about a
third of Gross Domestic Product (GDP).

The Government uses the mineral revenues to finance the social and physical infrastructure and
to improve the standard of living of the people. The current policies focus on increased
liberalization of the economy so as to broaden and strengthen the foundation for accelerate
diversification with strong private sector development. The diversification strategy is underpinned
by an effort to increase productivity through skills development. These achievements can be
traced to a combination of sound economic management and a deeply entrenched commitment
to consensual government.

The Government will continue to follow prudent fiscal management policies in order to enhance
the confidence of the private sector. Concerted effort continues to be made to contain inflationary
pressures through sound monetary policies.

Appropriate exchange rate policies are followed in order to influence investment decisions as well
as to encourage exports. Industrial infrastructure is being expanded and more competitive
conditions are being maintained through liberalization and deregulation.

The main development goal of the government is to negotiate a successful transition form the
rapid, but diamond dependent, growth of the recent past to a more sustainable and more
diversified pattern of development. An export strategy is being pursued with a focus on expanding
non-traditional exports. The government acknowledges that maintaining and increasing
productivity through, among other things, the introduction of new technology and organizational
improvements is important to enable the country to stay internationally competitive.

ECONOMIC INDICATORS
Inflation (2003) 6.4%
Gross Domestic Product (2002/03) US$6.4 billion
Per Capital Income (2002) US$3,300
Forex Reserves US$ 5 billion
(26 months imports)
Source : Bank of Botswana Report 2002
Rate : US$ 1.0 =P4.65

Botswana ranks among the top nations in the world in the economic freedom table. This is
according to the economic freedom of the world index created by the US Fraser institute. It
measures how free individuals and businesses are on such criteria as personal choice,
competition policies and property rights. Botswana provides more freedom than many advanced
industrialized economies including J apan, France and Russia. It ranks only a whisker behind
countries such as the US, Britain and Germany. Botswana has had stable, democratic
government since is gained independence in 1966 and allows its citizens and businessmen to live
and work in the freest environment possible.

Manufacturing

Botswana offers advantages that have attracted investors from countries including South Africa,
Taiwan, Portugal, Belgium, China, India, the United Kingdom, Sweden and Mauritius. A broad
range of goods is already manufactured for the domestic and export markets.

In its efforts to expand and diversify its manufacturing and other industrial sectors, Botswana
knows it faces enormous challenges but also some potentially rewarding opportunities. Although
manufacturing and industry currently account for around 5% of GDP and over 10% of formal
sector employment, growth has slowed in recent years. This is especially apparent following
adverse impacts on the textile and vehicle assembly sub-sectors at the end of 1990s, resulting
from economic and financial factors outside Botswanas control.

A degree of diversification has already taken place, reducing the predominance of meat
processing in the industrial sector. The main activities currently comprise food, including meat,
and beverage products, certain automobile parts and components, engineering machinery
including power tools and compressors, electronic and electrical items, textiles and clothing,
leather products, soap and detergents, housing and other construction materials, furniture and
shoe-making.

Past development of the textiles and clothing sector was focused on supplying the domestic and
regional markets, but Botswanas entitlement to duty-free access to the US market under the
African Growth and Opportunity Act (AGOA) has provided new opportunities for expanding value-
adding activities, and a number of companies have already been established to export textiles
and apparel directly to the US market.

Botswana-based enterprises are exposed to increased competition for investment resources and
market opportunities, and at national level there is a necessity to encourage wider citizen
participation in business, including the promotion of small, medium and micro enterprises. Under
the new industrial development policy, the emphasis has been switched from the previous
strategy of promoting import-substitution to one of supporting the establishment of a substantial
core of highly-productive and competitive export-orientated industries, to the extent that this is
commercially feasible with regard to local raw and natural resources.

Several factors have acted in the past to inhibit greater development of manufacturing activities,
including bureaucratic bottlenecks, a continuing shortage of serviced land in major centers, high
rentals and relatively low labour productivity. Remedies proposed include:

fast-track streamlining of the administrative procedures involved in setting up and running a
successful business
expanding the provision of serviced plots
continued efforts to improve labour force skills.

Specific assistance with the establishment of manufacturing and industrial enterprises is now
provided by two main government organisations, the Botswana Development Corporation (BDC)
and Botswana Export Development and Investment Authority (BEDIA). The BDC has the role of
providing the principal source for financing commercial and industrial developments in partnership
with the private sector, while BEDIAs main responsibility is to promote foreign direct investment,
with special emphasis on promoting export-oriented manufacture and services, together with
identifying market outlets for products manufactured in Botswana.

Mining

Overview

Minerals, especially diamonds, have been the mainstay of Botswanas economy since
independence in 1966, helping propel the countrys high rate of economic growth. The sector
accounts for 90% of national foreign exchange earnings and provides the single largest single
source of GDP, as well as of government revenues. Mining thus provides the basis for the
Botswana economy, giving it a position of stability from which to plan ahead for a more diversified
economic future. As other sectors develop, the contribution of mining will begin to diminish, but
there is plenty of life left in this all-important sector for many years to come.

Although mining is the main contributor to national wealth, it still employs relatively few people,
providing 7,000 full-time jobs in 2002, which is less than three% of Botswanas formal
employment. Most mines are run by large corporate concerns and there are only limited
opportunities for small-scale mining. However, the government is keen to encourage smaller
projects as a way of enhancing employment and alleviating poverty in rural areas. Nevertheless,
the country lacks the kinds of alluvial or secondary diamond deposits, which in other parts of
Africa provide opportunities for small-scale miners.

The existing diamond mines recover stones from kimberlite pipes or primary deposits. Debswana
Diamond Company a 50/50 partnership between the Botswana government and De Beers
undertakes production at four major mines, whose total output has expanded rapidly in recent
years, reaching close to 30 million carats in 2003. Botswana has thus moved rapidly into the first
league of world diamond producers and geologists see good potential for the discovery of
additional deposits. Debswana and BHP Billiton (BHPB) are actively prospecting, along with
several small exploration companies from Australia and Canada, as well as a few local firms.
With good promise for an established future, the diamond sector looks certain to remain at the
pinnacle of Botswanas economy for many years.

Besides diamonds, Botswana has two copper-nickel mines and a smelter, one coalmine, a soda
ash and salt extraction plant, and a number of smaller operations mining industrial minerals and
semi-precious stones. Gold mining, which has been intermittent in recent years, is set to resume
at a new mine. A large number of other minerals have been identified in various parts of the
country, including agates, antimony, asbestos, chromite, feldspar, fluorite, graphite, gypsum, iron,
kaolin, kyanite, lead, limestone, manganese, platinum, silver, talc, uranium and zinc. Although
their exploitation has so far been prevented by insufficient proven reserves, unfavourable
metallurgical properties and remote locations, thick desert sands covering much of the country
could be hiding greater riches still.

Government Policy

The governments main overall objective for the minerals sector will continue to be to maximize
the economic benefits for the nation while enabling private investors to earn competitive returns.
Government policy encourages prospecting and new mine development, and it promotes
opportunities for linkages to the rest of the economy to expand value-added activities, especially
through downstream processing of minerals, where this is commercially viable.

The Ministry of Minerals, Energy and Water Resources (MMEWR) is responsible for developing
and implementing the fiscal, legal and policy framework for mineral exploration, mining and
mineral processing. Committed to improving its administrative procedures to promote efficient
and transparent practices, MMEWR especially focuses on the administration of licensing mineral
concessions. With the aim of making Botswanas minerals sector more competitive and attractive
to investors, an entirely new Mines and Minerals Act became effective at the end of 1999, along
with a new mining tax regime. The key policy changes were:

the abolition of the governments right to 15% free equity participation in all new mining
projects, replaced by an option to acquire up to a 15% shareholding on mutually-agreed
commercial terms
a downward revision of royalty rates payable on the production/export value of all minerals
from five% to three%, with the exception of precious stones (including diamonds) and
precious metals, which remain at ten% and five% respectively
the introduction of a new variable rate income tax formulae where a specified profitability ratio
is greater than 33.3%, otherwise corporate income tax rate of 25% applies, in respect of all
mining operations apart from diamonds, the fiscal terms for which will continue to be directly
negotiated between the government and the operator
provision for an immediate 100% capital expenditure write-off in the year an investment is
made with an unlimited carry forward of any losses

The grant, renewal and transfer of mineral licences have been simplified, to make the process
more predictable and transparent, thereby improving security of tenure for the investor.
Restrictions on the transfer of mineral concessions have been liberalized. A new type of mineral
concession, the retention licence (RL), allowing an exploration programme and confirmed the
discovery of a mineral deposit to retain rights over it for renewable periods, should prevailing
market conditions make immediate exploitation of the deposit un-economic, has been introduced.

Mining Statistics

Mineral Production in Botswana (tonnes unless otherwise stated)
1998 1999 2000 2001 2002 % change/a
Diamonds (000 carats) 19,693 20,265 24,554 26,194 28,268 43.5
Cu-Ni matte 36,976 39,343 45,516 41,986 45,755 23.7
Copper 19,805 19,749 19,297 19,210 21,590 9.0
Nickel 16,758 19,258 21,899 22,453 23,896 42.6
Coal 924,008 945,316 946,898 930,374 953,081 3.1
Soda ash 189,700 228,693 190,489 251,234 283,400 49.4
Salt 139,805 167,610 184,755 178,642 315,100 125.4
/a: Between 1998 and 2002.
Sources : Central Statistics Office; Department of Mines

Diamonds

Botswana is the worlds largest rough diamond producer by volume, along with Australia, and in
terms of value is ranked first, ahead of Russia and South Africa, with output worth US$2.2bn as
of 2002. While most of Australias output consists of industrial diamonds, about 75% of
Botswanas production consists of gem-quality stones, providing the single largest source of
supply to the global cutting and diamond jewellery industries. All Debswanas diamond production
is currently sold under exclusive, renewable five-year sales agreements to de Beers London-
based marketing arm, the Diamond Trading Company (DTC), for marketing to the global diamond
trade.

The rolling out by De Beers of its new Supplier of Choice strategy from 2003 is expected to reap
benefits for Botswana by strengthening retail demand for diamonds. The problem of illicit
trafficking in so-called conflict diamonds by rebel groups in African civil wars must not impact
adversely on the legitimate diamond trade. Therefore, Botswana has taken an active part in the
Kimberley Process of diamond industry stakeholders since its inception in 2000.

A certification system for the international trade in rough diamonds was introduced in 2003, under
which diamonds have to be accompanied by a Kimberley certificate authenticating their origin and
national export/import control systems.

Botswana is fully Kimberley-compliant and began to issue its own certificates in 2003, while the
purchase of rough diamonds within the country is controlled through Precious and Semi-Precious
Stones (Protection) Act of 1969. Botswana also launched its own Diamonds for Development
campaign in 2000. It is designed to make opinion-formers aware that the proceeds from the
mining and export of diamonds are used transparently as a source of revenue for legitimate
national development programmes.

Botswanas partnership with De Beers was strengthened when the latter privatized in 2001.
Debswana participated in the process and now holds an effective 15% stake in the parent
company (giving the government 7.5%). This means that in addition to the tax, royalty and
dividend payments received from Debswana, the government also receives a share of income
from De Beers dividends.

Keeping developments in the global diamond industry under review, the government hopes to
ensure that Botswana is best placed to maximize benefits from its diamonds. As part of this
process it announced in February 2004 that a strategic review would be carried out by diamond
sector consultants. This may include evaluating the options for moving up the diamond value
chain by downstream and other value-adding activities.

Mining of one of the worlds largest mines the Orapa kimberlite diamond pipe commenced in
1971. In 1977 production started at the adjoining, smaller Letlhakane mine, with a third mine,
J waneng, located near Kanye in the southwest, 125 kilometres from Gaborone, brought into
operation in 1982. Substantial expansion in production over the past five years has led to
completion of the Orapa 2000 project, under which mine treatment capacity was doubled. Other
growth includes the commissioning of an improved recovery and sorting process (the Aquarium
project) at J waneng using innovative technology developed by De Beers and pioneered in
Botswana and the introduction of continuous mining operations at all Debswanas mines.

In 2002, carat recoveries were:

Orapa 14 million
J waneng 13 million
Letlhakane one million.

The government expects that reserves and installed capacity will be sufficient to enable diamond
recoveries to be maintained at least at prevailing rates throughout the period of the 9
th
National
Development Plan (NDP9) covering 2003/04 to 2008/09. The most recent figure for estimated
diamond reserves published by De Beers showed a total resource of 749 million carats as of
2000, of which 221 million carats were in probable category.

The fourth mine at Damtshaa, near Orapa, began operations in the second half of 2002 and has
already exceeded expectations with 292,000 carats produced during its first full year of operation
in 2003. Damtashaa was originally forecast to produce five million carats over a 30-yar life but
this target may be exceeded, while the mine has also improved the prospects for mining other
kimberlites in the vicinity of Orapa that were previously considered to be marginal.

Diamond exploration activities have also increased strongly in recent years. In 2003, BHPB
established a standalone associate company, Kalahari Diamonds (KDL), to explore for diamonds
using the groups Falcon airborne gravity technology for detecting kimberlite indicator minerals
beneath deep sand cover or the Makgadikgadi salt pans north of Orapa. This technology is
revolutionalising diamond prospecting around the world. KDL, in which BHPB has a 20% stake,
has been endowed with all BHPBs exploration licences and exploration data, covering large
areas in central and southern Botswana.

Another promising development has been the exploration programme undertaken since 2000 by
African Diamonds (AD), formed by a group of experienced, Irish-based mining entrepreneurs,
based on preceding work by a Botswana-based firm Kukama Exploration. AD currently holds
4,000 square kilometers under licence and its primary targets include undiscovered kimberlites
north of Orapa, tracing the so-far undetected alluvial deposits along ancient river channels from
Orapa, and a new diamond field in Serowe.

In February 2004, AD formed a joint venture with KDL to use its Falcon technology to explore its
licence areas, excluding the 21 kimberlites it has already identified. One of these, BK10, in which
several diamonds have been discovered, is thought likely to contain some 455,000 recoverable
diamonds. The main aim is to identify new pipes on the Orapa and Serowe licences, which AD
believes will save three years using conventional exploration techniques.

Diamond cutting and polishing factories have developed in Botswana since the first Teemane
Manufacturing was established in the 1990s by Debswana. It was sold in 2003 to a foreign
diamond-mining firm with international marketing expertise viewed at the time as the best way of
improving its commercial prospects.

A second is operated by a leading Israeli diamond cutting and polishing company. Profitability has
been difficult to achieve, partly because initial training costs are high, and because of strong
competition from low-cost cutting centers in China, India, Armenia and elsewhere.

However, the potential for adding-value and increasing employment through downstream
diamond activities by new entrants to the diamond sector is considered to be high, provided a
commercially-viable business model can be developed. While diamond trading is strictly
controlled to reduce smuggling opportunities, it is open to any investor to apply for a diamond
cutting or polishing licence.

Other Minerals

After depletion of old-established gold workings around Francistown, Botswana is again back on
track to become a gold producer with the development of a new mine at Mupane, also in the
Francistown area, by Australias Gallery Gold. After confirming some 914,000 oz of gold in
several deposits. Gallery announced it would proceed with an open-cast operation. Work start on
constructing the mine, in which the company is investing US$28m. Gallery is also evaluating the
potential of additional deposits in its nearby Shashe concession.

After diamonds, the next most valuable produced in Botswana is copper-nickel matte, a high
metal content product, and associated small quantities of cobalt, produced by the long-
established Selebi Phikwe mine and smelter in the east. The mines profitability fluctuates in line
with international metal prices and an accumulated debt burden has inhibited new investment, but
the mine has taken on a new lease of live through a partnership with Tati Nickel Mining Company
(TNMC), which exploits a nearby copper-nickel deposit and ends its concentrate for toll-smelting
at Selebi-Phikwe.

At the end of 2002, Canadas LionOre Mining International (LionOre) acquired Anglo Americans
shareholding in TNMC, thereby becoming the sole private sector shareholder, and also became
the largest shareholder in Botswana RST, the holding company for Selebi-Phikwe, through the
same transaction (the government is a minority partner in both companies). LionOre completed a
US$66m expansion of the Phoenix underground mine in 2002 which at full capacity of 3.6 million
tones per day of ore will double TNMCs payable nickel production to some 12,500 tonnes, along
with copper, and other by-products including small amounts of platinum group metals (PGMs),
silver and gold.

Production of soda ash and salt, by the Sua Pan plant near Orapa operated by Botswana Ash (a
partnership of Anglo American, De Beers, South Africas AECI and the government) focuses
mainly for export to the South African market. Demand has increased in the past three years due
to operational improvements and greater need by the regional market. Sua Pan covers some
3,500 square kilometers and contains an estimated brine resource of 16 billion cubic metres, one
of the largest in Africa.

Botswana has large untapped reserves of semi-bituminous coal but the sole mining operation is
the Morupule Colliery in eastern Botswana, over which Debswana assumed control from Anglo
American in 2003, which has a capacity to produce some one million tones per year. This coal
mainly supplies the Morupule thermal power station operated by the Botswana Power
Corporation (BPC), Selebi-Phikwe and Sua Pan mines. The government is pursuing strategies to
increase coal usage throughout the economy, including the establishment of a coal washing and
coal briquette plant, the promotion of affordable coal burning stoves for household use, and
improved distribution facilities. The planned expansion of Morupule power station to increase
local electricity generating capacity would increase demand for coal and possibly make
development of an additional colliery viable. Although the government has evaluated the potential
for developing new coalmines for export purposes, the high cost of transport is a hindrance. Since
coal is an import ant resource in Botswana, and there is potential for gas production through
development of coal-bed methane extraction.

Agriculture

Overview

Although agricultures share of GDP has been declining and currently accounts for less than 3%,
it remains the principal source of livelihood for most of Botswanas people. Both farming and
herding provide an important source of food and supply income, in addition to employment and
investment opportunities for the majority of the population in rural areas. The sector is also
important as it presents linkages with upstream and downstream industries; it is a supplier of raw
materials for agro-based industries such as meat processing, tanning, milling, oil, soap, brewing,
furniture manufacturing and suppliers of agricultural inputs.

Only some 5% of Botswanas land area, mainly in the east and southeast, is cultivable and crop
production is mainly rain-fed with irrigated farming conducted on only a limited scale. Botswanas
large-scale livestock sub-sector provides the bulk of agricultural output, and the beef export
industry is well established. Nevertheless, it is recognized that in the long-term, global market
sales principally to the European Union (EU) and South Africa will be adversely affected by
progressive world trade liberalization. In turn this could reduce prices, making diversification of
the livestock sector an urgent priority.

Food crop production, mainly of maize, sorghum, millet and beans, provides less than a fifth of
domestic consumption even in non-drought years. Domestic production of staple cereals has met
only some 10% of national requirements over the past five years, with the balance met through
imports, leaving Botswana as a net importer of good grains. Traditional methods of communal,
arable agriculture can do little to alleviate rural poverty and the government recognises that the
diversification of livestock and crop production is the most effective mans of improving incomes
and food security.

Over the next five years, the government aims to facilitate sustainable agricultural diversification
by widening the range of products, promoting value-added agricultural resources and improved
marketing arrangements. The key areas identified as new cash crops are horticulture, dairy
farming, ostrich breeding and processing, pig-rearing, hides and skins, fish farming (aquaculture),
veldt products and forestry.

A National Plan for Arable Agriculture and Dairy Development, adopted in 2002, aims to gazette
agricultural land to protect it from depletion by non-agricultural uses, the provision of better rural
infrastructure and a review of agricultural subsidies. New production training farms for rain-fed
crops, dairy farming and horticulture farming have been commissioned to showcase technology
and management practices that can improve farming production and profitability.

There is considerable potential for the development of entrepreurial fish farming. Presently,
fishing is not conducted on a commercial scale and is confined mainly to the Chobe river and the
Okavango Delta providing a small supplementary food source for rural households in those
areas.

The government will continue to support the agricultural sector through subsidy schemes. To
enhance production, sectoral subsidies are to be targeted to those beneficiaries who can use
them bet, including women. A coordinated approach to improving agricultural infrastructure is
being developed, based on expanding road links, power and water supplies and post-harvest
facilities. Existing credit facilities, mainly from the National Development Bank (NDB), have been
insufficient, leading to the development of specialized credit institutions and the improved
provision of agricultural extension services.

Livestock

Livestock, especially cattle, is the mainstay of both commercial and subsistence agriculture. As of
2001 the national herd comprised 2.5 million cattle with the same number of sheep and goats.
Beef processing accounts for some 80% of agricultural output. The Botswana Meat Commission
(BMC) a cooperative owned by the farmers who sell to it exports beef cuts to global markets.
The BMC abattoirs at Lobatse and Francistown also produce frozen and canned beef, as well as
hides all for export.

To expand the opportunities for livestock owners to market their cattle, consideration may be
given to liberalizing the sub-sector and ending the BMCs present export monopoly under a
review currently underway. Despite the prevalence of cattle disease, mainly foot and mouth
(FMD), of which there were outbreaks in both 2002 and 2003, some 80% of the country is
classified as FMD-free and the livestock sub-sector has proved resilient. A comprehensive study
to investigate all major factors affecting the livestock sub-sector, including its long-term viability, is
scheduled for completion in the second half of 2004, while research has been intensified with two
research farms identified for ostrich and poultry rearing.

Over the next five years, the government hopes to attract private sector investment in:

tanneries countrywide for the export of processed (as opposed to raw) hides and skins
the establishment of a poultry hatchery, breeder stock and poultry abattoirs
pig feed production and breeder stock.

Crops

The crop sub-sector is dominated by the growing of cereals, principally sorghum. By contrast, the
small commercial sector specializes in high-value crops such as vegetables, fruit, sunflower, and
cotton. A range of initiatives are being implemented to increase the productivity and expand the
range of crops grown. The main priorities include expanding both rain-fed and irrigated farming,
commercializing the arable sub-sector in addition to greater mechanization of farming operations
and increasing production of cash crops, including sunflower and groundnuts.

Horticulture has been identified as having significant potential for diversifying agricultural
production, as local output currently accounts for only one-fifth of domestic demand for fruit and
vegetables, along with oil seeds and dairy products (most of which are imported).

Water

Botswanas mainly semi-arid climate and low rate of water resource replenishment mean that
water is a scarce resource. With an absence of perennial rivers, except in the north where the
Okavango and Chobe rivers flow into the country, surface water resources are low.

Additionally, appropriate locations for the construction of dams are limited with groundwater
resources providing the bulk of requirements.

However, an extensive mass water supply system based on the channeling of water from the
north to the south has been developed. The biggest is a recently completed north-south carrier
water project, the largest single transfer scheme undertaken to date, under which water from the
Letsibogo dam in the north-east is pumped along a 360 kilometre pipeline to augment supplies in
the greater Gaborone area and major villages en route.

Most small-scale farms are dependent on boreholes, whose limited capacity has inhibited
expansion and diversification of agriculture. The government recognises the direct link between
water availability and poverty. One of Vision 2016s main goals is the development of a national
water system that ensures that water is affordable and accessible to all, including those living in
small and remote settlements. This will also combine measures promoting the efficient use of
water to best conserve available supplies.

Botswana is a member of several regional commissions for the joint management of river and
water resources, including the Okavango River Basin Commission (OKACOM), the Zambezi
River commission (ZRC), the Orange-Senqu River Commission (OSRC) via Botswanas Molopo-
Nossop river system. Additionally, a Limpopo River Commission (LRC) is currently being
established.

Services Sector

International Financial Services Centre (IFSC)

The Government has introduced legislation to create the fiscal and regulatory environment
necessary to make Botswana an attractive location from which services such as insurance,
investment advice, broking and trading of securities can be provided to non-residents and in
currencies other than the Pula. The IFSC was established with the mandate to promote these
services.

Tourism

One of the objectives of Botswanas tourism policy is to obtain, on a sustainable basis, the
greatest possible net social and economic benefits for the people of Botswana from their tourism
resources, scenic beauty, wildlife and unique ecological, geological and cultural characteristics.
The industry tries to protect Botswanas environment and resources through an overall policy of
low volume, high cost tourism. The tourism sector is well-established, and there are opportunities
for expansion and development.

Information Technology

Botswana has a relatively young but vigorously growing IT industry, with companies offering
services including training, database development, software development, networking, website
development, call centers and others. The Government is at the forefront of this IT revolution
and contributes by way of offering computer related training/courses at tertiary education
institutions, notably the University of Botswana, Botswana Institute of Administration and
Commerce and Botswana Accountancy College.

International Market Access

Botswana is a signatory to several international trade agreements, notably:

The European Union and African, Caribbean and Pacific States (EU/ACP) Partnership
Agreement (Cotonou Agreement)

The Agreement offers duty and quote-free market access of ACP states products into the
European Union. Companies seeking to qualify to export under this agreement must obtain a
EUR1 certificate from the Department of Customs, which serves as documentary evidence for
originating status.

Botswana and the United States of America African Growth and Opportunity Act (AGOA)
and Generalised System of Preference (GSP)

Some Botswana products enter the USA market free of duty and others at a reduced duty rate
through the GSP scheme. AGOA allows some products manufactured in Botswana duty and
quote-free access into the US market. Export documentation for non-textile products should be
accompanied by Form A. For textile exports, the manufacturer must obtain an AGOA approved
Visa Stamp from the Department of Customs to certify that the products were manufactured in
Botswana.

Southern African Customs Union (SACU)

Botswana is a member of SACU, together with Lesotho, Namibia, Swaziland and the Republic of
South Africa. The five countries share a common external tariff and accord each other duty-free
market access. This Agreement is the oldest of its kind, dating back to 1910.

Southern African Development Community (SADC)

SACD is the grouping of 13 countries of the Southern African region Angola, Botswana,
Democratic Republic of Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, South Africa,
Swaziland, Tanzania, Zambia and Zimbabwe. The Community seeks to increase intra-regional
trade through the SADC Protocol on Trade, by removal of trade barriers over an eight-year
period. Implementation of the SADC Protocol on Trade started in September 2000. With a
population of about 200 million, the SADC region provides a good market opportunity for products
manufactured in Botswana.

Botswana-Zimbabwe Trade Agreement

The Agreement accords both countries duty-free market access provided that the local contents
of the products is at least 25%.

Botswana-Malawi Trade Agreement

This is a bilateral trade agreement under which manufacturers must meet the 25% local content
requirement in order to benefit.

BEDIA

Role

The Botswana Export Development and Investment Authority (BEDIA) is an autonomous private
sector led organization. Mandated by an act of parliament in 1997, it encourages, promotes and
facilitates the establishment of export-orientated enterprises and selected services resulting in
economic diversification, rapid economic growth, and the creation of sustained employment
benefits opportunities.

BEDIA is the focal point for investment and export promotion activities. BEDIA plays an important
role in the diversification and industrialization of the economy. The Authority provides dedicated
support to potential investors and existing industrialists.

BEDIA works closely with the government of Botswana to ensure that the country has an
economy and climate conducive to investment. It is also entrusted with the task of identifying
market outlets for locally manufactured products, in addition to constructing factory buildings for
establishing manufacturing enterprises.

BEDIA acts as the first point of contact for potential investors in Botswana, ensuring they clear all
formalities, priding itself in the professional service that it offers to investors and the profile it has
as the friend of the investor.

Mission

To promote investment in export-orientated activities which result in raid economic growth and
sustained employment opportunities in accordance with Botswanas social and economic policies
and objectives.

Objectives

The main objectives of BEDIA are to:

promote inward investment into the country by encouraging;
o the establishment of manufacturing enterprises with special emphasis on export-
orientated manufacture and in the import replacement sector;
o investment in selected services, for example tourism and information technology.
organize and participate in trade exhibitions and contact promotion missions to other
countries, in order to expose manufacturers to other countries, in order to expose
manufacturers to the international market and identify market outlets for goods manufactured
in Botswana.
promote the establishment of joint ventures between local citizens and foreign investors.
encourage the transfer of technology and the building up of the skills of citizens working in
the manufacturing sector.
construct factory buildings and deal with the property market for investors to utilize.
provide a one-stop service facility to ensure that all clearances, residence permits, work
permits, factory space, land etc are obtained with minimal delays by existing and new
enterprises.

Services

BEDIA provides support and services to both potential investors and existing industrialists by:

identifying investment opportunities in the country
providing investment advice
identifying joint venture partners
organizing visits and meetings between economic operators in the country and potential
investors
assisting in obtaining factories
assisting in obtaining pre-investment clearances (work and residence permits, licences etc)
providing both economic and trade statistics

BEDIA is committed to resolving bottlenecks, helping to improve administrative procedures and in
providing assistance to small businesses.

Contacts

Brian M Mosenene

Regional Representative
Standard Bank Centre
11 Alice Lane, Sandton, 2146
P O Box 781371
Republic of South Africa

Tel: +27 (0)11 884 8959
Fax: +27 (0)11 883 7798
Email: bmmosenene@icon.co.za