New Mining Bill in Botswana Aims to Increase Local Equity

Botswana is set to debate significant amendments to its Mines and Minerals Act, which, if passed, will encourage new mining ventures to offer citizens the right to acquire up to 24% of projects in which the state has not exercised its option to purchase a stake. 

The proposed changes, driven by the ruling Botswana Democratic Party, are expected to pass given the party’s dominance in parliament.

Key Amendments and Their Implications

The proposed amendments to the Mines and Minerals Act seek to increase local participation in Botswana’s mining sector. Under the current legislation, the government is entitled to purchase up to 15% equity in any new mining entity. The new bill aims to incentivise, rather than mandate, new mining ventures to sell a 24% stake to local citizens or citizen-owned companies when the government decides not to exercise its 15% option.

“Where the government does not exercise its option of acquiring 15% working interest upon the granting of a mining licence, the holder shall use his best endeavour to dispose of the 24% to citizens or citizen-owned companies,” states the draft legislation.

Historical Context and Government Interests

This legislative change has been in the pipeline since 2016, reflecting a broader trend of resource nationalism, where developing nations seek a greater share of the profits from their natural resources. Botswana, the world’s largest producer of rough diamonds by value, has maintained policy predictability, which has been instrumental in attracting foreign investment in its mining sector. However, increasing local equity access is seen as a move to address historical inequities in wealth distribution.

The government currently holds stakes in key mining ventures through the state-owned Minerals Development Company Botswana. This includes a 15% stake in diamond producer De Beers, a 50% stake in the Debswana Diamond Company, and full ownership of the Morupule Coal Mine.

Economic Feasibility and Local Processing Requirements

Another notable amendment in the bill requires mining companies to process minerals within Botswana “as far as is economically feasible” and to the satisfaction of the Minister of Mineral Resources, Green Technology, and Energy Security. This move aims to ensure that the value derived from mineral resources benefits the local economy directly, fostering job creation and industrial growth within the country.

Additionally, mineral licence holders will be required to prioritise procurement from local citizens and citizen-owned companies, further embedding local economic benefits within the mining sector’s operations.

Financing Local Participation

To facilitate the acquisition of mining stakes by Botswana citizens, Minister Lefoko Moagi has suggested leveraging local pension funds. Recent legislative changes require Botswana’s pension funds to reduce their offshore investments from 65% to 50% over the next three years. This adjustment could provide a financial mechanism for citizens to invest in the mining sector, enhancing local ownership and investment in national resources.