Despite having low debt levels compared to most African countries, Sanlam economists believe Botswana’s overreliance on diamonds reveals an urgent need for a wider tax base. Sanlam economist, Patrick Buthelezi, told BusinessWeek during a Business Summer School Training there that whilst all sub-Saharan African countries needed to rethink their fiscal goals and policies due to rising debt levels, Botswana’s challenge is the decline in mineral revenues and the urgency of diversifying these streams.
“Botswana is not in a bad shape,” he said. “Its revenue collection as a percentage of GDP is better than most countries. "At the same time, it has a lower corporate tax rate which means revenue is managed well and lower corporate tax can help the country to attract Foreign Direct Investment.”
Buthelezi added: “The problem with Botswana is its overreliance on diamonds and therefore it is more vulnerable to external shocks. Also, El Niño did not help.”
A tax base refers to the assets and investment vehicles in the country available for government to tax and earn revenue from. The leading source for Botswana’s coffers over the years has been mineral revenues which rake in the highest tax and royalty earnings for government under its mineral agreement with De Beers.
Experts such as those at the Bank of Botswana, have long called on government to broaden the country’s tax revenue base in order to de-risk the economy from the overreliance on diamonds. The central bank has said this can be done by removing blanket subsidies on sectors such as health, education, water and electricity, and rather introducing targeted subsidies that ensure that only those who cannot afford the real cost of these utilities, benefit from government help.
The Bank of Botswana has also said there are economic activities and areas of wealth that are not being taxed, particularly around agricultural land holdings.
For the current financial year, the Finance ministry has tasked the Botswana Unified Revenue Service (BURS) with collecting P70.6 billion, an increase of P11.4 billion or 19.2% on the 2023–2024 target.
BURS Commissioner General Jeanette Makgolo previously said amongst initiatives to tighten gaps and increase collections, the authority would debut a track and trace system for excisable goods, introduce a transit monitoring system to prevent diversion and local dumping of transit-declared goods and also adopt the electronic VAT billing system.
The track and trace system involves placing a biometric imprint on all alcohol and tobacco products as they are manufactured and/or imported into the country, allowing the BURS to check that the correct tax revenue is being paid and that the products are genuine and not illicit.
To meet the hefty fiscus target the authority has also been exploring other avenues such as digital tax, which would include levying tax on service providers who make money from Botswana users without any physical operations in the country.
