BUDGET 2011 / 2012: HIGHLIGHTS

This is an extract of the Botswana budget for the year 2011/12 as presented at the Parliament by the
Honorable Minister of Finance and Development, O.K.Matambo on 7th February 2011.

In the SADC member states inflation was only in single digits as a result of stable food prices and modest
increase in fuel price combined with improvements in food supply.

Economy grew by 10.7 % in real terms over four quarters due to global recovery and improvement of
diamond and copper sales in world market.

Botswana has become less dependent on imports. As compared to 1970, the ration of import of goods and
services to GDP has reduced from 70% to 38% in recent years. Non mining sectors such as tourism,
manufacturing and services grew gradually and now account for 60% of total output.

Emphasis has been given for facilities maintenance. P 526 million has been allocated for reconstruction of
dilapidated infrastructure like schools and roads. In addition P 200 million has been devoted to
development of sewerage systems countrywide.

Balance of payments for 2010 indicates a slightly smaller deficit of 4.8 billion as compared to 4.9 billion
in 2009. In the 11 months to Nov 2010 the overall deficit for the balance of payments was 3.7 billion
compared to 4.6 for the whole of 2009.

Present forex reserves as at November 2010 stood at BWP 54.9 billion, which will cover about 17
months of imported goods and services. This was a decrease of 5.2% from 57.9 billion as at dec 2009.

During 2010 Pula appreciated against SDR by 4.9 % and depreciated by 7.4% against the rand largely
due to the appreciation of rand in world markets.

Average year–on-year annual inflation was 6.9% in 2010 compared to 8.2% in 2009.

Bank of Botswana set the bank rates to 9.5% in dec 2010 from 10% in dec 2009 resulting in reduction in
prime lending rate to 11% by commercial banks.

Diamond sales in 2010 were 33% greater than 2009. The diamond sales are expected to reach pre
recession levels by 2013.

Economy is expected grow in real terms by 6.8% in 2011 and 7.1% in 2012 provided that the mining
sector grows by 15% & 6.2% respectively.

GDP is forecasted for the current financial year at 101.59 billion, 109.5 billion for 2011/12 & 118.1
billion for 2012/13.

The first phase east Africa submarine cable system which cost 10.4 million USD was completed in aug
2010 and is ready to carry commercial traffic. The second phase will be completed by January 2012 and
will cost 37.5 million USD.
Unemployment rate stood at 17.5%

Government has shifted its focus from poverty reduction to poverty eradication. Additional P100 million
will be drawn from alcohol levy fund for financing poverty eradication initiatives during 2011/12.

The Citizen Economic Empowerment Policy drafted in 2008 has gone through various consultative
processes with stakeholders and a revised policy will be presented to the cabinet for approval in first
quarter of 2011.

BTC to be privatized by offering 49% of shares to Batswana through the Botswana Stock Exchange.

Ministry will seek Cabinet decision to outsource public services in Government departments such as
office cleaning, grounds maintenance, landscaping and security services which will reduce considerable
administrative burden.

Majority of public enterprises performed satisfactorily in 2009/10 financial year. BTC generated 181.1
million net profit, WUC 171.6 million and BDC 136.8 million. However, BPC recorded loss of 133.6
million, BMC 92.5 million and Air Botswana 45 million.

New Immigration Act has been published in the Government gazette and will commence on notice. The
objective of the New Act is to improve administration of non citizens entering the country for
employment. Processing and issuance of official documents such as passports, citizenship certificates,
work/residence permits and visas are now done electronically.

Budget outturn for 2009/10 was an overall deficit of P 9.47 billion compared to estimated deficit of 13.48
billion in the revised budget. This was due to under spending of expenditure budget and more revenue
earnings.

Total revenues and grants amounted to P 30 billion in 2009/10 which is higher than the estimated P 27.78
billion in revised estimates. Additional revenue is due to recovery in diamond market.

Total expenditure and net lending in 2009/10 amounted to P 9.49 billion against estimated 41.27 billion in
revised budget.

Revised budget estimates for 2010/11 showed a deficit of P 10.22 billion as against original estimate of P
12.12 billion which is 10.1% of GDP of 101.59 billion. Revised total expenditure for 2010/11 is estimated
at P 40.51 billion

Total revenue and grants for 2011/12 is estimated at P 34.10 billion. 80% of this is from four major
contributor’s viz. Mineral revenue 33%, Customs & Excise 25%, Income tax 18% and VAT 15%.
Proposed total expenditure for 2011/12 is estimated at P 41.03 billion comprising of development budget
of P 10.77 billion and recurrent budget of P 30.35 billion.

Recommended recurrent budget for 2011/12 is P30.35 billion which is an increase of 11.6 %. This
increase is due to increase in Public Service salaries by 10%. Out of this P 28.2 billion is for Ministerial
Recurrent budgets. Five ministries account for 75.5% of Ministerial budget. Education P 8.7 billion,
Local Govt P 3.8 billion, Defence P 3.68 billion, Health P 3.5 billion, Transport & Communication P 1.5
billion.

Budget for statutory expenditure is P4.9 billion. This includes Public debt service, pensions, gratuities and
compensation and others like Income tax refunds and subscription to IMF, World Bank and ADB.

Development budget for 2011/12 is P 10.77 billion. The highest share of this is for Ministry of Minerals,
Energy & Water Resources of P 2.37 billion. This will finance Construction of Morupule B Power
Station, Emergency Power Generation project, Construction of three dams of Thune, Lotsane &
Dikgatlhong, water connections to the major villages of Kanye, Serowe & Molepolole.

P2.13 billion is for Ministry of Transport and Communication for Bitumen and Trunk roads, airports
infrastructure and Botswana railways and secondary roads.

Local Government gets P 1.4 billion,

Ministry of State President gets P 1.108 billion, of which P 981 million is for HIV/AIDS program

Defence gets P1.023 billion

The amendments to the Income Tax Act, VAT Act and Transfer Duty Act will be discussed during this
parliamentary sitting.

Corporate tax rate will be 22% and dividend withholding tax of 7.5%. Two tier corporate tax system to be
abolished.

The threshold for individual tax payers will be increased from P 30,000 to P 36,000 w.e.f 01.07.2011

VAT personal allowance for goods imported will be raised to UA 1200 as compared to UA 500 to
compensate for inflation. Farming implements to be exempted from VAT.

To improve regulatory environment in financial sector, a Securities Bill is to be tabled during this sitting.
Micro Lenders Regulations are due to be gazetted. Establishment of a Tribunal to address complaints
against NBFIRA.