A report by the International Energy Agency (IEA) states that in today’s unstable economies coal remains essential worldwide. Until a reliable, new and reasonably priced base-load source of energy is found, coal is essential for growing economies, according to the report.
IEA notes that new energy technologies are being funded and developed to counter the reliance on coal and coal-fired power stations. Based on the data available, this could be a big mistake which would force energy companies to close down plants too early and increase the cost of power beyond what is economically viable. On the other hand it has been realised that Solar panels, geothermal wells, wind farms and tidal turbines are being installed to produce electricity.
While these solutions are often portrayed as reliant green energy, geothermal and tidal turbines are only considered transient and cannot yet be used for base-load service which is driven mainly by coal; a key factor for a stable power to a city, town or industrial centre. Solar produces no power at night and windmills only work when there is sufficient wind, while shutting down when the wind speed is too high.
In 2018, Minergy noted that coal demand continues to rise as it is still the most economical form of energy available. Regional end users are finding it difficult to source reliable and consistent supply as most producers are favouring the export market, they noted. According to Laszlo Varro, head of the gas, coal and power markets division, the resolution that can be applied on a global scale and is affordable and will immensely allow for large-scale economic use of solar and wind power. Varro adds that coal fuelled power is steady, still relatively cheap and runs continuously 24 hours a day. Therefore, there might not be a way around coal fuels for many decades to come.
According to the report, there are still many developing countries, the rising stars of tomorrow’s industrial world that rely on this affordable source of power generation to power their growing industries and are now being forced to comply with western politically driven often unrealistic targets. These countries as noted are many on the African continent and are now driven to allocate a significant portion of their fiscus on carbon dioxide (CO2 mitigation and reduction defined and sold by them – targeting shutting down coal use in any form.
While at this expenditure could be put to better use and is urgently needed to develop the countries’ infrastructure and large-scale industrial business that can improve these economies and add to job creation, improve the health system and reduce environmental pollution of the air, water and soil by noxious emissions and effluents.
“Electricity is increasing its share in total energy consumption and coal is increasing its share in power generation”, said Laszlo Varro, head of the gas, coal and power markets division for the IEA. The vast majority of the 400 GW in power generation capacity to be added in SEA by 2040 will be coal-fired. That will raise coal’s share of the SEA power market to 50 percent from roughly 32 percent, while natural gas declines to 26 percent from approximately 44 percent.
Coal will be the fuel of choice. The material is easily available, the cheapest source of power and also the safest. All major SEA countries are constructing that tripling in electricity demand will be primarily sourced from coal. Whilst renewables are expanding, their pace of growth is too slow to keep up with faster, more affordable thermal coal-fired power generation coal-fired power plants at a breath-taking pace. We predict that with a 40GWe energy shortage already prevalent in Southern Africa, a similar trend will emerge if the 4th Industrial Revolution (4IR) is ever to gain traction in Africa.
IEA cites that Coal’s share of electricity generation is expected to increase from about one third today to reach 50 percent by 2040. This is explained to mean that the SEA will pull up the global average for coal use and significantly contribute to coal continuing to be the power source for the developing world. Again, it is noted that renewables, including hydro will also grow but the staggering increased power demand cannot be met economically without the use of easily available, low-cost and safe coal.
This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.
The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.
Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.
He was speaking in Parliament on Tuesday delivering Parliament’s Finance Committee report after assessing a motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.
Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.
The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.
The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.
The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.
This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.
Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.
Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.
However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.
Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.
When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.
This as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.
Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.
The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.
Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.
In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.
Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.
Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.
Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.
Acknowledging the need to draw down from GIA no more, current Minister of Finance Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”
He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”