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Experts urge Gov’t to develop coal industry

Leading minds in the coal industry have reiterated that robust steps must be taken to develop a world class coal industry that can attract global capital and major investment players in turn birthing rigorous industrialization in Botswana. This they say can help in job creation and further diversification of the economy.

This emerged during the Botswana Resource Sector Conference held at the GICC this week. Latest prospected reserves indicate that Botswana sits on over 200 billion tonnes of coal deposits of which contain different segments of grade value as per economically minable mineralization. Already, a number of companies, mostly of Australian origin are on the ground exploring the economic mineralization of the coal deposits.

Andre Boje, Chief Executive Officer of Minergy, delivered a mouthwatering piece on the development of Botswana’s Coal Industry. Boje said though Coal was viewed as a non environmental source of energy its industrial value cannot go unnoticed, adding that it could be mined with environmental precautions in place. Boje said major mining companies in the world were making record profits from their coal divisions. He further cited that the International price of seaborne thermal coal was at levels last seen in 2007.

He is of the view that with regional and international shortages, Botswana with its abundant untapped reserves was better placed to emerge as a major player in the Global Coal industry. “Botswana coal is high quality and economical to mine,” he said. He also noted that the coal industry has acknowledged the impact of fossil fuels on the environment and have worked for decades on clean coal technology. According to Boje Carbon Capture and Storage (CCS), High Efficiency Low Emission (HELE) was some of the mining and coal utilization models that are regarded environmentally friendly. “Modern coal fired power plants using these technologies have reduced emissions to levels comparable to gas fired powered plants,” he said.

The International Energy Agency reported in their 2016 World Energy Outlook report that coal will remain the largest single source of electricity generation through to 2040. Boje highlighted that coal still accounted for up 41% of global electricity generation and 29% of primary energy demand.

“There are 1,600 coal fired power plants either being planned or under construction in 62 countries which will, without older plant decommissioning, expand the world’s coal-fired capacity by 43%,” he said, adding that coal will continue to  play a major role in delivering energy access and security long into  the future.

“All this aforementioned factors and facts about the global coal stands present a lucrative opportunity for Botswana which sits on top of one of the world’s largest untapped reserve,” he said. The Minergy Botswana Chief also added that the abundance of coal presented lucrative opportunity for Botswana to engage more independent power producers and output excess power for regional and continental export hence generating revenue and creating much needed employment. “The coal here is economical to mine. Government just needs to reduce bottlenecks and wipe off cumbersome processes which sometimes frustrate our capital mobilization efforts in the stock markets,” he said.


Boje also noted that currently 620 million Africans rely on firewood, kerosene and charcoal for cooking, heating and lighting. “600,000 Africans, mainly women and children, die prematurely annually due to illnesses caused by this.” He further added that Africa was facing alarming rates of deforestation due to firewood extraction citing that Zambia alone loses 250,000 hectares annually. “The situation in Zambia present yet another massive business opportunity for our coal –independent power producers, creating even more revenue on direct uptake, royalties and taxation,” he said.

It also emerged that traditional and long time regional supplier of electricity,   South African Power giant, Eskom, was reaching coal cliff with no green fields projects on the drawing board, further presenting a major opportunity for Botswana based power producers or direct export of Coal to South Africa.

Another Coal miner, Shumba Energy, represented by its Managing Director Mashale Phumaphi revealed that significant deposits of the Botswana Coal reserves were high grade for industrial purposes apart from power production. He noted that the Coal –Liquefaction proposition can materialize and create thousands of jobs for Batswana, boost government revenue through taxation and royalties. “We are talking about a setup that will create thousands of jobs for skilled and semi skilled personnel in high volumes for this country,” he said.

Phumaphi added that other value chain business opportunities would emerge in the process wherever the plant would be set.  Botswana Government has since embarked through its fuel commercial entity, Botswana Oil Limited, on a robust investment wooing quest to attract capital for the multibillion pula plant. Government said the project would be too steep to fund from public treasury.

Phumaphi also added that Botswana Coal can birth various industrial processing businesses like production of petroleum reactants, uptake on steel production, cement manufacturing in turn creating more jobs from these various industries. Government was urged to invest in the logistical infrastructure, moves to remove regulatory bottlenecks and accelerate approval timeframes. It was also underscored that review of the coal industry tax structure to negate the logistical disadvantage to RSA coal exports was long overdue.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020
Botswana-on-high-alert-as-AML-joins-Covid-19-to-plague-mankind-

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.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

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.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

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”

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