It appears there is light at end of the tunnel in the mining sector (base metals) as Botswana moves to dilute the dominance of the traditional diamond subsector. Mining is Botswana’s largest sector by revenue generation and the country’s largest private employer.
In the 2017/18 financial year Government collected over 17 billion pula from royalties and dividends while by March 2018 over 16 000 people were employed in the mining industry. The sector will remain the country’s economic anchor for more decades to come amid the economic diversification wave. This is because the mining sector is currently moving rigorously to diversity within itself as much as the nation is on an accelerated move to diversify economic activities away from mining.
Since the beginning of diamonds mining in the 1970s, the multibillion pula sector has been dominating mineral contribution to the country’s economy. The country has learnt it the hard way when over 10 000 direct and indirect jobs were lost in the copper mining industry from 2012 until 2016. But there is hope, experts this week pointed to the potential of the non-diamond mining industry at the annual Botswana Resource Sector Conference held in Gaborone.
The conference brought together leading mining and resources companies doing prospecting and exploration for different mineral deposits in Botswana. It emerged at the gathering that Botswana sits on a vast of economical mineralization and most valuable high grade deposits in the world. Apart from the traditional Copper-Nickel and Coal which has been complementing the lucrative diamonds sector for some years, it was also revealed that Botswana soils are also covering reserves of some of the most valuable industrial minerals.
These include among others Lead, Zinc, silver, vanadium and manganese deposits which exploration experts classify as some of the world‘s high grade reserves. When laying the foundation at the highly technical conference, Botswana Chamber of Mines Chief Executive Officer, Charles Siwawa noted that it was indeed not even over yet for controversial industries like the copper-nickel which faced a halt 2 years back due to predominantly depreciation of global commodity prices. Botswana‘s largest copper and nickel mining group BCL limited liquidated late 2016 following a series of closures of other copper mining companies.
Siwawa, an internationally recognized and seasoned mining expert told attendants at the conference that in the near future Botswana will bounce back and be recognized with the likes of DRC s and Zambias of the global copper mining industry. Meanwhile Charles Siwawa of Botswana Chamber of Mines Chief expressed that in the near future the world would look to Botswana not just for the lucrative diamonds but also for these valuable metal minerals which are mostly used for industrial purposes .
“While copper mines which initially closed due to liquidation are opening because of commodity price re-bounce, no one should undermine these aforementioned base metal deposits , these are world class reserves , your lead , Zinc and Silver , they are Botswana ‘s future of Mining industry,” he said . Siwawa noted that these metals mineralization exists in high grade deposits that would compete very well in the market for industrial uptake in global factories and heavy processing & hardware manufacturing plants.
Commenting on Siwawa’s views, Khemacau Copper Project Engineer and Country Manager, Jahannes Tsimako noted that his company was in good progress to unearth one of the valuable copper deposits in the region. Khoemacau is one of the companies exploring and moving to mine copper and other base metals in the Kalahari Copper Belt with one of their major mines being the Bosetu Mine, the company acquired the mine from Discovery Copper Botswana at a tune of $34.5 m (P343million) after the mine collapsed in 2013.
In 2016 Khoemacau was granted a mining license with Botswana Government retaining its 15 % participating interest in the Mine. Khoemacau started constructing the underground mine in March 2016. Boseto Mine is located in northwest of the country between Ghanzi, 70 km southwest of Maun. The mine is expected to produce copper and silver, on full scale operation hiring an excess of 2000 direct and indirect employees. Tsimako revealed that his company expects to mine sellable copper by first quarter of 2020.
Another major undertaking in the Kalahari Copper Belt is advanced explorations by Tshukudu Metals a subsidiary of Metal Tiger, the latter is one of the world’s reputable companies in the area of mining base metals. Kebalemogile Tau, Explorations Manager at the Ghandzi Based Tshukudu Metals enticed attendants and spoke life to the country’s future in Mining. The company is also at advanced explorations of the copper in the Kalahari belt.
Tau underscored that Botswana had a great future in Base metal mining. “The Kalahari Copper belt will give us long profitable mines with life span of 20-30 years employing thousands of our skilled and non-skilled personnel,” he said. Nigel Forrester, Chief Executive Officer of Mount Burgess Mining also revealed that his company was also on the final stages in prospecting Zinc Lead and Silver as well as Vanadium mineralization at its Kihabe reserves whose deposits spill over into Namibia. Forrester explained that his company explorations will output one of the world valuable lead and Silver mineralization.
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”