The Botswana Institute of Development Policy Analysis (BIDPA) has proposed extensive Policy recommendations in a Study into the Consequences of and Responses to the Depletion of Botswana’s Diamonds, estimated to creep in after 2027.
The Botswana After Diamonds report hovers on major issues of Encouraging more mining and exploration activity; Diamond production rate; and Planned infrastructure projects. BIDPA calls on government to be aggressive when dealing with these matters and to take real steps to mitigate the aftermath of 2027.
First among other issues, BIDPA sneaks into the legal and fiscal regime for mining in Botswana which is currently very competitive with the country being ranked in position 4 by resource Stocks magazine and 8th position by the Fraser Institute. Of the eleven exploration and mining companies in Botswana interviewed in the study, the majority find the mining laws in Botswana to be ‘fine and useful’ and the administrative process to be ‘fair and open’.
According to the BIDPA study, the issues relevant to mining laws are – future and current tax regime, and land claim and land issues. BIDPA recommends that Botswana’s level of mineral Royalties take into consideration the profitability of mining project and the latter, other things being equal, depends on the value of the mineral being mined. In this way, base metals and coal attract the lowest royalty rate of 3 % followed by precious metals, that is, gold, silver and platinum group metals at 5% and lastly diamonds at 10 %.
“We therefore do not believe there is additional incentive in lowering these rates as the level of prospecting activity is very high. We also would not recommend that these be raised as this may discourage the prospecting activity, which would do more harm than good. We however believe that there is always room to modernise the royalty formula, for instance, going to a sliding scale formula so that even some diamond mines that may have similar levels of profitability to other minerals such as base metals and coal are not overburdened by fixed royalty rate of 10 %,” reads part of the study report.
According to the study, which was edited by Roman Grynberg, Margaret Sengwaketse and Masedi Motswapong, BIDPA is convinced that the fiscal regime is well defined for non-diamond minerals while for diamonds section 51 of the Act stipulates that there will be a negotiation. “We believe that it is the secrecy of the negotiated regime that may be creating uncertainty and government should find ways of addressing this.” In response to this concern, BIDPA notes:
“Regarding the taxation issues, we believe government should find means to publicise those mining regimes that, after negotiation, still end up with the standard tax regime for mining to provide comfort to the current junior mining companies exploring for diamonds.”
Government should continuously explain the benefits of overlapping prospecting licences. According to the BIDPA researchers, it seems that this has not been sufficiently explained to the mining industry. In addition they have recommended that government should consider an Act for the Coal Bed Methane (CBM) gas and its accompanying regulations to assist in guiding activity in this area.
Meanwhile BIDPA notes that there is a lot of interest in exploration in Botswana, with the whole of the country taken up by exploration companies with only the swamps and some deep sand-covered areas of the Kalahari remaining open as they are inaccessible. “There is therefore need to ensure that only value-adding applications for exploration are approved to eliminate huge land holdings without the accompanying progress towards mine development.
The study also highlights the issue of water and power. “While some projects may be located near existing water and power infrastructure, the challenge faced by the project developers is that there are no set mechanisms for them to obtain such water and power. We therefore recommend that government consider a mechanism whereby the water and power utility companies develop the infrastructure to support the mining project and then recover the cost of such development through higher charges until their cost have been recovered. This would facilitate project development as they would be spared the upfront costs, which also improve project economics,” observers the BIDPA analysts.
The BIDPA study also touches on diamond production rate, stating that it seems Debswana is placing itself in the position of ‘swing producer’, adjusting its target production so as to leave the global supply/ demand balance in a position of shortage rather than surplus, and hence tending to push prices up, or at least maintain them if there are other negative forces at work.
In their view, the cushion of 10 million carats p.a between Debswana’s peak production and its recent production levels is certainly enough to influence the global supply/demand balance according to whether those 10 million carats p.a are being produced or not. “And the experience of the past three years does suggest that international market prices have responded to Debswana’s actual planned production rates,” they state.
BIDPA advises that in the short term Government should study the various production scenarios with the view to possibly revising the current long-term mining plans, which seem to be informed by the validity period of the mining leases for Debswana, which all run until 2029. Furthermore, BIDPA is of the view that Government should consider a policy of postponing possible projects at Debswana mines so that these are phased in at the end of the open-pit mining operations.
“These projects are profitable on their own (stand-alone- projects) and would not depend on the existing open-pit operations.”
Regarding rail and port infrastructure, future coal export projects and some copper and silver projects in the Ghanzi copper belt would rely on this, BIDPA says. “We therefore believe that government should be a joint venture partner in order to ensure that future projects benefit. We, however, caution that due to the scale and possible risks involved, government should conduct a thorough due diligence ahead of any participation in such infrastructure projects.”
The researchers indicate that the projected government mineral revenues from future coal mines are dependent on the existence of rail and port infrastructure to export the washed coal to the world steam coal markets in Asia and Western Europe. “Until concrete steps are seen on the development of the rail and port infrastructure upon which these projects depend, we believe they should be accorded a low probability of being realised by 2026.”
This BIDPA study was conceived about five years ago during the Global Economic Crisis and the impact this had on the economy of Botswana and on the private sector. At that time there was a dramatic decline in the demand for luxury commodities – diamonds and tourism services – which are two of Botswana’s most important export sectors.
These were hit disproportionately as a result of the economic crisis. Diamond mining, the principal source of revenue in the country, declined dramatically in 2009 as the mines at Jwaneng and Orapa were temporarily shut. In 2009 diamond production fell to 17.7 million carats from 32 million the previous year.
In conclusion, BIDPA observes that over the next 10-15 years, government mineral revenues are projected to rise on the back of a projected improvement in diamond prices that would be underlain by strong supply/demand fundamentals.
“While the decline in government mineral revenues from diamonds seems unlikely to occur within the period of projection for this study, we would like to caution that there would be a significant crunch when the open-pit mining operations cease, beginning in about 2027.”
While there is no hard-and-fast rule in politics, former Molepolole North Member of Parliament, Mohamed Khan says populism acts in the body politic have forced him to quit active partisan politics. He brands this ancient ascription of politics as fake and says it lowers the moral compass of the society.
Khan who finally tasted political victory in the 2014 elections after numerous failed attempts, has decided to leave the ‘dirty game’, and on his way out he characteristically lashed at the current political leaders; including his own party president, Advocate Duma Boko. “I arrived at this decision because I have noticed that there are no genuine politics and politicians. The current leaders, Boko and President Dr Mokgweetsi Masisi are fake politicians who are just practicing populist politics to feed their egos,” he said.
Former Botswana Democratic Party (BDP) parliamentary hopeful, Lawrence Ookeditse has rejected the idea of taking up a crucial role in the Botswana Patriotic Front (BPF) Central Committee following his arrival in the party this week. According to sources close to development, BPF power brokers are coaxing Ookeditse to take up the secretary general position, left vacant by death of Roseline Panzirah-Matshome in November 2020.
Ookeditse’s arrival at BPF is projected to cause conflicts, as some believe they are being overlooked, in favour of a new arrival. The former ruling party strategist has however ruled out the possibility of serving in the party central committee as secretary general, and committed that he will turn down the overture if availed to him by party leadership.
Ookeditse, nevertheless, has indicated that if offered another opportunity to serve in a different capacity, he will gladly accept. “I still need to learn the party, how it functions and all its structures; I must be guided, but given any responsibility I will serve the party as long as it is not the SG position.”
“I joined the BPF with a clear conscious, to further advance my voice and the interests of the constituents of Nata/Gweta which I believe the BDP is no longer capable to execute.” Ookeditse speaks of abject poverty in his constituency and prevalent unemployment among the youth, issues he hopes his new home will prioritise.
He dismissed further allegations that he resigned from the BDP because he was not rewarded for his efforts towards the 2019 general elections. After losing in the BDP primaries in 2018, Ookeditse said, he was offered a job in government but declined to take the post due to his political ambitions. Ookeditse stated that he rejected the offer because, working for government clashed with his political journey.
He insists there are many activists who are more deserving than him; he could have chosen to take up the opportunity that was before him but his conscious for the entire populace’s wellbeing held him back. Ookeditse said there many people in the party who also contributed towards party success, asserting that he only left the BDP because he was concerned about the greater good of the majority not individualism purposes.
According to observers, Ookeditse has been enticed by the prospects of contesting Nata/Gweta constituency in the 2024 general election, following the party’s impressive performance in the last general elections. Nata/Gweta which is a traditional BDP stronghold saw its numbers shrinking to a margin of 1568. BDP represented by Polson Majaga garnered 4754, while BPF which had fielded Joe Linga received 3186 with UDC coming a distant with 1442 votes.
There are reports that Linga will pave way for Ookeditse to contest the constituency in 2024 and the latter is upbeat about the prospects of being elected to parliament. Despite Ookeditse dismissing reports that he is eying the secretary general position, insiders argue that the position will be availed to him nevertheless.
Alternative favourite for the position is Vuyo Notha who is the party Deputy Secretary General. Notha has since assumed duties of the secretariat office on the interim basis. BPF politburo is expected to meet on 25th of January 2020, where the vacancy will be filled.
Botswana Democratic Party (BDP) big wigs have decided to cancel a retreat with the party legislators this weekend owing to increasing numbers of Covid-19 cases. The meeting was billed for this weekend at a place that was to be confirmed, however a communique from the party this past Tuesday reversed the highly anticipated meeting.
“We received a communication this week that the meeting will not go as planned because of rapid spread of Covid-19,” one member of the party Central Committee confirmed to this publication. The gathering was to follow the first of its kind held late last year at party Treasurer Satar Dada’s place.