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China falls away as destination for Botswana coal

Top economist says the coal age has gone past

India will be probably the biggest customer of Botswana coal. China’s move to put restrictions on coal imports, has effectively made the giant Asian country, much less of a prospect for Botswana coal, according to Jindal Africa general manager for Botswana, Rajendra Kumar Tiwari.


Tiwari said this week at the Botswana Resource Sector Conference, that the most feasible options for the realisation of the Botswana coal roadmap would be a combination of exports to India and thermal coal for power generation to mitigate the region’s 7,709 megawatt supply to demand deficit.


“As the sulphur content of the Botswana coal is high, it needs to be washed to reduce sulphur content and to increase the energy content,” said Tiwari, adding that this coal complements the Indian situation as it can be mixed with the lower quality Indian coal.


The Government of India is desperately trying to minimise the gap between production and consumption of coal. In spite of that, there would be demand of high grade Botswana coal mainly for blending with Lower quality coal available there. Low sulphur in Indian coal will be an added advantage.

To make Botswana coal cost effective, power industry needs to be developed along with coal industry. For sustainable coal mining industry low grade coal has to be given some economic value by using in power plant.


“Export to China would be a difficult task due to lower demand, stringent new laws and geographical location,” said Tiwari.


He said that due to fluctuations in the oil price and high capital involved in it, Coal To Liquids (CTL) will be high risk business and Botswana Is not ready for that after factoring in the non availability of human resource and unavailability of water.

Will be added disadvantage free on board (FOB) price of Botswana is always going to be higher compare to other countries due to more transportation costs incurred which is about 55 percent of the FOB price in the case of Botswana coal.


“So to reduce it, some costs must be shared with lower quality coal by using It in power plants,” Tiwari said, adding that there is enough requirement of power in SADC region that Botswana should take advantage of it, especially its central location.


Shumba Coal’s finance director, Thapelo Mokhathi also expressed that their company is aware of the global call for cleaner energy but took comfort in   The United Nations’ breaking ranks with the World Bank and environmental non-governmental organizations, by agreeing to continue coal-fired power plants in developing countries.


International environmental non-governmental community, the World Bank began to reduce funding coal-fired power plants in the developing world in 2011 and in 2013, it adopted a new policy curtailing such loans even further, offering only financial support for greenfield coal power generation projects only in rare circumstances, such as where there are “no feasible alternatives to coal.”


However, the United Nation (UN) green climate fund (GCF) refused an explicit ban on fossil fuel projects at March meeting in South Korea, reasoning that these countries would develop using coal as a source of electricity.


However, economist Keith Jefferies, during the deliberations at the Conference, poured cold water on the prospects of coal saying “the age of coal has come to an end.”  


“I don’t see the price of coal recovering enough,” referring to the price of the resource that has fallen by 52 percent since the Botswana coal roadmap was launched, taking down with it, the viability of the proposed 1500 km Trans Kalahari Railway line, that will run from Mmamabula to Walvis Bay in Namibia.

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P230 million Phikwe revival project kicks off

19th October 2020
industrial hub

Marcian Concepts have been contracted by Selibe Phikwe Economic Unit (SPEDU) in a P230 million project to raise the town from its ghost status.  The project is in the design and building phase of building an industrial hub for Phikwe; putting together an infrastructure in Bolelanoto and Senwelo industrial sites.

This project comes as a life-raft for Selibe Phikwe, a town which was turned into a ghost town when the area’s economic mainstay, BCL mine, closed four years ago.  In that catastrophe, 5000 people lost their livelihoods as the town’s life sunk into a gloomy horizon. Businesses were closed and some migrated to better places as industrial places and malls became almost empty.

However, SPEDU has now started plans to breathe life into the town. Information reaching this publication is that Marcian Concepts is now on the ground at Bolelanoto and Senwelo and works have commenced.  Marcian as a contractor already promises to hire Phikwe locals only, even subcontract only companies from the area as a way to empower the place’s economy.

The procurement method for the tender is Open Domestic bidding which means Joint Ventures with foreign companies is not allowed. According to Marcian Concepts General Manager, Andre Strydom, in an interview with this publication, the project will come with 150 to 200 jobs. The project is expected to take 15 months at a tune of P230 531 402. 76. Marcian will put together construction of roadworks, storm-water drains, water reticulation, street lighting and telecommunication infrastructure. This tender was flouted last year August, but was awarded in June this year. This project is seen as the beginning of Phikwe’s revival and investors will be targeted to the area after the town has worn the ghost city status for almost half a decade.

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IMF projects deeper recession for 2020, slow recovery for 2021

19th October 2020

The International Monetary Fund (IMF) has slashed its outlook the world economy projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.

On Wednesday when delivering its World Economic Outlook report titled “A long difficult Ascent” the Washington Based global lender said it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April.  For 2021, IMF experts have projected growth of 5.4%, down from 5.8%. “We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” said Gita Gopinath Economic Counsellor and Director of Research.

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Botswana partly closed economy a further blow of 4.2 fall in revenue

19th October 2020

The struggle of humanity is now how to dribble past the ‘Great Pandemic’ in order to salvage a lean economic score. Botswana is already working on dwindling fiscal accounts, budget deficit, threatened foreign reserves and the GDP data that is screaming recession.

Latest data by think tank and renowned rating agency, Moody’s Investor Service, is that Botswana’s fiscal status is on the red and it is mostly because of its mineral-dependency garment and tourism-related taxation. Botswana decided to close borders as one of the containment measures of Covid-19; trade and travellers have been locked out of the country. Moody’s also acknowledges that closing borders by countries like Botswana results in the collapse of tourism which will also indirectly weigh on revenue through lower import duties, VAT receipts and other taxes.

Latest economic data shows that Gross Domestic Product (GDP) for the second quarter of 2020 with a decrease of 27 percent. One of the factors that led to contraction of the local economy is the suspension of air travel occasioned by COVID-19 containment measures impacted on the number of tourists entering through the country’s borders and hence affecting the output of the hotels and restaurants industry. This will also be weighed down by, according to Moody’s, emerging markets which will see government losing average revenue worth 2.1 percentage points (pps) of GDP in 2020, exceeding the 1.0 pps loss in advanced economies (AEs).

“Fiscal revenue in emerging markets is particularly vulnerable to this current crisis because of concentrated revenue structures and less sophisticated tax administrations than those in AEs. Oil exporters will see the largest falls but revenue volatility is a common feature of their credit profiles historically,” says Moody’s. The domino effects of containment measures could be seen cracking all sectors of the local economy as taxes from outside were locked out by the closure of borders hence dwindling tax revenue.

Moody’s has placed Botswana among oil importers, small, tourism-reliant economies which will see the largest fall in revenue. Botswana is in the top 10 of that pecking order where Moody’s pointed out recently that other resource-rich countries like Botswana (A2 negative) will also face a large drop in fiscal revenue.

This situation of countries’ revenue on the red is going to stay stubborn for a long run. Moody’s predicts that the spending pressures faced by governments across the globe are unlikely to ease in the short term, particularly because this crisis has emphasized the social role governments perform in areas like healthcare and labour markets.

For countries like Botswana, these spending pressures are generally exacerbated by a range of other factors like a higher interest burden, infrastructure deficiencies, weaker broader public sector, higher subsidies, lower incomes and more precarious employment. As a result, most of the burden for any fiscal consolidation is likely to fall on the revenue side, says Moody’s.

Moody’s then moves to the revenue spin of taxation. The rating agency looked at the likelihood and probability of sovereigns to raise up revenue by increasing tax to offset what was lost in mineral revenue and tourism-related tax revenue. Moody’s said the capacity to raise tax revenue distinguishes governments from other debt issuers.  “In theory, governments can change a given tax system as they wish, subject to the relevant legislative process and within the constraints of international law. In practice, however, there are material constraints,” says Moody’s.

‘‘The coronavirus crisis will lead to long-lasting revenue losses for emerging market sovereigns because their ability to implement and enforce effective revenue-raising measures in response will be an important credit driver over the next few years because of their sizeable spending pressures and the subdued recovery in the global economy we expect next year.’’

According to Moody’s, together with a rise in stimulus and healthcare spending related to the crisis, the think tank expects this drop in revenue will trigger a sizeable fiscal deterioration across emerging market sovereigns. Most countries, including Botswana, are under pressure of widening their tax bases, Moody’s says that this will be challenging. “Even if governments reversed or do not extend tax-easing measures implemented in 2020 to support the economy through the coronavirus shock, which would be politically challenging, this would only provide a modest boost to revenue, especially as these measures were relatively modest in most emerging markets,” says Moody’s.

Botswana has been seen internationally as a ‘tax ease’ country and its taxes are seen as lower when compared to its regional counterparts. This country’s name has also been mentioned in various international investigative journalism tax evasion reports. In recent years there was a division of opinions over whether this country can stretch its tax base. But like other sovereigns who have tried but struggled to increase or even maintain their tax intake before the crisis, Botswana will face additional challenges, according to Moody’s.

“Additional measures to reduce tax evasion and cutting tax expenditure should support the recovery in government revenue, albeit from low levels,” advised Moody’s. Botswana’s tax revenue to the percentage of the GDP was 27 percent in 2008, dropped to 23 percent in 2010 to 23 percent before rising to 27 percent again in 2012. In years 2013 and 2014 the percentage went to 25 percent before it took a slip to decline in respective years of 2015 up to now where it is at 19.8 percent.

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