The Governments of Botswana and Namibia a determined to see through, the construction of the Trans Kahalari railway line, despite concerns raised in some quarters over its viability.
Low oil prices have kept inflation low, taking down with it commodity prices such as coal, of which the Trans Kalahari railway line are pivoted on.
Economists have raised the alarm on the viability of the railway due to the depressed coal prices globally. Coal prices currently hover at around US$50 per tonne.
“The construction of TKR is increasingly unlikely with current price levels (of coal) prohibitive, narrowing the window of opportunity,” said Bogolo Kenewendo from eConsult, earlier this year.
The other concerns raised are that of major buyer markets such as China and India being under pressure from environmental lobbyists to switch to more environmentally friendly alternatives.
Minister Mokaila said that there are possibilities of the railway line being a multi commodity transit option hence the feasibility of coal will not ring the death knell on the whole project.
The pre feasibility study by Aurecon, handed over to Government in January also revealed that The efficiency of the railway line coal supply chain is expected to be maximized by Copper resources in North West Botswana identified to boost TKR viability, Manganese ore resources in southern Botswana identified to add to the viability of the TKR. Mineral resources along the TKR corridor in Namibia also have the ability to further improve the viability of the TKR.
“The railway line can even be a people carrier,” said Mokaila emphatically. Mokaila said the TKR office will be opened next month and staff will be hired. The next step in the process is to perform bankable feasibility study for the project.
Meanwhile, coal explorers in Botswana are reported to be pressing ahead with plans to start production and use existing rail capacity to ports in South Africa and Mozambique instead of waiting for a line being built to Namibia, according to statements attributed to the Botswana Chamber of Mines.
Minister Mokaila revealed at a press conference held on Thursday this week that, he held a meeting with his Zimbabwean counterpart recently where they discussed the possibility of carrying 10 billion tons of coal on the Zimbabwean railway line.
On why there are no set timelines for the project, Mokaila said that cross national projects are difficult because of different sets of legislation that need to be harmonized as well as events that cannot be controlled such as elections that were held in Namibia, which meant that the newly appointed Executive could not deal with the railway line issues at all.
The railway line is expected to unlock the monetisation of Botswana’s coal resources, which are seen as a way to augment the depleting diamond resources that have been the mainstay of the country’s economy.
“There are a few things that need ironing out such as the funding by both governments but President Khama made it very clear to me that he wanted the project to start as soon as possible,” Namibia’s High Commissioner to Botswana, Mbapeua Muvangua, recently after a visit to Office of the President in Gaborone. “As we all know this project involves other stakeholders that need consultations but I am very confident the project is on track,” added Muvangua.
“The office will be staffed by seconded staff from both parties,” the National Planning Commission told Namibian media earlier this year.
He said the project is being developed through a public-private partnership based on a DBOOT contractual arrangement whereby developer undertakes the financing, design, construction, operation and maintenance of the project.
“The developer operates the project over the concession period to recover its investment, operating and maintenance expenses for the project under such tariff structure as may be agreed upon in the concession agreement or the specific project regulatory framework; and developer transfers the project at the end of the concession period to the jointly owned company, which is composed of government agencies from both parties responsible for rail in their countries,” he explained.
Early last year in Walvis Bay, a bilateral agreement was signed between the governments of Namibia and Botswana on the development of the Trans-Kalahari railway.
Also, an agreement on the Trans-Kalahari project management office was signed in Gaborone and it was agreed that the office would be in Windhoek.
The 1 500km railway line will traverse the vast semi-arid, sandy savannah of the Kalahari desert from Botswana to Namibia, with the sole benefit of connecting the landlocked Botswana to Namibia’s port of Walvis Bay, thus unlocking the value of coal mining in Botswana and power generation in the region.
The railway line will mirror the existing Trans-Kalahari Highway or corridor, which links Botswana to Walvis Bay, and will stretch 1 900km from Walvis Bay through Windhoek, Gaborone in Botswana and Johannesburg to Pretoria in South Africa.
Aurecon, the Australian project consultant, has given the resultant capital expenditure costs at a total of USD14.2 billion ( P140 billion), comprising USD8.6 billion for electrified rail, and USD1.9 billion for above rail, and USD3.6 billion for the port.
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”