The subdued global mining industry, owing to depressed commodity prices, has prompted Botswana to find alternative economic growth areas in other sectors of the country’s economy, simultaneously providing a prime investment opportunity, says Botswana Chamber of Mines (CoM) CEO Charles Siwawa.
Highlighting the country’s value to investors, the Electra Mining Botswana conference and exhibition is organised by South African events management company Specialised Exhibitions Montgomery and Botswana-based communications company Soapbox Communications. It will take place from September 12 to 14 at the Gaborone fairgrounds.
The event enables Botswana to showcase its continued efforts to grow its economy through diversification before the revenue generated from diamond mining runs out, owing to the eventual depletion of resources. Siwawa explains that, forecasting the future at current production rates, it is estimated that the start of the decline in diamond production is some three decades away. However, he adds that this date may be pushed beyond this forecast should there be more diamond discoveries of significant quantities.
Siwawa says it is encouraging that, since Electra Mining Botswana’s inception in 2013, it has increased in terms of exhibitors and attendees, with the Botswana CoM playing a facilitative and collaborative role.
“We want to emphasise that this is the right time to invest in mining in Botswana – when commodity prices are low. Once prices start increasing, certain investors will find it difficult to afford stakes in those projects they find attractive,” he notes.
African investment management, private equity and research company Quantum Global concurs, explaining that investors will do well to invest in the African mining industry while commodity prices are depressed, as it presents an opportunity to take advantage of lower costs, especially among producers.
However, the lower commodity prices have impacted on most African economies with commodity-centric export economic models, with the continent’s early-stage mining projects facing possible delays because of current commodity prices.
“This is a good time to invest in Africa, as there are countries that are experiencing sustainable growth outside major commodities. The long-term trend for many countries has not changed. . . In the short term, we see investment opportunities. In the medium to long term, investment decisions should provide healthy returns,” affirms Siwawa.
This optimal investment opportunity is positive news for Botswana, which has scored well, compared with 54 other African countries in terms of its credit rating, current account ratio, import cover and ease of doing business, according to Quantum Global’s ‘Africa Investment Index’ report, published in April.
Siwawa says being ranked first in the index comes with the responsibility of maintaining the position. “At worst, Botswana should maintain its current reputation. At best, the country should look at the attributes that make it a good investment destination and improve on them, while simultaneously driving the negatives out of the picture.”
Botswana’s current investor-friendliness can be improved through diversifying its economy, Siwawa states.
It is rich in diamonds, but these gems are a finite resource – once diamond mines reach a certain depth, their economic viability begins to wane, Siwawa emphasises. This is owing to mining costs escalating while the revenue generated by the operations remains relatively the same, resulting in a lower profit margin. Siwawa adds that revenue from diamonds is driven as a complex function of two factors – the quantities of diamonds extracted and price. “Sometimes these two work in sync, and at times against each other. If in sync, the prices will go up when quantities are low, owing to market demand,” he explains.
Therefore, Botswana has been researching alternative revenue streams to continue growing its economy. The country’s future economic growth can be facilitated by the country’s coal resources, comprising more than 200-billion tons, the development of the increasing number of base metals discoveries and their local beneficiation.
Siwawa says this will allow for increased investor confidence during times of low commodity prices. He explains that there are plans in place to establish coal export routes from within Botswana, motivating other players within the coal sector to establish mining operations. Revenue from these growth areas will be used to replenish government coffers, which will be used to fund other sectors of the economy, such as infrastructure and agriculture.
Coal will be exported and used for power generation.
Botswana is, however, aware of the detrimental effects of coal mining on the environment, which is why it has committed to using clean coal technology in power generation. “We cannot burn the coal simply because we have it. It must be done responsibly to reduce the impact on the environment,” Siwawa declares.
He explains that clean coal technology is not yet being developed in Botswana, owing to a lack of research capacity, but research is being conducted elsewhere in countries such as America, Europe and Asia.
The Morupule mine, in Palapye, is the only active coal mine in Botswana and produces an average of 2.8-million tons a year.
Meanwhile, taking advantage of the increasing number of base metals discoveries in the western part of Botswana will be sufficient to boost the economy, Siwawa assures. Recent discoveries, although not as substantial as those in, for example, Zambia’s copperbelt, include copper, lead and zinc.
A study conducted on the development of the local beneficiation of such metals points to the industry being a significant factor of economic growth, he says. All Botswana’s minerals and metals are currently mined and sold for beneficiation by other countries.
However, Botswana does benefit from a small part of diamond beneficiation through the relocation of the Diamond Trading Company (DTC) from London to Botswana in 2006. DTC, a 50/50 joint venture between diamond company De Beers and the Botswana government, is the world’s largest and most sophisticated rough-diamond sorting and valuing operation, with the capacity to sort 45-million carats a year.
DTC has added significant value to Botswana’s diamond industry and has assisted in the country realising the benefits of beneficiation within a mineral’s country of origin.