Operated in a 50-50 joint venture between the government of Botswana and the diamond giant De Beers in a company called Debswana, production from these mines make the country one of the world’s diamond leaders in terms of value.
But as the operations mature, there are fears that the revenue streams from diamonds will diminish substantially. However, the Botswana government has not sat on its hands, realising that dependence on the precious stones will not last forever. The government has aggressively called for foreign direct investment to develop the rich coal fields which lie in the country’s south, near the capital city of Gaborone.
The Botswana coalfields are an extension of neighbouring South Africa’s Limpopo-North West Province coal belt – and the only thing holding back Botswana right now is adequate rail and power infrastructure required to support the development of bulk commodities.
Botswana continues to receive praise for its pro-Western, business-friendly approach to the way it manages its economy, and is widely seen as a beacon of political stability on a continent where reports of bribery and corruption frequently make the headlines.
Its standing at ninth position out of more than 70 countries in this year’s RESOURCESTOCKS World Risk Survey supports this contention.
What Botswana lacks is an adequate railway system, desperately needed if it is to diversify away from maturing diamond mining operations and develop its fledgling coal industry.
An International Monetary Fund paper warned: “Botswana could experience a period of low growth between 2018 and 2024, including a steep recession in 2022 as diamond production declines sharply. [This would eventually be mitigated] by diversification, particularly in diamond processing. But the country’s non-diamond sector is not as strong as it should be.”
Standard Bank was also worried, saying despite its reliance on mining, Botswana was facing a challenge in adequate transport for its exports. “Plans are being considered for railway infrastructure which would expand its export potential but will take years to materialise.”
For many years, the government of Botswana has noted this need for diversification. It recently announced that it would sign a deal with Namibia at the end of this month to develop a 1500km railway for transporting coal exports to the port of Walvis Bay.
Technical glitches that delayed the Trans-Kalahari [rail] project had been resolved, Charles Siwawa, chief executive of the Botswana chamber of mines, told Bloomberg.
“Chinese and Indian demand for the more than 200 billion metric tons of coal in Botswana’s central Karoo basin” could boost economic growth in the landlocked southern African nation, Siwawa said. (Some 77% of this coal remains in the ‘hypothetical’ and ‘speculative’ categories, according to a 2012 paper from the Botswana Institute for Development Policy Analysis.)
The Trans-Kalahari line requires an investment of about US$15 billion, but it wasn’t yet clear where the financing would come from, according to media reports.
Jeremy Read, chairman of Botswana-focused copper producer Discovery Metals Ltd complimented the country for having “a First World sovereign risk rating and a stable and efficient bureaucracy”. That said, Botswana was too often viewed exclusively as a diamonds story, disguising opportunities elsewhere.
In an interview with International Coal News’ sister publication Mining Journal about the country’s prospects and limitations, Read said: “When people think of Botswana, they tend to think only about diamonds, which is hardly surprising as the country’s diamond resources account for nearly half of government revenue and 70% to 80% of the country’s export earnings.”
Gem Diamonds’ recently opened Ghaghoo diamond mine in the Central Kalahari Game Reserve where the kimberlite was discovered under 80m of sand. The mine was originally conceived as an open pit project costing US$500 million – but this plan was scuppered in favour of a smaller, underground mine costing a fraction of the price using innovative techniques. The company believes this could be a template for other underground mining projects.
South Africa-based Peter von Klemperer, executive for mining and metals at Standard Bank, said Gem had “pulled a rabbit out of the hat” and shown the way to others who were perhaps sceptical about investing in Botswana.
He said: “Gem has built a decline 80m into the ground … obviously they have had a lot of issues to deal with ... such as the soft Kalahari sand. From a mine that was going to be designed as an open pit operation which would have meant moving vast amounts of sand … in an environmentally sensitive area … they have done something different. Technology will make projects that weren’t possible 10 years ago a little bit more possible.”
Read was in no doubt Botswana was an investor-friendly destination, making it a plum target for foreign direct investment. Referring to a report by the Fraser Institute, he said Botswana sat below Queensland in terms of sovereign risk, adding to its attractiveness.
“One of the reasons it hasn’t had the exploration that Australia has experienced is that it gets lumped in with all the other difficult countries within Africa … such as the DRC [Democratic Republic of Congo],” Read said.
“There’s a lack of corruption in Botswana. You are not asked for bribes,” he said.
Not that Botswana comes without obstacles. Read said the biggest problem was energy, or the lack of it. How did Discovery deal with that?
“We built a 20 megawatt power station that runs our mine because there is no connection to the grid.” But that was expensive: 33% of Discovery’s total operating costs were accounted for by diesel fuel. “If we were drawing power out of the grid it would probably be more like 10% to 15%.”
