Having ranked consistently as one of the top mining jurisdictions in Africa, Botswana remains a popular mining destination for investment – despite current infrastructure challenges and the global economic downturn, mining consultancy Core Consultants MD Lara Smith tells Mining Weekly.
She points out that the Fraser Institute Mining Policy Perception Index 2014 ranked the Southern African country first in Africa and twenty-fifth in the world.
“Botswana is regarded as the ‘Switzerland of Africa’ – a jurisdiction where there is ease of conducting business and little or no corruption. Therefore, the country ranks high on the ratings scale and has enjoyed foreign direct investment against all odds,” Smith says.
This is supported by the expectations of Botswana Finance and Development Planning Minister Kenneth Matambo, who said that Botswana’s mineral revenue could increase by 30.4%, or P15.24-billion, in the 2014/15 fiscal year, Mining Weekly reported in February 2014.
Mining Weekly also reported that figures from Statistics Botswana showed that diamonds, copper and nickel were the largest export commodities in Botswana, with revenue from the sale of copper and nickel having increased from P197.4-million in October 2012 to P332.2-million in October 2013.
Investment was also buoyed by diamond miner Gem Diamonds, which noted that Botswana’s policy reliability and investment certainty made it possible for the company to commit P1-billion to the initial phase of the country’s first underground diamond mine, Mining Weekly reported in September 2014. The mine is expected to produce at a rate of 250 000 ct/y to 300 000 ct/y from 2015.
Strategy and communications consultancy Africa practice associate consultant Sinethemba Zonke agrees, noting that this perception of certainty remains as the country maintains its conservative economic policies that are clear and stable. Smith further highlights the ample opportunities for additional coal and copper concessions, as well as a willingness from the Botswana government to encourage the development and expansion of these sectors.
“However, opportunity hits a brick wall in terms of power availability and distribution, as Botswana is a landlocked country with a vast landmass on which to negotiate logistics and that has to be covered to reach a port, either through Zambia to Dar Es Salaam, in Tanzania, or through South Africa to Richards Bay,” she says, warning that this adds to business costs.
Further, Botswana is an expensive country in which to develop mining projects, based on current infrastructure challenges and a lack of a significant power generation industry, which is still not developing quickly enough, Smith notes.
She adds that any company considering the establishment of a mine in Botswana has to factor in the significant outlay for infrastructure and therefore the grades and resource size needs to be higher to justify the investment case. Smith further says that, for a country to remain an attractive mining jurisdiction, significant investment is required for the economy, which she believes Botswana has “left late” in developing. Adequate partnering for infrastructure development has also not yet been negotiated. “Botswana would have enjoyed more investment, even during the current downturn, if the required infrastructure was available and functioning,” she points out. Zonke adds that infrastructure is of critical importance for Botswana to maximise the value of its mineral resources, particularly coal.
“The present inadequacies have meant that Botswana has not been able unlock the full potential of its coal reserves, while only meeting limited demand from the single domestic power plant,” he points out. However, investments in rail infrastructure that will connect the landlocked nation to ports on the south-east coast of the continent, in Mozambique, or in the south-west of the continent, in Namibia, will give impetus to coal production to meet the demand of international markets, he believes