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Compromising Botswana as a preferred mining destination

Recent government decisions could compromise Botswana as a preferred mining destination

The recent decision by the Botswana government to directly award the tender to Botswan Coal and Energyconstruct units 7 and 8 at Morupule B to a South Korea-based firm came as a blow to Botswana’s own local companies. 

The appointed company has no operations in Botswana and has not previously invested anything in the country, while Botswana-based coal and energy companies have made considerable progress towards exploration and development of mines and power stations. African Energy, Jindal Botswana and Shumba Energy have invested an estimated P3 billion in the past 10 years and created employment for over 300 Batswana.

Botswana is gifted with 66% of Africa’s coal resources, with plans to develop them for both domestic and export use. The government’s decision could have a negative impact on the participation of private-sector coal companies in assisting with diversifing the economy. Companies in the country have had their sights on the government’s 300MW greenfield power plant tender, which is now at risk of being handed over to an international consortium. Due consideration in the tender process should be given to companies operating and with interests in Botswana as a country.

The country remains a popular destination for mining investment and is consistently ranked among the top mining jurisdictions in Africa. But this status could be compromised if the competition is being eliminated from the industry.

Furthermore, serious concerns surround the impact of the recent establishment of the state-owned Minerals Development Company Botswana (MDCB), which controls state owned Morupule Colliery, on the potential for the private sector to develop, given that government power stations are the largest local market for coal. Paul Smith, CEO of MDCB, recently stated that they would expand Morupule Colliery to compete with the private sector both domestically and in coal exports.

These decisions may also affect South Africa, since the Department of Energy (DoE) and National Energy Regulator of South Africa (NERSA) recently passed a verdict to formally determine the terms for cross-border electricity procurement. The determination states that electricity must be purchased from independent power producers (IPPs). Botswana coal is abundant, offering low-cost power and energy security, and the country has potential to shift from a power importer to an exporter to neighbouring countries.

Power blackouts have become commonplace, especially in South Africa. The World Bank estimates that 68% of inhabitants of sub-Saharan Africa reside in rural areas, making provision of modern energy services to this large segment of Africa’s population of vital importance.

 

 

 

 

 

 

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