The Mineral Race: Botswana’s Aspirations to Become a Mining Hub

Despite infrastructure challenges, Botswana eager to diversify mining industry.

Elisa l. Iannacone

Botswana-BLOGOnce known as the British protectorate of Bechuanaland, Botswana has been independent since 1966. For decades it housed anti-apartheid activists and refugees fleeing its southern neighbor, South Africa. Now a peaceful democracy, it has become one of the fastest growing economies in the world with a GDP per capita rate of $7,317, according to the Ibrahim Index of African Governance (IIAG). Though nearly a quarter of Botswana’s population is battling HIV, strong government programs have been set in place to address this issue. Botswana consistently ranks among the countries with the highest transparency and best governance on the continent. Though the economy is growing, it needs to be diversified and is hobbled by poor infrastructure and a lack of skilled labor. It is the government’s new goal to make Botswana a hub for the Southern Africa region by diversifying the industry and investing in infrastructure.

Botswana is working hard to diversify its mining industry, but up until this point, “diamond production will continue to be a significant GDP contributor as there is still diamond exploration taking place and the resource is vast,” said Charles Siwawa, CEO of the Botswana Chamber of Mines. The country’s mines are pushing hard to extend the resource until 2050.

The Botswana Investment and Trade Center (BITC) has focused on attracting major players to the country. Until last year, DeBeers had conducted all global sales from London but it has now migrated operations to Botswana and works with 80 clients worldwide. Though most buyers currently fly into the country to make a purchase and leave, the medium-term goal is to have clients operate within the country after purchase.

The next mining wave in Botswana is certain to create a large number of coal producers. “Botswana has the second largest coal deposit in Africa, standing at over 200 billion metric tons (mt),” said Mr. Siwawa. Jindal Africa has secured a mining license to begin coal extraction in early 2016. African Energy Resources is now working with First Quantum Minerals (FQM) to develop a coal mine that will eventually produce enough power for FQM’s operations in Zambia. Local players are working hard to take coal projects into production. “Our goal of becoming the country’s premier coal exploration, development, and production company is well on its way with our most advanced project, the Sechaba Thermal Coal Project which, has approximately 1 billion mt of coal,” said Thapelo Mokhathi, Director of Shumba Coal.

With over 12 coal and coal-bed methane projects in exploration and pre-feasibility stages, Botswana is hoping to become a leader in power production. According to Mr. Mokhathi, “Botswana has a major opportunity, which we are now starting to see companies exploit, to become an energy hub for the region. Neighboring South Africa consumes vast quantities of coal and the region is in high demand for power.” Though the country is still importing power from South Africa, the government is working hard to change this. “The government is developing the infrastructure to store six to nine months worth of fuel in Botswana. Whenever there are production strikes in neighboring countries, Botswana will be prepared. By 2020 I am confident that Botswana will not buy power from anywhere else and that we will produce enough to support our mining industry as well as other industries,” said Nicholas Zachem, Director of Zac Construction.

The main obstacle to mining coal and coal-bed methane in Botswana is the lack of infrastructure in the country. “The only thing that is currently holding back production is our lack of a railway line. Botswana is land locked and thus a railway line is needed to move the coal from Botswana to the coast,” said Mr. Siwawa.

Earlier this year an agreement was signed with Namibia to develop the trans-Kalahari railway, which will allow resources to reach Walvis Bay. “The trans-Kalahari railway running into Walvis Bay is under construction now. We will also connect to Mozambique in order to export coal to India and China,” Mr. Zachem explained. High demand for coal from China and India is present across the region, including South Africa.

Though Botswana has vast potential for coal, it is also encountering strong competition from neighboring Mozambique, which houses the world’s fourth largest untapped coal reserves. Companies such as Jindal Africa have been quick to enter the race for coal in Mozambique, and, at the same time, to Botswana, “transportation and logistics costs make it difficult for Jindal Africa to compete in the global market. The Chirodzi mine is around 120 km from the nearest railway station and we are sending our product via trucks,” said Parshant Kumar Goyal, Project Manager, Jindal Africa. In spite of the challenges, Jindal Africa has plans to triple production and build coal-fired power plants in Mozambique.

There may be a strengthened focus on coal in Botswana, but expectations are extremely high for the Kalahari Copperbelt, where the potential has optimistically been compared to Zambia and the DRC. “Botswana’s potential for copper is massive. We have been the pioneers on the field, constantly learning, but other companies can take our experience and apply it to their own projects,” said Mokwena Morulane, Country Manager for Discovery Metals. With stabilized production at the Boseto project sitting at 24,000 mt of copper per annum, Discovery Metals has the target to scale this figure up to 36,000 mt of contained copper per annum. The company has a large tenement area that encompasses over 10,000 square kilometers within the Kalahari Copperbelt. “Out of this, we have only explored around 30%. The Boseto project itself is only a fraction of the explored ground so there is significant potential for growth and further development,” Mr. Morulane stated.

Though a diversified landscape in metals such as gold, iron ore and even silver is slowly starting to emerge in Botswana, there are still several challenges to overcome. As a country covered by the Kalahari Desert, Botswana’s mining projects have often been faced with a severe lack of water, power, and road connectivity. “There are challenges like power lines that run too low and roads that are not wide enough to carry the loads of the equipment being transported. The government is working hard to improve this,” said Sean Bester, General Manager for Giant Transport. The development of infrastructure will be key to attract foreign direct investment. “If a country has no roads, telecommunication, water, or power, investors will go elsewhere. Proper road networks have to be set in place,” said Mr. Zachem.

The difficulty of finding skilled labor in Botswana has also deterred investors from entering the country and posed challenges for companies already operating there. However, newly re-elected President Ian Khama has stated that two of his strongest goals during the new term will be to improve education and develop skilled labor in the country. The Chamber of Mines of Botswana has secured an agreement with the government and GIZ to start training the mining technicians of the future. Mr. Siwawa says they have “started the program with 100 students and in about four years we will have highly qualified artisans, competitive with international standards, who will be incorporated into our mining houses […] it is our target to have 1,000 students in training over the next few years.”

Botswana has only tapped the surface of its mineral potential. Like Namibia, Botswana has a long history of diamond mining as its strongest resource. However, like its neighbor to the west, the country is working hard to diversify and strengthen the mining industry, which is still mostly reliant on diamonds. “We would like to welcome and encourage investors to look at base metals and other minerals outside of diamonds. It is not just a diamond destination,” Mr. Morulane said.

Botswana is a stable country with a history of transparency and a government that supports the mining industry. According to Mr. Siwawa, the country has a renewed focus “on aggregating the mining industry’s purchasing power and encouraging procuring goods and services from within Botswana. By purchasing locally, one can help in the development of the county as this will boost the industry and create employment.” The government has plans set in place to draw water from the Zambezi River and to position itself as a self-sustaining power producer. Though the wheels have been set in motion for the country to become a hub in the region, there is still a long road ahead.

This article was written as part of the research being conducted by GBR for its upcoming Mining in Africa Country Investment Guide (MACIG) 2015. To participate in this report, please contact Sharon Saylor at ssaylor@gbreports.com.


IAMGE: wikimedia commons

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