Botswana desperate to move away from diamonds – minister
by Jerry Bungu
The Minister of Minerals, Energy and Water Resources, Ponatshego Kedikilwe, says Botswana is desperate to move away from dependence on mining, especially diamonds.
Speaking at the Botswana Resource Sector Conference this week, Minister Kedikilwe said Botswana is “heavily dependent on a single and finite commodity namely diamonds”.
“We do recognize that economic diversification is a long term process and in our case, the immediate concern is how to lessen the country’s heavy dependence on diamonds,” he said.
He said Botswana’s fiscal regime for non-diamond minerals is predictable, has allow rates for royalties and a competitive variable rate income tax formula.
“Mining accounted for about 41 percent of government revenue and 32.3 percent of GDP in 2011,” said Kedikilwe.
He added that, as a diamond dependent economy, he was concerned that when everyone was hopeful for a recovery in Botswana and the rest of the world, “we are yet again traversing through turbulent times and faced yet major challenges in the diamond market.”
Kedikilwe said the country was closely monitoring another threat of a double-deep recession fuelled inter alia the problems in the Euro zone.
“Economic diversification and sustainable growth cannot succeed unless an overall enabling framework has been put in place first. Priority areas for my ministry are Coal and Diamonds.” he said.
The minister said coal provides for an excellent diversification option as it has various utilisation options such as coal for export, electricity generation for domestic consumption and export, cement manufacturing and a wide range of petro-chemical products.
He added that the Botswana government has resolved to establish a Coal Development Unit (CDU) to facilitate development of the entire coal value chain from mining, coal washing, power generation, transportation, storage at ports to shipping.
“The mandate of the CDU is to facilitate monetization of Botswana coal by developing and implementing an accelerated coal monetization strategic plan, coordination of the optimization of the coal value chain, directing the planning of the coal and coal related rail development, undertake coal facilitatory projects and will be the contact point between government and the private sector,” he spelt out.
The amendment of the Income Tax Act has also seen Botswana’s corporate tax regime reduced from 25 percent to 22 percent.
The minister said it was through this attractiveness that the government aims to entice companies to search for non-diamond minerals with the hope that this would lead a broadening of mineral production base in Botswana.
Independent economist, Keith Jefferis also reiterated that there is a dominant role for government in the economy – largely financed by mineral revenues but there were threats of diminishing diamond reserves, unemployment, fiscal stress and the resultant slow-down in economic growth which calls for economic diversification.
“Diversification has been the focus of economic policy but progress has been slow,” said Jefferis.
Jefferis brings out the constraints that Botswana is a landlocked country, coupled with high cost of production and the dominance of the government in the economy which makes the private sector weaker.
“Despite decades of incentives and support, manufacturing for export has never taken off in Botswana because the country is landlocked and high transport costs being one of the major problems,” he said.
He added that being a small economy, growth has to be export-led, mineral services with base minerals being on the lead. He said coal requires a dedicated rail line and port. He suggested that solar power generation as another diversification path given the abundance of sunshine in Botswana.
Jefferis suggested potential for increased use of skills and technology such as the internet to move up the services value chain which brings land-locked location not such a disadvantage. He suggested that Base metals such copper, nickel, cobalt, lead, zinc and silver. He also noted coal and coal-bed methane, uranium, diamonds and meaningful minerals beneficiation.
He said coal can be processed to produce oil or a range of industrial chemicals. Sustained high oil prices should make such an operation viable.