Local broking firm Motswedi Securities has found that amid the prevailing BCL gloom, the mine’s smelter is an opportunity that can be actively pursued given its potential to become a “game changer”.
This is revealed in the firm’s third quarter economic bulletin.
Motswedi’s research mavens, Garry Guma and Moemedi Mosele believe that despite the losses that the mine has been raking in over the years the predicament can be overturned by first shutting down some of the shafts from which value cannot be derived and then turning the focus on undertaking the smelter project.
According to the analysis provided, “the BCL smelter is one of the projects we believe has the potential not only to contribute positively towards the profitability of BCL but also turn Botswana into a hub for the smelting and refining of copper/nickel in the region.
“With a capacity to treat up to 850 000mt of nickel/copper concentrates per annum, the smelter is large enough to absorb all the smelting requirements of all nickel/copper miners in the region as it is the only copper/nickel smelter in the region. This is because it will be uneconomical for other small mining companies in the region to build their own refineries given the large capital outlay that is required to build one. It is estimated that the current BCL smelter has a replacement value of between US$2 billion and US$3 billion,” they say in the bulletin.
The current uncertainty clouding the mine carries, as the bulletin highlights, lessons to learn with relation to the decision to place it under provisional liquidation. The action as indicated by Guma and Mosele demonstrates the urgency with which diversification in the country has to be done.
“…There has been some movements in this regard as shown by the growth of the non-mining sector over the years and the decline of the mining sector contribution to the economy from levels of around 31 percent of GDP in 2004 to levels of around 13 percent of GDP as at December 31, 2015,” the bulletin states.
The economy’s reliance on a single commodity speaks of its vulnerability and as such the bulletin advices that the speed with which this is done needs catapulting, particularly in view that the pace of diversification is moving at a snail’s pace.
The closure of BCL as has been widely reported and scrutinised begs the question: where to from here? A few possibilities, such as the operation of the smelter, have been discussed across a spectrum of perspectives, on the streets, in boardrooms, in households but the weight of the matter will come from the liquidator’s report.
The report will determine precisely the extent to which the economy will suffer. The bulletin says the liquidator report is likely to come up with two recommendations – complete shutdown of the mine (which is highly unlikely) or scaling down of the mine operations and closure of some of the shafts which are unprofitable. The second option is “highly likely, although we cannot rule out some job losses”, the bulletin says.
A second analysis of the economic aspects of the BCL liquidation is provided by Econsult, the country’s economic think tank on its third quarter economic review which says the “brief answer is, at a national, macroeconomic level ÔÇô significant, but not too serious, but at a regional level, in north-east Botswana ÔÇô a major, negative and potentially long-lasting impact”.
Econsult provides a broad impact across various actors of the economy, even extending it to the region. It highlights that the BCL’s workforce of over 5 000 is made up 1.5 percent of total formal sector employment and that its total monthly wage bill of P68.7 million is 3 percent of total wage income in Botswana.
The think tank highlights that the silver lining to the BCL debacle is that “government has finally made a choice about where it should devote its limited resources”. The analysis expounds that government cannot continue to throw money at problems and going forward spending decisions should reflect productive gains. It emphasises that for private sector development to take off in Selibe Phikwe, long overdue reforms to local and foreign investment have to be made.