Indications are that coal may be the major product in the Botswana mining sector and production forecasts indicate a rise in the coming years, the UK-based Business Monitor International (BMI) has revealed.
In a report released this week, the firm states that while diamonds are the main source of revenue for Botswana’s mining sector with new potential projects from Gem Diamonds, Diamond Corp. and Debswana, the coal sector has a strong growth potential since Botswana has the largest coal reserves in Africa which is largely undeveloped.
“Output forecast is expected to increase at double-digit rates over BMI’s 2015 ÔÇô 2019 oultook period with companies, including Anglo America, Exxaro, African Energy and CIC Energy driving a fast growth from a low base,” states the report.
BMI Research’s forecast for the mining sector through to 2019 has indicated the Botswana will carry on attracting global investment, which will help the country’s mining sector despite a decline in real GDP from 4.4% in 2014 to 4.1%.
“For example there are current plans for a 300 MW coal-fired power plant with an estimate cost of US$750 million to be put in place. However a lack of diversity will leave the country’s mining sector weak in comparison with competitors,” states the report.
It is reported Botswana is increasing its efforts to expand its mining sector. The government is planning to develop production of non-core minerals, such as copper, gold and nickel. Yet BMI believe this diversification may prove difficult due to the weakness in global metal prices.
BMI expects Botswana’s mining industry to be supported by diamond production as well as strong growth in coal over the long term.
The report says Botswana’s mining sector will continue to attract global mining investment due to the country’s strong regulation and attractive business environment.
However, BMI reiterated that a lack of diversity remains the country’s weak spot, with Botswana vulnerable to growing competition from other diamond-producing countries in the region.
The report also says that latest developments ongoing electricity and water shortages will weigh on economic growth in 2015, pushing real GDP down to 4.1%, from 4.4% in 2014.
“It is also unlikely that the bumper upswing in diamond production witnessed in 2014 will be repeated as base effects wear off, impeding net exports. Despite this, we maintain a constructive outlook for Botswana’s mining sector over our forecast period to 2019,” says the report.
For instance, the report says, African Energy Resources is considering doubling its investment at the Sese power project. Current plans are for a 300 megawatt coal-fired plant.
“In total we forecast the country’s mining industry value will see average annual growth of 4.0% to 2019, reaching a value of USD3.7bn by 2 Slow economic recovery in the US and Europe, two of the main export markets for Botswana’s diamond production, has prevented more rapid growth in the country over the past few years. Therefore, the government is keen to reduce reliance on diamond revenue,” says the report.