The European Union which was instrumental in setting up the Selebi Phikwe Economic Diversification Unit (SPEDU) may withhold funding for proposals to save Phikwe from turning into a ghost town.
Breaking the silence on the closure of the BCL Mine, the EU office in Gaborone revealed this week that it would hold the Botswana government against their Memorandum of Understanding (MoU) before deciding of funding the proposals.
While the EU said it did not have an official position on the closure of BCL, its Gaborone office spokesperson, Bester Gabotlale, revealed that “pending the review of the MoU, the EU has not taken a stand on the concrete proposals for funding”.
Although Gabotlale stated that, “SPEDU has been implementing activities based on the original Memorandum of Understanding which was agreed with the EU delegation and Botswana Government at the time”, his reference to projects proposed under the MoU suggests that Botswana’s commitment to the proposals was half hearted.
Responding to a Sunday Standard questionnaire, Gabotlale revealed that the original MoU signed between the EU and the Government of Botswana enumerated funding proposals “listed as priority projects, however, many of these have been overtaken by events.”
He said there was a pre-feasibility study for the Acid Capture Plant in 2011, funded by European Union Investment Bank (EIB), but that concluded that there are not really any possibilities to go further with that project without a significant infrastructure investment from the government.
Another project listed as priority was the expansion of the Selebi Phikwe College. The project never made it out of the drawing room. Gabotlale told Sunday Standard that “while the TVET colleges elsewhere in the country are utilised only to 40 percent it does not make sense to refurbish and expand a college in Selebi-Phikwe further.”
“The other projects, such as the tourism infrastructure, were also listed as a priority projects. However, pending the review of the MoU, the EU has not taken a stand on the concrete proposals for funding,” Gabotlale said.
He explained that the EU provided soft loans to BCL from Sysmin resources of the Lom├® IV Convention (until 2000 when Lome was replaced by the Cotonou Agreement) as well as from the European Investment Bank.
“Sysmin resources were paid back into the Re-Employment Account and as part of debt forgiveness, this money was turned into grants to be used for the diversification of the economy around Selebi-Phikwe knowing that the mine alone will not sustain the economy there forever.”
He said the loans provided at the time were following normal due process, including the economic feasibility.
“The government’s decision to close the mine was based, as we understand, on the very high subsidies that had to be paid from the national budget to sustain the mine as well as the lack of prospect to make the mine profitable in view of sustained low world market prices for copper and nickel,” said Gabotlale.
He added that: “The profitability of the mine (or at least its chances of cost recovery) is to a large extent dependent on the world market prices, which are exogenous factors. The EU has therefore no position on the discontinuation of the mine.”
Gabotlale noted that: “The approach of the EU to turn the BCL loans into grants for the benefit of the diversification of the economy of the region has turned out to be the right one.”
Asked to comment on reports that that the Botswana government at some point had some differences on the use of over P640 million from the Sysmin Re-Employment Account (REA) to foster economic diversification in the region of Selebi Phikwe, Gabotlale said: “The use of the REA amount, which is owned by the Government of Botswana, is subject to a Memorandum of Understanding with the EU.”
“The existing Memorandum was to be reviewed by the end of 2014; this review is still pending and discussions between the Government of Botswana and the EU are ongoing,” he said.