Thursday, October 28, 2021

Paul Smith:  The invisible hand behind BCL closure

Sometime in 1995 cabinet asked the then minister of minerals to find the best way to close down the BCL Mine in Selibe Phikwe which owing to a commodity price crunch of the time was draining government coffers.

David Magang said “no” a  least three times, including in a Cabinet Memorandum in which he went at detail to point out that BCL was not an ordinary business whose performance evaluation could judged solely on profits.

BCL, Magang reasoned was a social investment carrying on its soldiers thousands of lives beyond those drawing an occasional cheque from the company.

A strong willed minister, Magang told his colleagues that BCL was the lifeline of an entire town, supporting not just direct employees and their families but businesses in Selibe Phikwe including those owned by government like Water Utilities Corporation and Botswana Power Corporation.

BCL closure would adversely affect communities in a number of villages and far-flung districts away from the copper-nickel tunnels.

And he was right.

After a series of shouting matches inside cabinet, Magang prevailed and the then President, Sir Ketumile Masire grudgingly agreed to pump in more money into BCL until commodity prices turned a corner.

It was a small victory for Magang inside cabinet, but a much bigger one for the economy and country.

Twenty six years later BCL was back again on the cabinet table to haunt Magang’s successor at the ministry of minerals.

The instruction from cabinet given Kitso Mokaila was to close down BCL. This was after BCL approached Government for a lifeboat of P1 billion only a few months after an exactly similar facility had been offered.

Like Magang decades before him, Mokaila fought spirited battles against his colleagues in cabinet trying to convince them to measure the importance of BCL to the country not based on profits the mine churned out.

Mokaila tried to adopt Magang’s copybook.

But for Mokaila the outcome was different. Cabinet would have none of it. Not only did he have few supporters in cabinet, those who opposed him in his quest to save BCL were vociferous.

“The phrase that was often used was ‘bottomless pit’ in reference to the mine,” one senior minister said.

Realising that Mokaila’s mind was made not to prevail over the liquidation of family silverware, President Ian Khama shunted him away under what analysts have since agreed has been a phoney cabinet reshuffle.

But why did Mokaila fail to save BCL?

Colleagues sympathetic to him say he never stood a chance owing to the involvement in the mix of one Paul Smith, the Chief Executive of Minerals Development Company Botswana.

MDCB was created a few years ago to act as a warehouse for all the interests that Botswana has in mining.

MDCB has no operations of its. But it is a company that through its Chief Executive Officer wields oversized influence inside government.

Yet for a man wielding so much power, enjoying so much access to cabinet, especially to President Ian Khama, little is known in Botswana about Paul Smith.

A search on his background reveals that he has previously worked as Chief Operations Officer at Wesizwe Platinum, an obscure platinum miner in South Africa.

He resigned in June 2015, officially to pursue personal interests.

It is not clear if he left voluntarily or was pushed.

He was earning close to 4 million Rands a year, which is way above his current salary at MDCB.

He had been with the company less than two years hence.

At least two ministers who have talked to Sunday Standard have said so far Mokaila has been Paul Smith’s biggest scalp since his arrival in Botswana.

“Paul Smith won the debate inside cabinet. He had it easy because he pitched an easy sell that Botswana does not have the kind of money needed to keep BCL on life support,” said a senior minister, who still believes closing the mine was a big mistake.

While Mokaila maintained throughout that the closure of BCL would with time spell an ignominious  death confirmation for Selibe Phikwe as a town, Paul Smith who enjoyed the ear of President Khama maintained that BCL was a dead business case.

For Paul Smith, the idea of closing down BCL was first blew out his lips at a London meeting in October with Norilsk executives from Russia who had sold their company stake to Botswana Government.

At that meeting Norilsk executives put on the table an offer to Botswana Government to make a 60% immediate down payment and the remaining 40% once the mine had started making profits.

The immediate response from his was essentially that BCL was dead.

“The Russians were dumbfounded,” said someone who is well conversant with the negotiations.

At around the same time Paul Smith’s attitude towards BCL executives with whom he was supposed to work to carve a solution drastically changed.

He would not even talk to Dan Mahupela, the then BCL Chief Executive.

Paul Smith might have won his fight to close down BCL, but for Botswana Government the whole victory might prove as hollow as it is expensive.

Government finds itself with lumbered with a social cost and economic cost of close to six thousand people that are out of work.

Even without production, Government has to finance the care and maintenance of the mine.

Close to five hundred employees remain just to do that at a monthly bill of over P3 million.

Thousands of diesel liters are needed to keep the smelter at holding temperature even when not in use.

Official figures indicate that 112 000 liters of diesel are needed every three days to achieve just that. All at Government cost.

When BCL closed down, government owned companies like WUC and BCL lost a significant amount of monthly revenue needed for their keep.

WUC lost P14 million in monthly income. BPC lost 25 million. The upshot of it has been an announcement by both parastatals that they will be retrenching.

And that is not all. BCL wage bill was P55 million. Over and above the 6000 direct employees, the company employed an extra 3000 contractors.

As Magang once said over twenty five years ago, BCL was much more than just a mine.

To President Khama, Paul Smith might be an oracle of mining, but so far evidence on the ground points to an altogether different direction.

RELATED STORIES

Read this week's paper