Shumba Coal, the Botswana Stock Exchange (BSE) quoted exploration company, says the growth of the country’s coal industry has come with opportunities including mines and exploration, power stations, provision of services and equipment as well as power distribution infrastructure.
The company’s Managing Director, Mashale Phumaphi, said the main attractions in the coal industry is that Botswana is centrally located in a power hungry region adding that the SADC region has severe power shortages which are only going to get worse.
“At present there is the opportunity to invest in or purchase coal deposits at all time low level,” said Phumaphi, whose company recently bought prospecting licenses from Impact Minerals.
“The last three coal deposits sold were bought at a price lower than the expenditures that had been spent on that project by the previous owners,” he added.
Botswana has large easily mined coal resources and Phumaphi said that in order to produce cheap competitive electricity it is best for the power station to be close to the source.
“Transport costs can add significantly to costs. This will make it very competitive in relation to Eskom. The South African Power Pool exists and can enable the export of cheap Botswana power throughout SADC from its central location,” said Phumaphi.
On the domestic beneficiation of coal, he stated that by beneficiating they aim to maximise the local economic contribution of the coal sector to Botswana.
Phumaphi is of the view that Botswana has a favourable investment climate, the best in Africa, adding that the country has a stable and democratic political environment, rule of law, no exchange controls and a favourable regulatory environment for business.
He also noted that power stations are highly capital intensive with long pay back periods and that thus a stable predictable jurisdiction is key.
“Botswana has no foreign exchange controls and allows full repatriation of profits, investments and capital gains, free of withholding taxes. Again this will be attractive,” said Phumaphi.
Botswana has one of the most highly developed financial sectors in Africa, with a range of private and government backed financial institutions able to provide loans, overdraft facilities, and equity capital to both foreign and domestic investors.
“With the need to supply coal to regional and international customers, Botswana export infrastructure requires investment. By 2016 Eskom will need an additional 60Mtpa and India an additional 200Mtpa,” he revealed.
He observed that the South African economy is a clear example of how cheap power can stimulate industrial development. Phumaphi said cheap power will allow the regional metal beneficiation industry including Botswana, South Africa, Zambia and Zimbabwe to grow as the smelting and processing of mineral ores can be very power intensive.