Latest events at BCL are bound to provoke mixed feelings of anger and anxiety. This is because at stake is not just the welfare of a township, but the lives of thousands of human being ÔÇô those employed directly by BCL, but also those whose lives are indirectly linked to the mining house. Whatever happens in the end, there is no running away from the basic fact that a lot of factors and events, many of them outside human imagination have badly conspired against BCL.
At the top of these factors has been the slowing down of the Chinese economy. That slowing down started a litany of events including suppressed demand and ultimately a collapse in prices. The case of BCL is by no means an isolated case. Yet listening to Government ministers and members of the public one is left with an impression in their mind that somehow only BCL is in the current mess. Bigger and more profitable companies like Glencore are going through exactly the same troubles that BCL is grappling with. At the bottom of all the meltdown is the collapse in commodity prices that has seen demand of commodities like copper, nickel and others also plummet to the lowest levels in many years. Economic events in China are the beginning and end of it all. The slowing Chinese economy has wreaked havoc. Just as China took with it companies like BCL high up, so it did take them with it down when its economy slowed down. The situation is by no means peculiar to BCL.
Across the world resource companies are going through a hard time. Those still holding out are those that have been better prepared by way of creating buffers for themselves, especially through stockpiling substantial cash reserves. In a bizarre way, in Botswana we are better off. While here we are talking about BCL, in some parts of the world it is the future existential wellbeing of entire countries and entire economies that is at stake. Take Zambia for example, and you have a clear picture of how difficult it must be for other countries. Zambia survives disproportionately on copper. This meltdown also extends to oil. And countries like Nigeria and Angola that rely heavily on oil are at the moment going through similar mindboggling headwinds. Until commodity prices recover, there is no end in sight. BCL as is the case with its peers around the world will continue bleeding. The biggest mistake forced on BCL management two years ago was to take away all the company’s cash stockpiles in taxes ÔÇô over a billion Pula in total – just as the world commodity prices were beginning the cycle of its nosedive. This left the company vulnerable and exposed.
Things were made worse by the fact that long overdue maintenance work for the plant could not be postponed any further. And in came bills for which the company was not able to meet its obligations. It is foolhardy to blame BCL management or indeed the Board for the enormous troubles besieging the company. While these two entities might indeed have committed some administrative mistakes, as the delays in raising capital from the markets, the fact of the matter is that with commodity prices at their current low levels, it was only a matter of time before reality knocked at the door. No soul, however brilliant can save a company that has such huge operations costs when prices of their products are so low. What is important is for Government as the shareholder to bid their time, bite the bullet and wait the cycle out. This is a process against Botswana Government is totally helpless. Having said that we want to point out that a decision by Botswana Government to buy the entire stock of BCL was a correct and prudent one. The only sad thing about it is that it came at the tail end of a long drawn out era of commodity boom. As a result Botswana Government has not been able to enjoy the benefits of its investment. But such is the nature of resource businesses.
They are inherently cyclical. And it is only a matter of time before Botswana Government will be reaping rewards. This has nothing to do with copper or indeed nickel ore grade. As long as there is demand. And prices are good money will come in. And to put the cherry ion top, BCL has a massive investment in its smelter, which still is underutilised. This means that there is room for growth and expansion, way beyond the wild dreams that the outgoing management ever had. It would be a gross mistake were Government to sell off its holding in BCL under the current circumstances.
