Economists who were engaged by Botswana government to do a post diamond study have suggested a wide range of options that could make the rail and port infrastructure non viable citing low coal prices in the future as a fundamental factor for the project as the commercial viability of export coal looks headed for a big slope in the future.
Dr Rob Davies who recently spoke at a workshop organised by Botswana Institute for Development Policy Analysis (BIDPA) said that if coal exports are going to have a significant down fall in the future, owing to amongst others, pressure from international environmental activists to stop international financiers such as the World Bank, International Monetary Fund (IMF) and African Development Bank (AfDB) from funding of coal projects due to its hazardous carbon emissions, then the Trans Kalahari Rail Project faces risk of becoming white elephant.
The project will run from Mmamabula to Walvis Bay. “Timing is a critical issue and the capital intensive infrastructural project will be done at a time when the market can or will sustainably support it,” adding that the government needs to consider what lies ahead in the future for coal.
Another report titled, Minerals and Energy Exports and Revenue Projections which was authored by University of Botswana lecturers, Dr Khaulani Fichani and Peter Freeman, states that, “Regarding rail and port infrastructure, future coal export projects and some copper and silver projects in the Ghanzi copper belt would rely on this therefore we believe that government should be a joint venture partner in order to ensure that future projects benefit.” It further suggests that, “we however caution that due to the scale and possible risks involved, government should conduct a thorough due diligence ahead of any participation in such large infrastructure projects.”
The detailed academic report also mentions that electrification of the rail line would make positive economic sense as it provides additional benefits including opportunity to convert coal which is unsuitable for export purposes to power generation. “Regarding access to water and power, we believe that a mechanism should be put in place where by the utility companies provide the service to a mining project on a cost recovery basis,” it reads. “This would eliminate the need for mining companies to make upfront payments for power, which would improve the pace of project development as well as their project economics.”