Over-reliance on minerals hurts Bots
Gaborone – Botswana President Ian Khama says the decline in the mining sector has seriously dented economic growth that the country needs to focus on creating employment and wealth through small, medium and micro-enterprises.
In his state of the nation address last Monday, President Khama said the economy has done badly, which he blamed on the decline in the mining sector during the first half of the year.
He said economic growth was expected to slow to 3.5 percent from 8 percent last year due to lower than expected mining output.
The February national budget had projected 4.4 percent. Growth should reach 5 percent next year.
“The diamond market has been significantly affected. We expect this to adversely affect our economy, as diamonds are still a significant contributor to our gross domestic product,” said the President.
President Khama blamed the situation on the constrained markets in the eurozone, China, India, and the US.
He said the International Monetary Fund’s World Economic Outlook warns of continued weakness in advanced and key emerging market economies.
“The global economic slowdown is having a continued negative impact on minerals, which otherwise remain both a principal source of revenue and a primary sector for growth and diversification,” he said.
Diamond sales forecast for end of the year is expected to reduce significantly. Carat sales and revenue are forecast to drop by 13 percent and 19 percent, respectively, mainly due to sluggish diamond markets.
As a result, President Khama said new diamond projects such as the Lerala mine, which had restarted production in February 2012, and the Monak Venture’s BK 11 Mine have been placed under maintenance. The President added that nickel and copper prices also declined considerably during 2012 when compared to 2011. As at end of September 2012, the average price for nickel was 22 percent lower than the average price for the whole of 2011, while the average copper price was 9 percent lower than the average price for the whole of 2011.
But President Khama said the government’s mineral investment promotion initiatives are yielding results as evidenced by the recent commencement of production by two new mines – Karowe diamond mine and Boseto copper and silver mine.
Another mine, Ghaghoo diamond mine, is under development, and is expected to start production in 2013.
Given the number of prospecting projects that are at an advanced stage, the outlook for further mine development is encouraging. In February 2012, Government established the Okavango Diamond Company to buy and sell up to 15 percent of Debswana’s production, in accordance with the New Sales Agreement. The company has recently appointed a Chief Executive Officer, who, together with the board, is preparing for the company to commence its buying and selling operations during the second quarter of 2013.
With respect to other minerals, government approved the amendment of the Mines and Minerals Act to improve the country’s mineral legislation competitiveness.
The amendment ensures that mineral rights are granted through competitive process in an effort to reduce speculation and facilitate early access of prospecting areas by genuine investors, he said.
“In January 2012, government approved the establishment of a Coal Development Unit to co-ordinate the monetisation of Botswana’s coal resources.
“While in March 2012 government further approved the establishment of a mineral investment company, wholly owned by government, to manage government investments in the minerals sector. The establishment of the two entities is currently ongoing,” said President Khama.