Bots mining industry in crisis
Gaborone- A considerable number of companies in the mining industry in Botswana have closed shop or retrenched staff since the end of last year and the beginning of 2015.
However this state of affairs in the mining sector has not gone unnoticed by the country’s leadership.
When briefing parliament about the matter recently, the Minister of Minerals, Energy and Water Resources Kitso Mokaila said his ministry was monitoring the situation with keen interest.
While he did not admit that the mining sector is in a crisis, Mokaila acknowledged that several companies in the copper and diamond sectors have closed shop due to high operation costs and high prices of rough diamonds.
It was also reported that some companies are having a tough time after banks in Botswana that used to loan diamond companies up to 100 percent of their required capital for operations reduced the loans to 75 percent.
The reason given was that the companies did not use the money for the purpose it was borrowed for.
Mokaila said high operation costs were quoted as the main problem besetting the industry.
For example unavailability of power at some mines has forced companies such as Discovery Metals to generate their own power, pushing up production costs.
Discovery Metals owns Boseto Copper Project in North West Botswana.
Minister Mokaila also pointed to the mining model preferred by Discovery Metals as another factor that contributed to its collapse.
He emphasised that: “Discovery Metals chose an open pit model at the time when copper prices were justifiable enough to allow them to choose that model but when the copper prices went down it became not viable for them to go that route. They realised that it could have been more viable if they have gone for the underground type of model.
“Discovery Metals had a debt of around US$110 million and to now change from the open cast to underground mining it required US$40 million. It was difficult for the company to take option B because it was already financially constrained.”
Several companies have shown interest and negotiated with the Discovery Metals with an option to buy the mine and unfortunately the negotiations have not yielded any results.
One of the potential buyers terminated the negotiations in January this year.
On February 7, another company signed a deal with Discovery Metals but there is no movement on the deal.
Another mining firm Diesel Power Botswana is also finding the going tough.
Recently 150 workers lost their jobs after the company closed its operation in Thakadu.
According to Mining News online, Buildmax, a subsidiary of Diesel Power Mining, was awarded a new long-term contract to provide hard-rock opencast mining services at African Copper’s Thakadu and Mowana open pit copper mines in Botswana.
Serowe Teemane Manufacturing Co also folded after failing to realise any profit.
Minister Mokaila said through discussions with the firm it emerged that the biggest challenge was the cost of doing business outside Serowe.
“They raised few reasons as to why they had to close. First the high prices of rough diamonds affected them, flexibility to export was another issue. Out of 80 percent they got they only exported 20 in which they preferred to do all the exportation to better their profits.
“They also experienced high production costs while at the same time productivity is very low in Botswana.
With the prices of rough diamonds going up and if one could have reduced it could have affected those who already were carrying stock at a particular price,” said the minister.
Mokaila said a number of diamond companies are stressed because of the high rough diamond prices and the kind of model they chose for their operations.
“We are working on how the high rough diamond prices can be dealt with to ensure that business in Botswana is more sustainable,” said the Minister.
“We are engaged with the industry to find ways of making the industry in Botswana a little more favourable. Most companies struggled from the beginning, some are doing well some are not doing well.
We are hopeful that somebody will buy companies like Discovery Metals. I am confident there will be a buyer.”
The diamond industry has suffered job losses from the beginning of this year.
The Botswana Diamond Workers Union (BDWU) said 490 of its members lost jobs at Serowe in central Botswana, Teemane Manufacturing Company and at the Gaborone based Diamond Manufacturing Botswana (DMB).
At Molepolole village in the southern part of the country, a diamond polishing company, Leo Schechter retrenched 28 workers last year and a further 42 in March this year.
About 105 workers were laid off at Eurostar Botswana.
The union said the job losses were a clear indication of the rough patch the diamond cutting and polishing industry is currently going through.
BDWU said it was surprising that the government has chosen to remain mum about the issue.
The Executive Secretary of BDWU, Mhuri Bontshetse said in a statement that the union has long demonstrated its willingness to work with both employers and government over issues that affect the diamond industry.
Bontshetse said they have been battling retrenchments and dismissals in the industry over the years and were dealing with difficult employers who have little regard for workers’ rights and interests.
“They (employers) accuse the union of wanting to usurp the powers bestowed on management or that we want to control their companies,” Bontshetse said.
The union is now seeking government’s facilitation to establish a national social dialogue forum for the diamond industry which is provided for by International Labour Organisation (ILO) Convention No. 144.
BDWU also wants the government to register an industrial bargaining council which they have long proposed.
BDWU says government should also develop an empowerment policy for local diamond entrepreneurs and ensure fair labour practices and protection of workers.