Overview
Overview
Botswana’s mining industry continues to be a global mining stalwart, especially diamond mining – Botswana is the world’s leading producer of diamonds by value. The downside of this sector is that its performance is tied to global demand and was therefore hard hit during the COVID-19 pandemic. Although this sector contributes about one third of total revenues and about 80 percent of foreign exchange earnings, long term trends have shown a decline of mineral revenues, largely due to increased costs, especially in the diamond industry. This decline fuels the need for accelerated transformation efforts to achieve a diversified and export led economy. The sector experienced a boom in 2021/2022, a positive recovery from COVID-19, with the United States being the main driver for that recovery and growth. However, this did not last as there has been a slowdown in the global market for rough diamonds in the first two quarters of 2023 owing to subdued demand, falling prices, and growing competition in synthetic diamonds. Rough diamond sales by De-Beers Global Sight holder Sales in the first half of 2023 were reported at $2.42 billion, which was 23 percent lower than in the first half of 2022. This is reflected in lower diamond exports from Botswana which were down 19 percent for the first 4 months of 2023 compared to the same period in 2022.
The Ministry of Minerals and Energy is also encouraging and actively seeking further investment in this industry through the exploration and exploitation of non-diamond minerals, in order to diversify the minerals sector from its dependence on the diamond industry. Other mined minerals include copper, nickel, silver coal, manganese, soda ash, gold, semi-precious stones, and granite. Botswana also has untapped uranium, lead, and zinc reserves, that companies are seeking to exploit. The country has established entities that are key to the successful development of this sector. Botswana’s Diamond Hub was established to transform Botswana into a competitive diamond center emphasizing rough and polished diamond trading; the Diamond Trading Company of Botswana (DTCB) has the capacity to value 45 million carats per year. The Okavango Diamond Company (ODC) currently controls sale for 25 percent of Debswana’s diamond production to facilitate secondary rough trading. The new Botswana-De Beers agreement will see this percentage increasing to 30 percent at the beginning of the yet-to-be-finalized agreement and progressively increasing to reach 50 percent by the final year of their 10-year agreement. In the past, ODC has struggled to sell its stock of Debswana-mined diamonds, so observers plan to closely watch how increased volume affects sales numbers, diamond cutting and polishing activities, and jobs in Botswana. In September 2023, ODC announced a new initiative for citizen-owned diamond companies called the 3e3p Sales Model, which aims to create a level playing field for local companies. The Minerals Development Company Botswana (MDCB) was established to manage GoB interests in mining companies and to seek out new investment opportunities.
In 2014, Botswana and Namibia signed an agreement to establish a jointly run company that will supervise the construction of the Trans-Kalahari Railroad. The project, which has been under consideration for years, is estimated to cost upwards of $15 billion to build and was proposed as the export route for Botswana’s estimated 212 billion metric tonnes in coal reserves. The GoB is looking at converting the project from a coal railway to a multi-commodity line to attract investors. The Ministry of Minerals and Energy through Botswana Oil Limited company has pre-qualified bidders for the coal-to-liquid fuels project (Ikaegeng XTL project) and is still in pursuit of securing a partner to develop the project through a PPP model.
U.S.-based companies have captured a sizable portion of the mining equipment market. Mining equipment is supplied by distributors mainly located in South Africa and recorded as imports from the country of supply and not as imports from the country of origin, hence the understated value of imports from the United States. All heavy equipment and machinery are imported; there is no local production or assembly. Local distributors tend to focus on light industrial, non-specialized equipment for mines (e.g., switches, pumps, and cleaning equipment) rather than heavy mining equipment. Distributors report that mines in Botswana, in general, are interested in purchasing high quality, long-lasting industrial equipment with robust warranties and therefore are less price-sensitive than most industries in the country.
In 2014, the GoB and the Chamber of Mines created a committee to oversee the purchase of mining supplies with a 10 percent preference towards those produced locally. Compliance is not legally required but is strongly recommended. The De Beers Group and its affiliated mines employ this practice, and it is regarded as an industry standard.
Sub-Sector Best Prospects
Mining equipment, services, base metal processing, mineral prospecting, underground mining skills training, and consulting are sub-sector prospects. Botswana wants to capture more of the diamond production value chain including trading, cutting, and polishing. There are currently 16 diamond cutting companies; the GoB strategy aims to increase them to 24 companies.
Opportunities
Botswana’s Diamond Hub (which houses the Diamond Technology Park), established in 2008, aims to attract diamond technology companies and has four areas of concentration: diamond cutting and polishing, establishing a rough and polished diamond trading facility, developing diamond jewelry manufacturing, and support industries. In 2016, the U.S. International Development Finance Corporation (DFC), previously OPIC, in partnership with Barclays and Lazare Kaplan, approved the first $125 million loan guaranty facility of its $250 million loan guarantee to stimulate diamond processing in Botswana. DFC signed the second tranche of $125 million loan guarantee facility with the Standard Bank Group, known as Stanbic Bank in Botswana, in September 2018. The De Beers Group relocated its diamond sorting and sales facility from the United Kingdom to Botswana. SEZA has been established by the GoB to streamline investment in sector-targeted geographic areas in the country. The two Gaborone area SEZs are intended be multi-use but focus on diamond processing and the financial. The private sector, in partnership with the Botswana Chamber of Mines, is conducting a pre-feasibility study on the processing of copper-to-copper metal. The study is supported by the Ministry of Minerals and Energy and if viable, it will result in the construction of a $230 million refinery to be developed through a public-private-partnership model. Another feasibility study is being conducted on value addition for bitterns aims to produce Sulphate of Potash (SOP), Sodium Sulphate, and vacuum salt from what is currently the bitterns waste stream.
Resources
- Ministry of Minerals and Energy
- Debswana
- De Beers
- Lucara
- Okavango Diamond Company (ODC): www.odc.co.bw
- Botswana Ministry of Trade and Industry
- Botswana Unified Revenue Services (BURS): www.burs.org.bw
- Diamond Technology Park