Botswana shines brightly in mining

By Ntsako Khosa

Diamonds and coal, among many other resources, are what makes Botswana stand out as a nation. We pay tribute to its mining industry, and take a closer look at the present situation.

Botswana is one of the largest producers of diamonds in the world, and is home to the world’s biggest and most sophisticated rough diamond sorting and valuing company, the Diamond Trading Company.

Mining industry

The country also hosts significant copper, nickel, cobalt, gold, soda ash and coal deposits, which are currently being exploited and developed.

Botswana has reaped an established growth in its economy through decades of using best practice. Its way of working prompted Kenyan president Uhuru Kenyatta to seek counsel on Botswana’s methods, describing these as “enviable”.

Mining contributes 34.2% of the country’s GDP and 50% of its tax revenues, representing a dramatic growth in the mining industry since Botswana’s independence, when mining contributed just 1% of the GDP.

The Jwaneng Diamond Mine produces approximately 11 million carats (2 200kg) of diamonds. The recoverable ore grade at the mine is about 1.25 carats per ton (250mg/t). Since 2005, known reserves allow production at current levels to continue for 27 years. The high rate of diamond extraction, combined with high-quality diamonds fetching excellent per weight prices, make the Jwaneng Diamond Mine the richest diamond mine in the world by value of recovered diamonds.

Mining laws

Botswana has come up with a model where the interests of investors and the country are balanced. Success of the mining industry is attributed to government keeping a tight leash on mining operations. This started in 1999 when the country reformed its mining law to promote greater certainty and predictability.

The granting of a mining licence, under the Mines and Minerals Act of 1999, depends on clear and transparent criteria. Applicants must show that they have adequate financial resources, technical competence, and experience to conduct effective mining operations. This explains why investors prefer its mining regime.

In the Fraser Institute’s Annual Survey of Mining Companies 2015, Botswana came second out of 109 countries for avoiding uncertainty in the enforcement of existing regulations. “Botswana’s mining policies are clearly defined, and obtaining all the required mining permits is relatively quick and straightforward compared to most countries,” the survey found.

Government involvement

While the government will retain the right to acquire a minority interest in new mines, this will now generally be up to a maximum of 15% and will be on commercial terms, with the government paying its pro-rata share of costs incurred. Taxation of mining companies outside the diamond industry has also been revised, with a new variable income tax rate replacing project-specific rates. The new rate will normally be 25%, increasing on a sliding scale for very profitable projects up to a theoretical maximum of 50% and will be determined annually by reference to the mining company’s profit ratio.

The government of Botswana also insists on having an effective participation in the mineral sector through equity participation and board representation. Generally, for large projects government participation falls within the range of 15–25%, issued free of cost. Minimum controls are exercised on business operations and the management is left entirely to the private sector partner. Government normally requires some representation at board level.

Safety in mining

Since 1984, the Jwaneng mine has achieved one of the lowest disabling injury incident rates in Botswana. In 2016, the mine underwent an external OHSAS/ISO audit and the auditors recommended re-certification.

Since 2000, the mine has maintained an ISO 14001 certificate for environmental compliance, making it the first mine to achieve this in Botswana. Jwaneng mine also boasts excellent safety records that have seen it winning multiple national and international safety awards.

The future

The mining industry has faced many challenges and Botswana has not been exempt. The ever-tightening grip of the recent recession’s effects on the mining sector has so far led to the closure of two mines; other mines have downsized their workforce through retrenchments.

Debswana Diamond Company has embarked on a major investment of BWP24-billion over the next 14 years. The expansion project, called the Cut-8 Project, will ensure continuous production until at least 2024. With Cut-8, the life of the Jwaneng mine will be extended further by an additional seven years.The scope of the Jwaneng Resource Extension Project (JREP) involves the delivery of an indicated resource estimate down to 850m below surface, which will support mining operations for the next 20 years, including all key expansion activities such as the Cut-8 and Cut-9 projects.


Mining contributes 34.2% of the country’s GDP and 50% of its tax revenues.


 

Botswana’s general mining policy aims to maximise the national economic benefit from the development of mineral resources.

This is to be achieved by way of:

  • Encouraging prospecting and new mine development;
  • Negotiating mining agreements that maximise the net national economic benefits resulting from mine operations;
  • Generating linkages with the rest of the economy and increasing local value added;
  • Creating employment and training opportunities for Botswana; and
  • Vesting all the mineral rights in Botswana — the Mines and Minerals Act regulates mining activities in Botswana.

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