BB sidelined in S/Phikwe rescue

SHARE   |   Tuesday, 21 March 2017   |   By Ditiro Motlhabane
BB sidelined in S/Phikwe rescue

Private sector think tank (mother body) – Business Botswana (BB) – has been sidelined by government in initiatives to save Selibe Phikwe and SPEDU region from implosion due to economic crisis occasioned by the closure of BCL mine in October 2016, it has emerged. The leadership of BB was on Monday at pains, almost contradicting each other; trying to explain the role they are playing in measures instituted by government to resuscitate the troubled economy of the region. Consequently, BB has been conducting an independent investigation on the impact of the closure of BCL mine and possible solutions, parallel to government initiatives. Shortly after BB President Lekwalo Mosienyane revealed that they were never engaged officially or invited to be part of the strategies currently rolled out by government, Chief Executive Officer Dr Racious Moatshe was quick to interject and explain that this should not be construed to mean they are at logger heads with government. A moment later BB vice president North Palalani Moitlhobogi, who operates a consultancy business in Selibe Phikwe, reiterated that the business community in that town is not part of any committee set up by government to resuscitate the economy of the region. He, however, denied that the ongoing BB project is a duplication of government efforts, arguing that theirs is not centred on whether BCL mine is re-opened or not. “We are not part of the committee set up by the Ministry of Investment, Trade and Industry (MITI). Ours is to advise on strategies to create a vibrant economy for Selibe Phikwe and the region independent of the operation of the mine,” said Moitlhobogi, commenting on recent developments where government is negotiating with an investor interested in buying BCL mine assets. An investigation carried out by BB on the impact of the closure of BCL mine, contained in a report released on Monday found that “the town is not yet ready to operate without BCL as the anchor, therefore making the issue of total closure of the mine non-viable. The situation could have been managed better if socio economic and environmental impact studies were done to guide the process.” Throughout the investigation there was strong and consistent opinion by stakeholders with direct relations with BCL that government mishandled the closure of the mine and failed to consult adequately, which resulted in a national crisis.

The BB investigation findings confirm and support earlier recommendations by among others former BCL employees and their trade union Botswana Mine Workers Union (BMWU) and the Daniel Mahupela-led BCL executive management. The latter had in their handing over report to the liquidator, which was also submitted to government – the sole shareholder in BCL Limited – recommended that due to a slump in commodity (copper) prices in international markets the mine be placed under care and maintenance to await recovery. The BB report cites the example of current projections published in December 2016 by diversified mining and marketing company, Glencore, who project a global supply shortage in nickel during the period leading to the year 2020 due to increased demand for electric vehicle production. “If that projection is correct, the future profitability of nickel is very promising. While projections and forecasts are an essential part of business, they are subject to error margins. Nonetheless, forecasts which are based on expert analysis and business intelligence have a lower margin of error consistent with projections made earlier by expert consultants engaged by BCL management to draw the Polaris II strategy,” reads the report.  Contrary to widespread condemnation and doubt on the financial, technical and forecasting adequacy of Polaris II strategy for revival of BCL, the BB investigators concluded that in fact it was accurate in its detection and prioritisation of operational recovery for the mine.  The diversified strategy – Polaris II – shows that BCL had other interests in a diamond mining project, iron ore and manganese mining initiatives. Currently, BCL mine has 35 million tonnes of slug with expectancy in excess of 50 years, which has potential to kick start steel manufacturing. However, Polaris II strategy was found to be medium to long term and narrowly focused on BCL. “There is need to device short-term “NOW” strategies to have an immediate cushioning effect of the Selibe-Phikwe economy. These include relocating some government functions to Selibe-Phikwe e.g. agriculture and transport, relocating sections of some tertiary institutions, especially those related to mining, metallurgy and related fields to Selibe-Phikwe to boost the economy, and investing  in the production of iron from the existing mine dump to feed directly into Pula Steel,” BB investigators recommended.  Another option, recommended by BCL EXCO in their final report, was that government recapitalise and restructure the mine to streamline operations to cut costs with a reduced workforce and focus on core business. To this end, BCL management had developed an Aggressive Re-organisation Plan which proposed a refinancing of the mine to extend its lifespan up to at least 2022. This plan suggested a phased closure of unprofitable shafts, which would result in retrenchment of close to 2 000 workers while continuing the operations of the mines and developing other resources elsewhere. The latest BB investigation has uncovered emerging costs that are quite significant after the temporary closure of BCL mines. “Considering these costs and other unknown expenses, in the medium term, they could turn out to be significant compared to the initial bail out money that was required to keep BCL afloat,” observed BB.

Emerging costs due to BCL closure

          Activity                                                 Costs
i. Terminal benefits of employees                   P700 million 
ii. Running the smelter (later closed)               P20 million/ month
iii. Operational costs of skeletal staff                 P3 million/ month
iv. School fees for children of ex-employees  P11 million
v. Medical expenses of former employees     P15 million
[Source: Business Botswana Report on BCL]

BB investigation also shows that out of an economically active labour force estimated at 39, 086 in the region in 2006, total concomitant unemployment is likely to reach more than 50 percent as a result of the closure because economic and commercial developments and services around Selibe-Phikwe hinterland have been a direct spillover effects from BCL mine. “Given the fact that all government and private sector services are contingent upon the mine’s existence to the extent that they either service the mine or its employees, the task team finds it reasonable to assume that 85 percent of such services would not survive without BCL,” reads the report. Additionally, researchers found, the closure of BCL mine will result in considerable layoffs in associated companies in Francistown and Palapye, further adding to the unemployment effects. In collaboration with SPEDU, the MITI through the office of the Coordinator of the Economic Revitalisation of Selibe Phikwe and the Region led by Linah Mohohlo, has developed a revitalisation strategic plan as a baseline for achieving their mandate. The strategy includes projects categorised into agriculture production and processing (already 400 hectares being developed for maize ploughing), tourism and related services as well as manufacturing estimated at P1.8 billion and expected to created 6 856 jobs over two years. SPEDU is also targeting development of water-based tourism around three big dams in the region Dikgatlhong, Thune and Letsibogo. Selibe-Phikwe has also been identified as a special economic zone and an engine for economic growth offering lucrative incentives.