The year of opportunities in mining and manufacturing value chains

Mphoeng Mphoeng | Monday January 16, 2023 09:32

From joining the Botswana Investment and Trade Centre (BITC) delegation that was led by His Excellency, President Mokgweetsi Masisi at the Dubai Expo 2020 where we were attempting to attract investors, to the Southern African Customs Union Investment Roundtable where the economic plans of the region were mapped out, to the Global Expo where Botswana businesses and opportunities were on show, to the Business Botswana Northern Business Conference where Business Botswana members strategised on how to grow the economy to the Citizen Entrepreneurial Development Agency (CEDA)-hosted African Development Financing Institution CEO’s Forum where the conversation was about investing to realise the aspirations of the Africa Continental Free Trade Agreement (AfCFTA).

All of these events, combined with a decent amount of interaction with various ministries but more especially the newly founded Ministry of Entrepreneurship, gave me a sense of understanding where Africa, the region and the country are all headed or aspiring to get to.

As an entrepreneur, I therefore took the slow down of the December period to try and reflect on 2022 and armed with the dizzying amount of information I took in last year, try to establish where exactly the pockets of opportunities will come from.

Not just for entrepreneurs and business people but more importantly for jobs and employment creation at a macro level. It is no secret that the unemployment rate in Botswana has been uncontrollable in the last 15 years since the global financial crisis and all of our policy efforts have borne little fruit as we continue to see the official unemployment numbers go to unacceptable levels (though my belief is the unofficial numbers are possibly 10-15% worse than officially stated).

It probably isn’t an overstatement to say Botswana is at a crossroads where business as usual (which the then Minister of Finance Hon Matsheka in 2020 declared) cannot be maintained as this would throw us into the abyss of a declining fiscal situation, poor economic prospects for individuals and widening economic inequality: all of which could lead us to civil unrest. (NB: this situation isn’t peculiar to Botswana.

There is a general sentiment globally that we could be on the edge of a global change in the world order and we could see current systems and incumbents fall as the masses stage revolutions across the world in protest of the status quo).

We therefore are at a now or never inflection point. Thankfully, from attending all the above mentioned events and getting to interact with the leaders at various levels, it does feel like we have finally fallen onto the right economic approach and focus to turn this country away from its current trajectory.

In my view, the current policy and strategic focus of concentrating on growing and exploiting our value chain opportunities is the most likely way of Botswana becoming more globally competitive and finally settling on an approach we have competitive advantage in.

The marked difference as well with this specific focus and previous policy stances, is that one is able to see the green shoots that can provide optimism that this strategy can work. Implementation (not necessarily in government but in the general ecosystem) seems to actually be happening.

So what are these green

shoots and why am I optimistic? In the past we have extensively talked about citizen economic empowerment and empowering Batswana to take back control of their economy.

One green shoot is us finally getting the Economic Inclusion Act (which while arguably watered down from a more radical and potentially racially polarising approach) is definitely an important step in the right direction.

This move coupled with the establishment of the Ministry of Entrepreneurship, which is tasked with consolidating and executing all the various policy efforts of the past, shows an intent one can start to believe in.

I have also had the pleasure of interacting with the Minister, his Permanent Secretary and some of the Deputy Permanent Secretaries at the new Ministry and I am even more confident we are on the right path.

Barring some catastrophic sabotaging of the ministry’s efforts, we should see the roll out and execution of the ministry’s mandate and more coordinated policies and programmes which should take advantage of low hanging fruit and much stronger more promising results by end of the year.

The main challenge will be whether we will have the vision to commit the necessary resources (human and financial) to ensuring the envisaged strategies work. This will be tested in the 2023-24 Budget Speech. That will give a true indication of whether we will put our money where our mouths are. One of the big mandates of the ministry, as espoused in the Reset Agenda, will be to create and deepen value chains in Botswana. Whilst we should not leave other sectors behind, my belief is that our focus should be mainly on mining and manufacturing (especially around agro processing). Why?

Mining l In terms of mining, Botswana has indisputable competitive advantage in the industry which we’ve only been using at extraction level.

At any given time, we have 70-80 prospecting licenses for minerals in operation and we have had two significant mines open in last five years with a few more like Giyani Metals, Jindal and a few others likely to come online in the next few years.

What is sometimes overlooked about mining is that in Botswana it has the highest average salary and therefore the largest knock-on economic effects. Five thousand BCL jobs being replaced even by 5,000 agriculture jobs is not the same, as one industry has an average salary eight times that of the other, meaning there would be eight times more money in the economy.

Mining also creates excellent support services opportunities where other industries like banking, insurances, education and training, information technology, logistics and security can also thrive. So if you get the mining value chain correct, it will automatically boost other industries without you needing to necessarily focus there, e.g. in terms of technology, should Botswana not be a leading supplier of mining related products and services like we have seen with companies like De Wet Drilling?

Why are we not focusing our BDIH, BITRI, BIUST and other research activities on mining related products and services? What has also been more than a green shoot for optimism is that the mining related efforts are actually led by the private sector.

We have seen Debswana lead the charge in Citizen Economic Empowerment with considerable success. Morupule has also followed suit in the past year with its 1-3-27 strategy and considerable opportunities will be emanating from both these companies efforts.

As more and more local companies take over the wallet spend of these companies, more and more Batswana will have access to decent jobs which were previously exported by importing services and products. With the stewardship of Botswana Chamber of Mines, we also expect more mines to go this route and also to develop local service providers who can provide meaningful employment to Batswana.

This is our golden opportunity and companies like Giyani Metals have the potential to create electric vehicle battery making industries in Botswana and this would open up a whole world of opportunities in terms of manufacturing and support services.

And as these mines and industries flourish, we would then need to greatly increase our energy consumption and that would allow Botswana to consider taking advantage of our great coal reserves and produce power on a larger scale for the country and potentially the region. More jobs.

In order to fully grasp where the opportunities might be in the next few years, I recommend the Mining Indaba in Cape Town in early February. This could allow you to meet potential partners who may be interested in moving to Botswana to take advantage of opportunities here. I do also hope that we will see the reawakening of the Botswana Resources, Infrastructure and Energy Forum, which was always a great place to get an idea of all the various efforts in those respective industries. I do also expect more forums that will address how to grow into these various industries and value chains, which will put together all relevant stakeholders. For example, a forum that would discuss why and how we can fix the budding problem of Batswana not being involved as much as desired in the prospecting and therefore resultant development and opening of mines.

Manufacturing The biggest opportunity we can lean on in this industry is largely due to our overly large import bill. With Botswana importing around 90% of everything we consume, we have an opportunity to create inward-looking markets for local companies.

Thankfully we have seen successes in this space with the closure of borders for products like bottled water and baked goods and more recently salt products and school uniforms. Whilst the consumer experiences short-term pain and inflation (which potentially we could have handled better), we will see the effects of such policies in the long run.

Linked to the above has also been strategic focus around developing special economic zones and clusters. I have it on good authority that the Ministry of Entrepreneurship is currently looking at strategies and programmes that are going to prioritise developing business clusters and special economic zones around the country, focused on producing products for consumption similar to the approach that the Economic Diversification Drive had espoused.

We will also see the work and successes of state owned enterprises like SEZA and SPEDU come to the fore this year (though SPEDU showed some excellent wins last year). We are likely to see the SSKIA Special Economic Zone take off this year and also show tangible progress. (Don’t quote me but this could turn out to be a bigger success story than we envisaged if everything goes according to whispered plans).

Focus on the value chain development would also trickle down to agriculture industries as their products would be required as inputs in agro-processing, which would bode well for the industry as farmers would be able to do contract farming and therefore be able to easier finance and support their respective farms.

We have already seen successes in this area as at the tail end of last year we saw some cluster farming initiatives like in Sefhophe being launched by the Assistant Minister of Agriculture.

All of these would bode well for jobs around the country and we should be able to see some early successes in the coming years. Like in mining, we should then focus institutions like BDIH, BUAN, BITRI, NARDI (where I am a non executive independent director) and BIUST to support these policy efforts in development of local products and commercialisation.

In conclusion, I do believe that if our leadership stays laser-focused on mining and manufacturing, and focuses their resources (time and financial) in consolidating ministry, research institution and private sector efforts, as well as creating an enabling environment for all the various stakeholders to work well, we could see the economic turnaround and employment that Batswana have been craving for the past 15 years and hopefully lead us to the attainment of aspirations of Vision 2036, Prosperity for All. That said, it is with a BIG IF. But we will continue to be quietly hopeful and assist and advise where we can and are called up to. I believe 2023 will be the year of opportunities in Botswana. I pray we take advantage of them.

Good luck in the New Year.

*Mphoeng is a director at MP Consultants, a local citizen-owned corporate finance, economics and business consultancy. Previously, he worked for the University of Botswana as a Lecturer in Accounting and Finance, Botswana Investment Fund Management (BIFM), Standard Chartered Bank and Bank of Botswana