A right balance between infrastructural development and the state playing the role of the entrepreneur is important. The state is the only entity that can invest in capital and labour intersive projects that we need while also striking a balance between economic and accounting profits, or even continuing to fund ventures that are not making profit but are growing the economy and creating ripple effects in the form of secondary economic activities.
If we want to create banking jobs, teaching jobs, telecom jobs, logistics jobs and so on, we have to harness the ripple effect of primary industries. I will give a living and breathing example which is a low hanging fruit. Jindal Energy is building a P13 billion 300MW power plant through the Mmamabula Coal project, which will create 3,000 jobs and talks are on to increase it to 600mw.
A decisive government should match Jindal’s investment and raise the capacity of the plant to at least 1,200 MW which will increase the number of jobs close to 15,000. We have a very narrow window of opportunity in exploring and mining the 200 billion tonnes of coal we have because of the current phasing out of coal and the global green energy transition plans. The western world and its institutions like the World Bank are pushing back and refusing to fund coal projects because of these COP 28 conference-ratified agreements of phasing out coal in order to deal with greenhouse emissions and global warming (while Africa as whole is only responsible for 4% of these global greenhouse emissions). We learned a hard lesson in Morupule B; projects of this megasize require prudent risk spreading and surgical financial management.
Another lesson that we have to take is from the closure of the BCL mine, that the state has to focus more on Economic profits and not Accounting profits. The Phikwe mine was not making profit and was heavily subsidised by government. But the economic activity that the mine generated to the Phikwe community was huge. When the BCL mine closed, the entire Phikwe economy crumbled because the mine was a primary industry that generated a lot of economic activity outside the mine operations.
So the question we have to decisively deal with is: how can the state raise P20 billion or so to invest in the Jindal Power station to create 15,000 jobs, and the other 4,000 to 8,000 secondary jobs without having to take an extreme financial risk but still reap the economic benefits? I strongly believe that we have to back down on the idea that Foreign investors will come and save us. It’s been close to 50 years of preaching economic diversification through attracting FDI and we have to wake up and realise that these investors are not coming, at least not at the rate and speed we require to transition into an upper income earning country and move away from these unstable diamonds.
South Africa has an energy deficit of 6000MW, and they are not even commissioning new power plants and will continue to experience loadshedding for the next 10 years. That is the market for our electricity. Surely we can approach Eskom and sell them 1,000MW through a power purchase agreement. They will fund a significant portion of that P20 billion initial investment and will recoup it through getting the electricity from us at pre-negotiated price.
Jindal has a similar agreement with BPC. The state can draw from its coffers to finance and invest in the power plant, involve institutional investors as other key stakeholders to raise the capital,and the objective should be economic profits over accounting profits while also maintaining low risk exposure and fiscal fatigue.
Mmamabula will see the opening of banks, schools, private hospitals, telecomms, shopping malls, insurance firms, which will be pulled by the industries mine and power plant. These are secondary white collar jobs that are the ripple effect of a decisive state intervention. We will never industrialise or create sizeable jobs if the state is not decisive. The state should double as the investor as it is the only entity that has the capacity, capital and risk appetite to undertake mega size projects. We just need four or five mega size projects in Botswana and then unemployment will be a thing of the past.
The government cannot divorce itself from the responsibility of job creation. We run a mixed economy, that is both socialist and capitalist in nature, socialism in the aspect of free education, free ARVs, social protection schemes, free healthcare, subsidised electricity and water and so on.
The private sector cannot create jobs at the rate we need. The government has to assume the role of the investor to generate revenue to fund those free amenities and in turn create jobs. Whether through direct or indirect means, the government's responsibility is to create jobs through owning the means of production, starting business like BDC or Public Private Partnerships.
Tax is not enough to be the main revenue for government and that is why we should have a deliberate prudent policy that allows the government to be an investor, utilise our sovereign wealth fund to build incredible state-owned companies and invest in projects that can deal with this scourge of unemployment. Socialism alone is an expensive exercise and it needs the state to also be capitalist in approach as well.
*Maatla Kgasa is a published author and Business Analyst at Sanvest. He is also currently based in Asia on his final year furthering his studies in Finance. Feedback can be sent to [email protected]
