• How would you describe the economic environment we are seeing right now?

Economic activity is still subdued in 2018. Inflation for the month of May 2018 came in at 3.3%, stubbornly routed near the bottom end of the Bank of Botswana’s objective range of 3% – 6%. The Bank also maintained its accommodative monetary policy stance, leaving its benchmark rate unchanged at 5.0% at its June 2018 meeting. In reaching its decision, the Bank stated its expectations of close but below full capacity growth and subdued domestic demand pressures. What this means, put simply, is that they expect the economy to grow but at a rate below the optimal level. As a result of this below target growth, the Bank doesn’t anticipate inflationary pressure driven by increased consumption. We are optimistic going into the second half of the year, as a ramp up in Government spending is expected to boost economic activity. That, coupled with the recovery in the mining sector, is positive for the economy in the near-term.

• How would you describe Botswana’s resource sector at present?

Mining activity accounts for a lion’s share of Botswana’s Gross Domestic Product (GDP), Government revenues and foreign exchange earnings. Even though the mining sector’s contribution to GDP has been below 25% since the 2009 recession, available data indicates that the sector still leads in terms of value added contribution to GDP. While the major mining operations survived the commodity price downturn, the same cannot be said for junior miners in Botswana; the current upturn in the commodity price cycle has aided in the recovery of this segment of the market. We are seeing increased activity in the resources sector; both in terms of corporate actions and on the ground operational activity. We are also seeing the industry recapitalising and cautious investment activity. Essentially, this means companies are raising capital to fund exploration and operational activity; and investors are selectively investing in companies in this sector after years of mine closures and disinvestment.

• What recent notable trends must we consider when looking at the future of our resource sector? What positive developments, what challenges, what threats and what opportunities?

The commodity price upturn has been beneficial for resource sector profitability and activity in Botswana and across the region as well. That said policy uncertainty in a number jurisdictions, due to reforms in mining legislature, has curtailed investment. Legislation reforms are being driven by the need to bring laws in line with current international standards, as well as addressing social issues such as increased state participation, local procurement, local community empowerment and adjustments to tax regimes. This positive for Botswana as investors and developers look for alternate jurisdictions to make investment where there is a stable policy framework.

We expect the commodity price cycle to remain buoyant, creating opportunities for miners. This is because demand for base metals, especially copper, is expected to remain strong, driven by large investments in technology and its critical use in various industries. The drive to electric cars is a key boost for future demand for copper which is used in the vehicles themselves, as well as the power distribution infrastructure required to support these vehicles. Base-load power needs, as well as industrial uses of coal, remain a support for coal demand. Opportunities also exist when it comes to smaller, niche diamond mines.

• What do you believe we need to do as both public and private sector to help propel the minerals and mining industry forward?

Local resource beneficiation presents opportunities as Botswana can unlock more value with progression up the value chain. That said, a strategic approach is necessary to ensure that investment is made only where it makes sense and where a competitive advantage can be created.

Skilled labour is available locally, viable deposits exist and Government has shown commitment in developing requisite infrastructure. Given the characteristics of our market, risk capital is not readily available for exploratory projects, but with more disclosure and investor education the pool will develop with time. Timely execution of regulatory processes is also key to ensure that investment is not held up by unnecessary red-tape. It is paramount that both the public and private sector work to help propel the minerals and mining industry forward.

• What must an investor looking at Botswana’s resource sector consider and are we a good investment?

Sustainability of operations is a key consideration; operations that are defensive in the down-cycle when prices aren’t very favourable. Strategic positioning is especially valuable in the commodities space where there is no product differentiation. Given heightened policy uncertainty in the region, Botswana is placed well to attract investment into its mining sector. The key question is whether this potential for investment will actually be realised. If one had to make a judgement on whether Botswana is a good investment as regards our resource sector, we would say Botswana is an excellent investment destination in the resources space.