A top currency analyst with Rand Merchant Bank has advised Botswana to use its coal mineral to generate electricity than exporting it as raw coal, a top analyst with Rand Merchant Bank has said.
His advise comes amid revelation that price of the mineral has gone down by 70 percent on the international market.Coal prices have reportedly plummeted to around US$55 per tonne from over US$120 per tonne recorded over 13 years ago.
Reports say the demand for coal has shrunk and the industry has struggled with large global coal production cuts and accelerated mine closures. India and China which until recently, have been pillars of strong demand.Botswana is reported have coal resources of 200 billion tonnes but of that only three to five billion tonnes can be economically mined.
Economists say the abundance of coal resources constitute a strength that the country should leverage on. Botswana has one operating mine, the Morupule mine, located west of Palapye in eastern Botswana.
Speaking during budget review meeting Rand Merchant Bank Currency Strategist John Cairns said it was not wise for Botswana to export its coal in raw form.
“We have seen a very dramatic decline in almost all the commodity products. Oil for instance earlier this year it was US$30 per barrel. Similar declines have been observed in many other mineral and metal commodities,” said Cairns.
He said the decline has various implications on the Botswana economy. “First of all Botswana export meaningful amount of copper and gold and all those prices have fallen down. Secondly there has been talk that Botswana could move exporting coal and our assessment during that time when those proposals where made we thought this was a very ambitious but certainly now it does not make any sense when coal price have dropped by 70 percent from highest,” said Cairns.
He said the best option was to use the coal and generate power which is in high demand.“At this stage unfortunately the coal in the ground is very unlikely to be able to be a significant source of revenue for Batswana. Only perhaps, if the country could export its end product in terms of electricity from coal,” said the economic analyst.
He said Botswana has extensive and largely unexploited, coal resources which when developed can form part of the Government’s effort to diversify the economy. Cairns said due to the decline in commodity such as copper and gold was affecting the economic growth of the entire African continent.
“There is a significant slowdown in growth in all African countries. Africa rising story has been affected by the fall in commodity and Africa is probably no longer the fastest growing economy in the world in the next few years,” he said.
He also further notes that the government revenue is set to be affected by reduction in production at Debswana.“Botswana major exports is diamond and its prices has held up far better than other commodities unfortunately Debswana cutting back on production and this has implications for budget revenue and expected tax,” he said.