BMI View: The infrastructure and construction sector of Botswana is heading into a period of sustained growth on the back of continued investment in the mining sector and the development of associated transport and power infrastructure. However, highlighting the challenges facing sector development from poor electrification and water shortages, we have slightly downgraded our 2015 forecast from 5.7% to 5.0%, with average annual real growth over our 10-year forecast period at 6. 4 %.
The biggest source of value creation is likely to remain electricity and transport. The country is working hard to reduce its reliance on South Africa for electricity and cater to growing domestic demand from its mining sector. There are a number of projects being developed and due to come online over the medium term. These include the long-delayed Morupule B coal-fired plant, which has had its implementation date pushed back several times. International companies are also expanding their business and investing in mining projects.
Key Trends And Developments
The timeframe of the current government's National Development Plan (NDP) 10 has been extended until the end of March 2017. It will be followed by NDP 11, starting April 2017. The reason for the delay is to enable new parliamentarians to participate in drafting NDP 11.
Australian junior, Walkabout Resources, stated in January 2015 it had completed a scoping study, confirming the robust development model for its Takatokwane thermal coal project in the Kweneng District, estimated at USD767mn. The conceptual operation at Takatokwane is based on two open pit strip mines, each delivering 6mn tonnes a year of coal.
Botswana will become an increasingly significant player in the global coal market, given the country's ample reserves. In total, Botswana has an estimated 212bnt (billion tonnes) of coal resources, the highest in Africa and almost all of which remain unexploited. Currently, the only operating coal mine in the country is the Morupule colliery, supplying the Botswana Power Corporation. Yet a number of companies have the potential to significantly ramp up coal output in the country and export to India and China in particular.
Away from the mining sector, the private demand for construction projects will remain robust as the country's private consumption story benefits from an accommodative monetary policy and benign inflation. Furthermore, Botswana's banking sector is set to increase its lending in the next year as a result of a reduction in the banks' reserve requirement.
Shumba Coal plans to develop a solar power station to generate up to 200MW with power from the station supplying upcoming copper mines in the Kalahari copper belt. This follows an announcement from Cupric Canyon Capital on June 9 2015 that it will begin construction of a copper mine in Botswana's Kalahari copper belt in 2016, near where the solar power station will be. In addition, African Energy Resources is considering doubling its investment at the Sese power project. Current plans are for a 300MW coal-fired plant with an estimated cost of USD750mn.
Botswana is expediting the construction of a BWP16bn (USD1.6bn) pipeline, which will supply water from the Zambezi River to southern Botswana, and plans to complete the project in seven years. Negotiations will be completed by 2016, with final implementation expected in 2026. The Ministry of Minerals, Energy and Water Resources' Permanent Secretary Kgomotso Abi revealed the government is reviewing its original designs for the project (Engineering News). The pipeline was originally planned to draw 495mn cu m/yr of water for a commercial agriculture project in the northwest, but the water shortage in the southern part of the country has forced the government to reprioritise plans. The first phase of the scheme will involve a pipeline leading to the Pandamatenga farms, while the second phase will comprise a pipeline from the Zambezi to Francistown, and then continue to the southern part of the country.
Botswana retains its top position in BMI's Infrastructure RRI for SSA this quarter as one of the few African countries improving its score at the outset of 2015. Above average scores for all indicators make the country the most attractive in the region out of 16 countries. Botswana had previously been level with South Africa. However, South Africa's declining business environment has led to a drop in its scores, allowing Botswana to overtake. The country's economy has been growing impressively since independence in 1967, driven by a strong mining sector and political stability.