- Coal outlook will remain negative in the long term
- Upswing in coal price could change local economy
- Renewables take over India, China appetite for coal
Botswana Government will not admit that the envisaged P136 billion Trans Kalahari Railway line (TKR) is not a viable option, despite project consultants Aurecon, an Australian firm, warning that the viability is dependent on world coal prices. An analyst at Afena Capital, Shoaib Vajey, told Gazette Business that he does not see an upswing in the coal price as rhetoric has moved towards “coal is dead,” with environmental concerns pressing for an optimal balance between renewable energies and coal fired power generation.
Coal buyer markets such as China and India, also, have both experienced some changes, with an incremental switching off of coal generated power supply and gravitation towards renewable energy.“The long and short of it is that both China and India, who have their own coal, are consuming less and less coal and the negative outlook is not likely to change,” said Vayej.
However, Minister of Minerals, Energy and Water Resources (MMEWR), Kitso Mokaila, in September 2015 reiterated Government’s intent to go ahead with construction of the TKR saying there are possibilities of the railway line being a multi commodity transit option hence the feasibility of coal will not ring the death knell on the whole project.
An expert has observed that the coal price is the only stumbling block to Botswana’s economy booming and creating economic ripples that would create the much needed economic activity and job creation.
Meanwhile, the governments of Botswana and Namibia, who are partners in the project, have not made convincing steps towards implementation, with information coming from MMEWR indicating that the private sector has not yet been invited to express interest in partaking in the project.
Chief Public Relations Officer in the Ministry, Lebotsang Mohutsiwa noted when responding to an inquiry from Gazette Business, that there are other matters that are still being dealt with. The TKR project is an initiative by the Botswana and Namibian governments that is aimed at constructing a 1, 500 kilometre railway line from Walvis Bay, Namibia to Mmamabula coal fields in Botswana. The project is intended to be financed fully by the private sector, with the two governments only playing a facilitatory role.
“The two Governments of Botswana and Namibia signed a Memorandum of Understanding in 2010 and immediately conducted a pre-feasibility study which they completed in 2011. The parties agreed to play a facilitatory role with the private sector playing the lead in the development of the project. The preferred investment model to be adopted is that of Design, Build, Operate, Own and Transfer (DBOOT). No invitations to private sector investors have yet been made at this stage,” he said.
He said that the two governments are involved in other things related to the project before potential financiers could be invited to express interest after Minister Mokaila attended a Joint Ministerial Meeting in Namibia on 10th March, where he met his counterpart to discuss certain aspects of the project.
According to Mohutsiwa, “the Ministers approved some PMO (Project Management Office) Policy documents for further review by the Joint Technical Committee. The Policy documents will be used to guide the day to day operations of the office amongst others.” The PMO executes the activities of the TKR project, procures the services of experts, coordinates various activities, and performs any other duties as may be deemed necessary.
Mohutsiwa said the Ministers also recognized and acknowledged the challenges facing the implementation of the project as a result of the current low prices of coal in the market and decided that a scoping study be conducted to investigate the feasibility of widening the scope of the project to improve its bankability. “Efforts to bring the project into a more bankable state, for ease of implementation are ongoing,” he noted.
The railway line, which comes with a P136 billion price tag, is expected to unlock the monetization of Botswana’s coal resources, which are seen as a way to augment the depleting diamond resources that have been the mainstay of the country’s economy. In 2014, Aurecon gave the resultant capital expenditure costs at a total of US$14.2 billion, comprising US$8.6 billion for electrified rail, and US$1.9 billion for above rail, and US$3.6 billion for the port.