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Botswana After Diamonds BOTSWANA AFTER DIAMONDS: A Study into the Consequences of and Responses to the Depletion of Botswana’s Diamonds Edited by: Roman Grynberg, Margaret Sengwaketse and Masedi Motswapong Botswana Confederation of Botswana Institute for Commerce Industry and Manpower Development Policy Analysis BOTSWANA AFTER DIAMONDS: A Study into the Consequences of and Responses to the Depletion of Botswana’s Diamonds First Published in 2015 © Botswana Institute for Development Policy Analysis Edited by: Roman Grynberg, Margaret Sengwaketse and Masedi Motswapong ISBN 978 99968-454-0-6 Published by Mmegi Publishing House Plot No. 134, Tlokweng P/Bag BR 298 Gaborone Botswana, Southern Africa Tel +267 319-1733 Fax + 267 350-0648 Email: [email protected] On behalf of the Botswana Institute for Development Policy Analysis Private Bag BR29 Gaborone Botswana www.bidpa.bw Cover design by Seon Impressions (PTY) Ltd Electronic origination and text design by Seon Impressions (PTY) Ltd, Printed and bounded by Printing and Publishing Company Botswana. All rights reserved. The copyright of all materials in this publication resides with the Botswana Institute for Development Policy Analysis (BIDPA), unless otherwise stated. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, or mechanical, for any purpose, without the express written permission of the BIDPA in accordance with the provision of the copyright and neighbouring rights act of 2000. The publishers have made every attempt to ensure that acknowledgements and permissions have been obtained from copyright holders of all materials included in this publication. In the event that there are any omissions, we offer our sincere apologies and request that the copyright holders contact us as soon as possible. Table of Contents Introduction and Foreword to the Botswana After Diamonds Study ...............................................................................x Acknowledgements ..................................................................................................................................................................xii Part I Minerals and Energy Exports and Revenue Projections LIST OF TABLES .................................................................................................................................................................xvi LIST OF FIGURES ..............................................................................................................................................................xvii LIST OF ACRONYMS .......................................................................................................................................................xviii APPENDICES........................................................................................................................................................................xix ABBREVIATIONS AND CONVERSION FACTORS ..................................................................................................xx 2.0 Objectives ............................................................................................................................................................................1 Minerals and Energy Exports and Revenue Projections ..................................................................................................... 1 Executive Summary ...................................................................................................................................................................1 3.0 Scope of the study ...............................................................................................................................................................2 4.0 Methodology ........................................................................................................................................................................2 5.0 The Mines and Minerals Act .............................................................................................................................................3 6.0 Forecasting government mineral revenues .....................................................................................................................4 7.0 Discussion of results .........................................................................................................................................................8 8.0 Policy recommendations ...................................................................................................................................................9 9.0 Conclusions .......................................................................................................................................................................11 1.0 Background .........................................................................................................................................................................13 1.1 The role of mineral revenues in Botswana’s economy ........................................................................................................13 1.2 Government’s management of Botswana’s mineral boom ..................................................................................................14 1.3 A plateau followed by decline in mineral revenues? .........................................................................................................14 1.4 Mineral revenue projections in the National Development Plan 10 (NDP 10) ...............................................................15 7KHLPSRUWDQFHRI GLDPRQGVLQGLUHFWPLQHUDOUHYHQXHÁRZVWRJRYHUQPHQW .....................................................................15 1.6 Objectives ......................................................................................................................................................................16 1.7 Scope of the study ...........................................................................................................................................................16 2.0 Review of literature ...........................................................................................................................................................17 2.1 Resource risk ..................................................................................................................................................................17 2.2 Production risk ...............................................................................................................................................................18 2.3 Mineral commodity prices ................................................................................................................................................18 2.3.1 Base metals .............................................................................................................................................................18 2.3.2 Diamonds ...............................................................................................................................................................19 iii 2.3.3 Coal – world steam coal markets ............................................................................................................................. 20 2.3.3.1 Supply regions .......................................................................................................................................................20 2.3.3.2 Demand regions ...................................................................................................................................................22 2.3.3.3 Steam coal prices .................................................................................................................................................25 2.3.4 Coal – climate change issues ....................................................................................................................................29 2.4 Foreign exchange rates .....................................................................................................................................................30 2.5 Review of recent performance in forecasting government mineral revenues ..........................................................................30 3.0 Botswana’s mineral legislation and policy ......................................................................................................................34 3.1 Background ....................................................................................................................................................................34 3.2 Project cycle: exploration to mine production ....................................................................................................................36 3.3 Proposed approach on incentives to increase the pace of investment ...................................................................................36 3.4. Anticipated challenges ....................................................................................................................................................37 4.0 Methodology ......................................................................................................................................................................38 4.1 Data .............................................................................................................................................................................38
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