Gaborone: In a generation when the history of Botswana is written by those who are now children they will look back at the legacy of Botswana's 'diamond age' as the sweetest and easiest time in the nation's history. What will follow will never be quite as easy as diamonds - just a couple of holes in the ground with very limited environmental impacts and a few 'bakkie' loads of diamonds every year and the country lives well for 50 years. That will come to an end and even though Botswana will continue to export diamonds for at least another 30 years. Around 2025-27 the big profits from open cast diamond mining will come to an end even though mining will continue long after.
Against the tide President Seretse Khama and President Masire who together engineered the commercial arrangements that exist between Botswana and De Beers did brave things. In the late 1970's and early 1980's the predominant thinking in the international community was that governments should not own shares in mining companies. Fortunately Botswana's leaders did not listen to them on this one and acquired 50 percent share in Debswana which therefore meant that all decisions on mining had to be made by consensus. They went even further and over the years acquired 15 percent of De Beers.
Looking back it was probably one of the best investments ever made even though government officials at the time of Jwaneng's discovery were told by De Beers that Jwaneng was a 'marginal' mine. Fishermen and miners always understate their assets because they are forever concerned with their silent partners - the state. Subsequently it was found that at Jwaneng it cost 10 thebe to produce one pula of diamonds. Jwaneng proved to be the richest piece of real estate on earth.
It was the enormous profits generated by that mine and Orapa that created such wealth for the people of Botswana. However, what has to be recalled is that if President Seretse Khama and President Masire had not taken 50 percent share in the mines and 15 percent in De Beers then those profits would have flowed to De Beers and not to the people of Botswana. It is the decision to take partial ownership of De Beers and Debswana and not Botswana's tax system that was negotiated that assured the high returns that Botswana earns from diamonds. Of course as the digging becomes more and more extensive at Jwaneng and the costs rise, the profits inevitably fall.
Kimberly - the mother of all blood diamonds?
One day it will all come to an end and we shall be left with big hole in the ground but hopefully much prettier than the other great diamond mine at Kimberly in South Africa. That town's name is synonymous with diamonds in much the same way as Klondike was with gold in Alaska. Kimberly, like old gold mining areas all over the world from Australia to Canada, has done the obvious and built a theme park around the 'Big Hole' and the town continues to make profits from diamonds long after it has dug most of them out.
Those who are the commercial life for Jwaneng will no doubt be dreaming of a similarly tacky theme park for Jwaneng once the diamonds have gone. Ironically, Kimberly is the very home of blood diamonds where the great 19th century war lord, Cecil Rhodes, accumulated enough diamonds to fund the plunder of Zimbabwe. Kimberly has cleverly rebranded itself with the famous 'Kimberly Process' which supposedly addresses the issue of the 21st century blood diamonds.
No Mobutu in Botswana
As a result of the diamonds and the fact that those who have lead Botswana, unlike President Mobutu and his 'kleptocracy' who lead a similarly resource rich Democratic Republic of Congo, have not plundered all the resources, Botswana is now a relatively peaceful and prosperous nation. For two decades we had growth rates in Botswana that were the envy of Africa and the world. This has now stalled and in the first decade of the current century and our growth rates are lower than the sub-Saharan African average.
Gone are the heady days of the 1990's when one attended international meetings where tedious World Bank officials would lecture African policy makers on 'Why can't you be a little bit more like Botswana'.
These days the World Bank tells African policy makers to copy Rwanda which, like Botswana in the 1960's, started from such a low economic base after the genocide of 1994.
So what will become of Botswana once the profits from diamonds are gone? Will the children be poorer than this generation? That depends almost entirely on what the country does right now. Fortunately the nation's reputation for being a stable place to invest has meant that we have had a steady flow of young Australian and Canadian junior miners looking for wealth in the sands of the Kalahari . They have been remarkably successful in finding what are huge quantities of coal which is Botswana's next 'big thing'.
But they will not stay for long and the fact that they are still here and not replaced by the big boys from India is testimony to the fact that coal in the ground does not yet equal profits. Coal cannot be put into a suitcase and shipped out. What it requires is three very big investments.
The first is we need the mines which will cost around P30 billion in investments in mines to get to a critical minimum of 50MT of coal exports per annum. Second we need a railway to the coast (cost P70-100 billion) a pipeline to the Zambezi to provide what will probably need to be 100 Mm3 of water just for the mining industry (which cost P20 billion). That is hard enough but the really hard work is what to do with the waste. Diamonds were easy, coal will create massive waste and be very hard work.
If we export 90Mt of coal to India every year as is the eventual target we will produce about the same quantity in what is called middlings and discards, ie waste. If we do nothing with this waste it will make a serious environmental mess. In other countries that export massive volumes of coal like South Africa and Indonesia the waste is thrown into thermal coal plants and turned into electricity. But Botswana will need another 600 MW of electricity to 2020 and then a bit more beyond. This will consume another 3 Mt of coal but not 90Mt of coal waste. The hard bit will be to decide what to do with all this coal waste.
Billions of tonnes of iron in Ngamiland?
The potential excess supply of coal for electricity does create a fabulous opportunity to use that coal to produce relatively cheap electricity if we decide to do this. As Eskom and South Africa can attest cheap electricity was for decades a key commercial advantage to resource rich countries processing their minerals. We have also discovered what are increasing quantities of base metals including copper, nickel zinc and lead.
At this week's Capital Resources Conference on mining the representative of Tsodilo Resources, Dr Michael de Witt, announced quite dramatically that the company has discovered what are probably 'billions of tonnes of high grade iron ore' in Northern Ngamiland. We shall see if this proves to be true but the deposit had better be very high grade because to discover a low value base metal like iron ore 400 km from the nearest railhead at Tsumeb in Northern Namibia which is a further 700 km from Walvis Bay is commercially akin to finding iron on the moon.
Nevertheless, what is becoming obvious is that we have the ingredients in Botswana to combine all these base metals with cheap electricity and relatively cheap labour to really transform the country.
Will the children be richer?
The answer to the question of whether the next generation will be poorer than the present depends on whether Botswana opts for the easy choice to just 'go with the flow' and export unprocessed raw materials as we did with diamonds for 30 years or to push the country to use these resources locally and transform Botswana into something quite different. This will be a really hard and painful road to travel, not encrusted with diamonds, but if it is successful, and there is guarantee, then the children will be thankful.
* These are the views of Professor Roman Grynberg and not necessarily those of the Botswana Institute for Development Policy Analysis where he is employed.