Gov’t to cede mining equity entitlement to Batswana
Mbongeni Mguni | Monday July 10, 2023 06:00
Amendments to the Act could also potentially see the 15% equity option for government increased to 26%, BusinessWeek has established.
The current Mines and Minerals Act allows government to buy a 15% shareholding in any new mining project, with an option for a higher, negotiated stake in diamond mines.
At present, government, through state mining agency, the Minerals Development Company Botswana, has equity stakes in mining groups such as De Beers, Morupule Coal Mine, and indirectly in Minergy.
The issue of whether to take up equity or not has not been a precise art, involving much due diligence and debate. Government previously elected not to exercise its right to acquire stakes in mines such as Karowe, which has since gone on to produce world-renowned gems. On the other hand, investments in the BCL Ltd group have weighed heavily on government, which effectively was left singlehandedly funding the mines before and after their closure.
Minerals and Energy minister, Lefoko Moagi told state television last week that the updated Act would contain provisions to cede government’s equity entitlement to citizens.
“The Act is going into the winter Parliament and one of the things is ownership where before we give out a mining licence, we have that option to buy up to 15%,” he said. “Now, instead of that 15% just going away, Batswana are there and if they want it, they should have the option, whether as individuals or companies. “These days, we have the pension funds and many of them have been helping energy and mining companies. “That’s where Batswana can approach for funding to invest in these mines and diamonds.”
Moagi added that the percentage that government could take up in new mines could go up “to 25% or whatever it becomes”.
The latest developments date back to as early as 2016, when technocrats in government began suggesting that the 15% equity entitlement be increased and that in cases where the state opts not to exercise its right, citizens be invited to do so.
“We plan to increase government optional shareholding window after realising that the 15% does not carry much weight in terms of influencing the direction of the company,” the ministry’s then deputy permanent secretary, Nchidzi Mmolawa told a Stanbic conference in August 2016. “At 26%, the Companies Act, at least, allows you to exercise some minority rights. “But in the event that government opts not to buy the 26%, the plan is to pass on that option to Batswana to buy the shares.
Industry insiders previously told BusinessWeek that consultations had dragged on for years due to concerns about the legislative change, with some questioning the appropriateness of a mining investor being invited to partner up to 26% with an investor who may or may not know anything about mining or a particular mineral.
“The investor coming on board may have the money but not the management skills or knowledge about mining. “You find that you have brought people who will make noise at board level, but have no knowledge of the business,” said one insider.
Analysts also said the industry consultations had been prolonged because while government wanted to empower Batswana, it was also treading carefully around issues of mines and ownership, particularly because similar initiatives in neighbouring states and broader Africa have triggered panic amongst investors.