Bankers scramble to back mining
Mbongeni Mguni | Friday July 24, 2026 15:57
A few years ago, the banking sector backed away from most parts of the mining industry, after yet another commodity slump led to the non-performance of loans and pushed a major bank into the red.
Mining in the country is a boom and bust affair, with the different players bouncing around the commodity cycle rollercoaster through the years. In good years, they soar to dizzying heights and in the lean years, sink to impossible depths, sometimes swinging right off the rollercoaster and into liquidation.
For banks saddled with a statutory duty to protect and optimally manage depositors’ funds as well as shareholders’ interests, the boom/bust cycles have often proved not worth the pain. The promise of returns shimmers in the horizon, but the banks have burnt their fingers too many times to be tempted again.
In the past two years, nearly all the major mineral categories in the country have either been weak or plateauing, most notably diamonds, coal and iron chrome. In 2025, production was weak across all the major mineral groups, except for copper where output and prices have been soaring in recent years, powered by the global hunt for critical minerals.
Banking has not been having fun either in the past two years. A “structural adjustment” of sorts has taken place in the sector, making more of its players unwilling to take the risks required by most miners. The liquidity squeeze in the banking sector has meant greater risk aversion, while government’s scramble for funds in the local capital market, has threatened to ‘crowd out’ other borrowers such as miners.
And yet, at the Future of Mining Summit held recently, bankers turned out in large numbers, expressing a clear and determined message of support for a sector where risk and return play a daily game of Russian Roulette.
The renewed support comes as government’s doubles down on efforts to enhance citizen economic empowerment in mining. Recent amendments to the Mines and Mineral Act now allow government to cede its right to purchase up to 24% equity in new mining ventures, to citizens.
Giving opening remarks at the Summit, Minerals and Energy minister, Bogolo Kenewendo, also stressed government’s push to ensure that mining goes beyond extraction to create, citizen economic empowerment as well as greater value through beneficiation, exploration, innovation and industrialisation.
The banks stood up.
First Capital Bank Botswana CEO, Lesego Osman, stressed the importance of tailored financing in supporting mining growth and also explained how the bank is looking at opportunities in value chain development.
Standard Chartered Bank Botswana, Corporate and Investment Banking executive director, Chamu Mugangavari, spoke about how mining projects require financing structures capable of supporting their long-term development.
At the Citizen Entrepreneurial Development Agency, the spearhead of the country’s citizen development funding, CEO Khalala Mokefane, said the organisation was ready to support Batswana involved in major mining projects.
“We are signing up MoUs with the likes of Morupule Coal Mine and we will be focusing on the youth and women-led businesses that will finance part of the supply chain into that mine,” he said. “We are also looking at an MoU with Debswana to ensure that we are not just building on the actual mining, but saying ‘Debswana has built a mine like Orapa, how do we make sure it lives beyond that mining town and remains a viable town after that’? “We are also saying ‘how do we bring innovation into what we will be financing’”?
For bankers, even with its cyclical woes, the mining industry in Botswana is simply too big to ignore. Of particular interest as they hunt out opportunities across economy, is the value ecosystem around mining which includes the SMMEs, towns, local authorities and a world of other players over and above the actual spade-in-ground operations.
An easy snapshot of the value ecosystem can be seen in mining towns such as Jwaneng, Orapa and Sowa whose economies have been built up, sustained and grown around the thousands of sub-contractors, suppliers of consumables, light manufacturers and a host of others, drawn by the mining activities.
The country’s second largest bank, Absa, is amongst those that have steadfastly supported mining and its ecosystem through the years. Absa Bank Botswana estimates that its loan book to sightholders, the midstream firms which enjoy exclusive rights to De Beers’ auctions, is about P1 billion, a position held despite the challenges the diamond sector has faced in the past three years.
“Absa's very consistent approach has really been to focus on the value chain of mining,” Absa corporate director, Tebogo Giddie said. “We are still currently the only bank or maybe one out of two banks that are still funding the midstream or sightholders in the diamond pipeline. “We spend a lot of time understanding the value chain and then making sure that with every stage within any mining commodity, we understand how we manage the risk, we understand the challenges and out of that, we have been able to plug in facilities.”
The bank takes efforts to de-risk its activities in mining. One of these is clearly identifying and continuously assessing the anchor in any value ecosystem. Another is working with the identified SMEs and handholding them in the mining industry, including providing training and support services to ensure their graduation into a higher tier of the corporate world.
“One aspect of ecosystem is to really make sure that we understand who the anchor is. “We consider the anchor and if the anchor is able to confirm that they’re comfortable with the quality, comfortable with the quantum of the supply, what we then try to do is make sure we support that SME by making sure that it doesn't run short of any funding, as we understand that the anchor will eventually pay once the service has been provided,” she said.
Banks are also evolving in the kind of support they provide actual miners, both in the types of finance solutions on offer, as well as the conditions accepted throughout the lifecycle of the project.
From initial study of Botswana Geoscience Institute records, through the lengthy studies on the ground, the regulatory red-tape, fundraising and eventual commissioning, even the most basic of mining operations can take a decade for shareholders to see the first thebes flow in.
Giddie explained that Absa secures its comfort from factors such as developers demonstrating thorough research as well as outlining target completion dates for key achievables which include pre-feasibility.
Crucial for banks is the technical expertise of developers, their track records and the partners they bring into the project. Related to this and even more essential, is to what extent shareholders are willing and able to have their own skin in the game, meaning the extent to which they too co-finance or take up monetary risk in developing the project.
As a project advances through key milestones, Giddie said the bank is able to relax some of its support parameters, as it reassesses the risk it is carrying. Working capital lines can be discussed as the bank and project developer interact on timelines and targets to production.
Part of the flexibility Absa, in particular, is able to provide miners, comes from the blended finance it provides, where the bank’s finance can be mixed with development finance institution lending, which is more of the “patient capital” required by the sector.
Even when fully operational projects run into trouble, the banks do not necessarily call in their loans immediately.
“There were few sights (diamond sales auctions) during COVID until institutions like the Diamond Trading Company Botswana and Okavango Diamond Company became a lot more creative and held these virtually. “But we were able to provide moratoriums just so that businesses could survive,” she said.
With government doubling up its efforts to empower citizens in mining, local banks are raising their hands to anchor a new era in the industry that has sustained the country’s economy over the decades.