F/town will rise again, economist says
Ryder Gabathuse | Friday April 22, 2016 10:08
FRANCISTOWN: As a city chiefly relying on commerce with very little manufacturing, the resurgence of mining activity around Francistown a few years ago brought hope for economic prosperity to the city and its environs.
The bad news is that the African Copper mine in Dukwi closed operation recently due mainly to a near 50 percent drop in base metal prices last year.
As a result of the same fall and also low ore grades at Tati Nickel Mining Company, its contracted mining company, Aveng Moolmans recently closed shop shaving 600 jobs from the Phoenix mine.
Moolmans vacated the TNMC site in February. Still at TNMC, workers on fixed contracts have been forced to exit the employ of the mining house and soon all the housed Tati employees will be forced to vacate company houses – as the company intends to sell them. TNMC also plans to end the leases it has for its workers.
Mmegi: How do you think this development is going to affect the economy of Francistown as it is clear that the city depended mainly upon the mines?
Obuseng: From the background information you provide, it would appear that mining had become a significant player in the economy of Francistown and its environs. There is no data on how big the economy of Francistown is or how big a contribution mining was, at its peak, which is fairly recent, making to the economy. My honest surmise though is that the closure of African Copper and the cessation of operations at Tati Nickel, occasioning a loss of 600 jobs in the latter case alone, will have serious economic impacts. It will slow down the rate of growth of the local economy. Firms that depended on the mine will suffer a decline in business and some will close shop. Because of the mines’ linkages to the local economy, the region will shed far more jobs than the 600, or whatever the final figure shall be, lost at Tati Nickel. Every household whose income is linked to Tati Nickel and African Copper, directly or indirectly, will suffer a contraction in income and welfare. That applies as much to those that rented out their properties to the mines and their suppliers, as it does to those who supplied goods and services to the mine, from transport and logistics, to everyday consumables, to artisan services. Even the informal sector will feel the pinch.
Mmegi: Now for the retail and real estate sectors. Give a picture of how these two sectors will suffer going forward as a result of the slump?
Obuseng: Look, the mines rented properties. Some may have been custom built for them. These properties will be vacated. There is no guarantee that any of the real estate, the mine, its employees and some of its suppliers release will be quickly occupied, so expect some owners of real estate to lose significant amounts of income. As for the retail sector, the proportion of the affected mines’ output that used to be spent on the local economy in the form of regular consumption by salaried employees or locally procured supplies by the mines, is no longer there. That is a direct hit on the retail economy. How big a hit, I do not know. Maybe a couple of millions of Pula a month, maybe a couple of tens of millions of Pula, but it is significant.
Mmegi: How do you think Francistown city can rescue itself from the effects of the collapse of the mining industry to stand on its feet again? Does the city really have the wherewithal to survive post-mining?
Obuseng: From the background you gave, Francistown had high hopes that mining would diversify the economy and give it fresh impetus. The collapse of mining now will no doubt hurt the city a lot, but I think the Francistown economy will recover, in part because the current setback for mining is not necessarily permanent. Commodity prices will recover. The other reason is that whilst the city may have had high hopes that mining could change the dynamic for the economy, mining there is nowhere as important to the local economy as it is in say, Jwaneng.
But there are questions regarding how you deal with effects of the collapse of mining activity in the Francistown region. Clearly, Francistown does not have the fiscal capacity to deal with those. That capacity lies in central government and as is the norm everywhere, major shocks to local economies are typically dealt with by central governments. Is this one big enough to attract government attention? I do not know, but I am pretty certain that the city lacks the capacity to mount any form of mitigation measures, whether directed at affected households or firms.
Mmegi: You presented yourself as a proponent of the Local Economic Development (LED). How do you think this will help in critical times for a city like Francistown to mitigate against emerging economic challenges?
Obuseng: I am an unmitigated LED enthusiast. At one level, LED guarantees local jurisdictions much needed economic sovereignty, but in more pragmatic terms, it gives local jurisdictions space to creatively build dynamic and resilient economies. Global trends, and I am talking here about trends in thought and practice, point to empowered local government as key force for economic transformation in the 21st century. It enables more effective identification of opportunities and management of risks to build more resilient local economies.
Just as there is a general need to free business and the economy from asphyxiating regulation, there is need to free local economies from central government to all energy as innovation from below drive them.
Mmegi: With this slump, what do you think Francistown authorities should do to continue surviving?
Obuseng: In reality, local authorities in Botswana have limited scope for creativity. We are way too centralised, but I would imagine that there is sufficient wiggle room for a city such a Francistown to reach deep and figure out how best it could become more attractive to economic activity. I understand they have an investment company, but that is not my idea of how a local authority catalyses a local economy. I would insist on efficient regulation and efficient service provision. I would insist on stoic focus on being an efficient city. It would require great skill to mobilise stakeholders, including central government, in that direction, but I do not see how else Francistown could transform its economy. Needless to say, Francistown should be one of the biggest voices clamouring for reforms to empower local government.
Mmegi: Do you envisage Francistown recovering anytime soon after the collapse of mining operations around it?
Obuseng: As I have already indicated, Francistown can and should recover from this setback. Mining, though significant, probably was never that dominant in Francistown and in so saying I do not wish to diminish the danger of being a retail economy. And of course, commodity markets will recover as well, which should help Francistown. But Francistown needs to be deliberate, systematic and creative in building a more diversified and resilient economy.
Mmegi: It is a given that mines generally pay very well. Will the job losses affect the buying power of city dwellers in the long term or what?
Obuseng: No doubt they will. Many enterprises, especially SMEs and the informal sector, will feel the pinch. So will households.