Selebi-Phikwe trips, as BCL limps
Onalenna Kelebeile | Friday April 22, 2016 10:19
SELEBI-PHIKWE: A decline in metal prices has not only affected BCL Mine and its employees, but has had a far-reaching effect on the copper/nickel mining town’s economy at large.
This affirms an urgent need to speed up diversification of the local economy away from a death wish-like dependence on the mine. Local companies are feeling the pinch to the extent that some are either winding up, retrenching or even relocating to establish themselves elsewhere.
Business Botswana has first hand experience of this, having experienced a serious decline of its membership in Selebi-Phikwe due to many companies relocating to other areas.
Business Botswana, formerly known as Botswana Confederation of Commerce Industry and Manpower (BOCCIM), had close to 40 members in Selebi-Phikwe in previous years, but these numbers have shockingly dropped to only five paid up members, including BCL Mine, this year.
Business Botswana vice president, Palalani Moitlhobogi said BCL Mine injects a lot of money into the local economy hence if the company experiences cash flow problems, the town and surrounding villages feel the pinch.
“This suggests reliance on the BCL Mine at a more practical level. The current problems at BCL have brought to the fore the bigger problems that exist locally as many businesses rely mainly on BCL despite calls to diversify away from reliance on the mine,” he said.
Moitlhobogi noted that almost all local businesses deal directly or indirectly with BCL and thus it is an underlying factor of business that if BCL fails to pay its contractors, then serious problems arise.
“My view is that efforts must be made to ensure that the financial problem that BCL is in does not recur in the next five years, otherwise the town is dead. The town cannot afford a second blow,” he added.
He noted that once a company winds up it is difficult to open again and expressed hope that government with its expertise and resources could ensure that this does not happen again. He observed that other companies resort to financiers to stay afloat but then it takes a lot of effort and resources to pay back these loans and get back on their feet.
Moitlhobogi expressed concern that there is no meaningful dialogue between SPEDU and local businesses on what could be done, adding that many people have moved out of the town because opportunities are shrinking.
“Investment is gone. We used to have a vibrant business community here. We used to have the Selebi-Phikwe Diversification Committee that led a consultancy that eventually came up with SPEDU. The only opportunity and funding lies with money allocated to SPEDU,” he added.
Moitlhobogi explained that Business Botswana is currently undergoing restructuring to improve the services it offers to its members.
He said their role is to advocate for an enabling business environment and they only intervene when companies collapse due to regulatory issues.
“We do not have the financial capability to assist our affected members, but we can only discuss with our members in the financial sector to assist affected companies, that is if they approach us,” he added.
He said the main problem is that many businesses are not members of Business Botswana but benefit from the organisations’ efforts to advocate for their members in terms of policies and regulations.
Dinesh Textiles, which is Selebi-Phikwe’s only surviving textile business, has incurred 85 percent revenue loss in the last eight months because their main customers, who are BCL sub contractors, have stopped placing orders.
The company’s business manager, Jacqueline Vanessa Rogers revealed that they have not received even a single order since January and this has forced them to lay off 35 workers.
“If we do not receive any order by the end of this month, we will be forced to retrench another 30 workers. If the current situation persists then we are going to be seriously affected. Management once considered relocating from Selebi-Phikwe, but thought of workers who would lose their jobs and decided to observe the situation for a year,” she said.
Dinesh Textiles used to be the town’s second highest employer after BCL Mine with 1,200 workers between the year 2005 and 2006, but has since been reducing the numbers.
Last year the company had only 186 and this year they are about to downsize the workforce to 133.
Rodgers added that government used to assist textile companies with a special support programme that she said helped a lot in sustaining jobs. She observed that if government does not step up to help BCL from its situation, then the whole town is likely to get affected.
Rodgers added that their challenge as the textile industry is worsened by the fact that all the raw materials are imported from South Africa hence the need for government to attract more investors.
Security Systems is one of the many companies indirectly affected by BCL’s economic situation. Though it has not reached a point of retrenching its workers, the company is grappling with unpaid debts by contractors it offers services to.
This is exacerbated by the fact that even individuals are terminating their security contracts because they can no longer afford to pay.
The company’s Selebi-Phikwe branch manager, Chakalisa Mokwakwa said their many customers are construction companies contracted by BCL. He added that their business is seriously affected as their debt book balances are increasing because customers now wait to be paid in order to pay Security Systems.
“At the same time we are not in a position to terminate their contracts because we have hope that the situation will get better. We have experienced a high number of terminations. Our wage bill is high while income is low,” said Mokwakwa.
He added that they did not realise the influence and impact of BCL to the local economy, but now the reality is beginning to show that there is no life in this region without BCL.
The vibrancy that used to exist in Selebi-Phikwe is almost dead. The local economy is bearing the bruises of the mine’s financial situation and the fact that the mine is even failing to pay its workers on time, has also killed the hype that used to exist around town during the pay days. This has now been replaced with a dull atmosphere and a desperation that is evident in the faces of workers and their dependants.
BCL Mine’s financial challenges became evident last year after the delayed completion of the smelter rebuild project, which was initially budgeted for P700 million but ended at P754 million.
A 50-day delay in the project also meant the company lost approximately P270 million in potential revenue during the period.
Delayed salary payments began in October last year and the mine explained that the cash flow problem was compounded by below budget ore production and worldwide commodity prices among others.
The company’s marketing and public relations manager, James Molosankwe recently explained that BCL Mine’s woes were not unique.
“In fact, 70 percent of all nickel producers worldwide are operating at a loss and BCL is no exception. Mines in South America, Australia, Europe and Africa have started to close and are retrenching employees because they cannot meet operating costs at current nickel prices.
“In January alone key producers such as Brazil-based producer Votorantim Metals, Australia’s Mincor Resources and Panoramic Resources have all made announcements to cease production in 2016 while Queensland Nickel has filed for voluntary administration,” he said.
He explained that BCL, including its subsidiary Tati Nickel, have ore resources enough to operate for many years to come. However, BCL needs to bring down its costs of operation to match the depressed base metal prices in order to survive the harsh trading conditions.
He noted that the company is involved in evaluating measures and processes to lower its costs of operation such as fast tracking Selkirk open pit to be on line by the end of this year, reducing utility costs, increasing smelter utilisation and disposal of non-core assets.
“As a result of this, there is need for re-organisation of the business and the company will duly consult with employees and relevant stakeholders in accordance with established consultation structures. Implications of the decision taken will be carefully considered within the broader context of transforming the organisation into a viable entity and its long term survival,” he said.