Silver lining seen as commodity cycle hits trough
Pauline Dikuelo | Friday May 6, 2016 10:58
BusinessWeek: What is the state of mining as reported by BCM members in 2015?
Siwawa: The situation in 2015 was slightly better as the year started, but continued to deteriorate to the point that some of the mining companies had to seek external sources of funding over and above what they normally receive for their operations. This necessitated stringent measures to try and stabilise their operations in the quest for sustainable mining. Some of the exploration companies were also affected to greater degree primarily because exploration activities by definition do not generate revenue, but are dependent on shareholder or stock market funding which at times is restricted in its approach.
BusinessWeek: What are the major causes of downturn as reported by members?
Siwawa: The major cause of the downturn can be attributed to low commodity prices around the world. We see in some situations the prices having dropped by over 50% and this can have a devastating effect on the financial cashflows of an organisation. On the upside though one can say the operating costs did not rise at the same rate as the decline in commodity prices otherwise the industry would have experienced a total collapse.
BusinessWeek: What are the responses by members to the downturn?
Siwawa: The responses to the downturn have been varied, but in essence the focus is on sustainability of the operations. In other words, the mining companies would do all they can to reduce costs and stay afloat in anticipation of a recovery in the commodity prices. The very last option in all these scenarios is closing down a mine. The current situation is to be expected considering historical database. Mining commodity prices are cyclic by nature driven by supply and demand. The bigger the demand of a commodity the prices increase provided the supply is constant. However should the commodity supply also increase, one tends to see a stabilisation or even a downturn in prices. However, the expectation is that the troughs in these cycles must be as short in duration as possible and also not be dramatic in terms of value decrease.
BusinessWeek: What are the prospects by members going into 2016?
Siwawa: The prospects for members remain focussed on staying afloat in anticipation of price changes in particular in the short term and that whilst this scenario is unfolding, the operating costs remain stable or reduce. Theorists have it that this pressure might ease more towards the end of the year or into the first half of next year.
BusinessWeek: Have BCM members approached government for assistance and what was the response?
Siwawa: There will always be linkages between the mining companies and the government to ensure the survival of this part of the economy. The industry is indeed part of the bigger driver in terms of Botswana’s economy.
BusinessWeek: What is BCM’s own outlook going into 2016?
Siwawa: The prospects remain stable in the short term, but see some improvements in the medium to long term. The mining world is huge and dynamic and we see similar if not worse conditions elsewhere than what the local industry is facing. What is of importance to sustainable mining in Botswana is collaborative efforts as distinct from aggressive competitive drives.
BusinessWeek: What is the state of industrial relations as reported by members, in light of the downturn.
Siwawa: It is difficult to suggest that the industrial relations across the mining companies would remain the same as those experienced in better operational times. This is the period where the relationship between the employer and employee has to be managed carefully such that the difficult and trying times can be overcome with as little pain as possible.
BusinessWeek: Do you have any additional information that you would like to add on?
Siwawa: The mining industry in Botswana is still to reach maturity stage. There are mineral deposits around the country that are currently being explored for to ascertain viability and sustainability. It is my hope that these will soon turn into operational mines and provide the desired impetus into the country’s economy. This mining industry will continue to provide for a larger portion of Botswana’s economy.