Government now expects mineral revenues in the form of royalties and dividends, to amount to P12.4 billion for the upcoming financial year, down from an initial forecast of P14.4 billion, due to mounting troubles in the mining sector.
Each year, government’s mineral revenues comprise mineral taxes and royalties paid by different operators, as well as dividends paid to government by those mining companies it has a stake in, such as Debswana.
For the year 2020/21 which starts on April 1, government had initially forecast royalties and dividends of P14.4 billion, compared to P13.6 billion in the current year. The original forecast, made in last month’s budget speech, would have meant royalties and dividends would contribute about 23% of the expected revenues for the year.
However, with the global economy feeling the effects of the coronavirus pandemic, it had been widely expected that the numbers would be revised to reflect the sudden instability in markets such as those comprising consumers, commodities, equities and capital.
On Monday Mineral Resources, Green Technology and Energy Security minister, Lefoko Moagi presented the latest revisions to Parliament in his Committee of Supply presentation.
“The Ministry projected total revenue for the financial year 2020/21 amounts to P12.4 billion,” he said. “The budget is expected to decrease by P897.2 million as compared to the current revised budget of P13.3 billion of the financial year 2019/20. “The bulk of the decrease is expected from mineral royalties and dividends.”
In the draft 2020/21 estimates released by the Finance Ministry shortly after the Budget Speech last month, the Minerals ministry’s total revenue was forecast at P14.4 billion. The ministry expected to earn P10.2 billion from dividends and
The reduction announced this week follows a frenetic period for global markets, as the impact of the coronavirus has spread rapidly across borders, even as the virus itself has spread.
De Beers, government’s equity partner in Debswana and the primary source of dividend income, saw values at its second auction of the year fall 36% to US$355 million. Shoppers in key markets such as China were under lockdown and unable to shop, resulting in traders unwilling to take up De Beers’ rough diamonds.
De Beers holds 10 auctions each year in Gaborone where it offers rough diamonds to an exclusive list of buyers called sightholders, who largely represent the cutting and polishing factories that produce jewellery abroad.
Government this week also decided to ban arrivals from 18 countries, including Belgium, India and China, where the majority of these buyers come from.
The decision was a response to the rising coronavirus threat, but it throws future sales into jeopardy. Moagi told a weekly newspaper that a meeting would be held with De Beers next week to determine the way forward on the sales. Government’s dividends from Debswana are also forecast to dip this coming financial year as the diamond group’s shareholders have committed to funding life extending projects such as Cut 9 at Jwaneng and Cut 3 at Orapa.