At the recent Botswana Resources Infrastructure Energy Forum in Gaborone, delegates heard that the Debswana Citizen Economic Empowerment Programme (CEEP) will ensure short and long term citizen beneficiation and even diversify the diamond value chain away from diamonds.
This came to light in a panel discussion themed Deepening Citizen Economic Empowerment in the Mining Sector, which was held in Gaborone from 16 to17 May 2022. Moderated by the CEO of Old Mutual Group, Gerald Randall, the panel discussion was aimed at exploring ways through which citizen beneficiation in the mining sector can be maximised. Significantly, the Debswana model was found to be iconic, considering the fact that the parastatal’s beneficiation programme has already been rolled out and that the results are bearing fruit.
Under the programme, delegates heard that the world’s leading diamond producer by value allocated a staggering P20 billion to help advance government’s efforts of achieving a diversified economy, inclusive economic growth and import substitution. Delegates were told this by one of the panelists, Nametso Gaepotlake, who is Supplier Development Manager at Debswana Diamond Company.
Through its Citizen Economic Empowerment Programme (CEEP), Gaepotlake said, Debswana has a vision of its own, which is an ambitious initiative that is expected to create a remarkable 20 000 jobs. Under this ambitious undertaking, Debswana will localise manufacture of its production inputs and grow Botswana’s manufacturing base, a commitment that no other company has ever made. Furthermore, Debswana wants its manufacturing value chain to trickle down to all economic groups so as to achieve inclusive economic growth. Consequently, Gaepotlake said the Debswana CEEP requires that its suppliers utilise local inputs in order that the value chain is further expanded and diversified.
Significantly, a partnership was forged with commercial banks to ensure that SMEs that supply Debswana have access to finance, mentoring and business development from these commercial banks, with Debswana acting a guarantor of the financing. Under this arrangement, Gaepotlake said the colossal diamond miner’s partnership with the banks provides solutions to financial challenges faced by budding citizen enterprises.
The banks on board include Stanbic Bank Botswana, Absa Botswana, Bank Gaborone, BancABC as well as First National Bank Botswana (FNBB). By providing the mentorship and financial assistance to these selected entities, Debswana’s aim through this transformational programme is to help them contribute meaningfully to the country’s economic diversification agenda and create alternative livelihoods to mining.
Another delegate, Kushatha Chilisa, who is Head of Enterprise and Supply Chain Development at Absa Bank Botswana, said through this arrangement with Debswana, Absa has set up a team that handholds SMEs that are suppliers and contractors to Debswana to ensure that they effectively execute their contracts. According to Chilisa, some of the contractors win Debswana tenders mainly because they had considerable work experience as Debswana employees. “However, we believe that may not necessarily mean they have the best business management expertise,” she noted. “We basically impart business skills like managing their finances to them and ensure that there is business sustainability even beyond the one contract they may have won.” Chilisa said this is meant to ensure that even in manufacturing, the local companies meet the desired product quality. She observed that through the Debswana CEEP, opportunities that will benefit the economy have been created even beyond the mining industry.
Notably, she disclosed that a Memorandum of Understanding (MoU) has been signed with the Original Equipment Manufacturers (OEMs) and Debswana, in that way creating a great opportunity for Batswana to enter the equipment manufacturing space and benefit from the entire value chain, more so that there is funding available. “Through the SMEs that we alone have financed, there are around 750 jobs created,” Chilisa said. “Imagine how many jobs will be created from the entire CEEP value chain!”
Her counterpart at Access Bank Botswana, Onkemetse Monnaatsile, whose position is Head of Sales and Trade Finance, said their role as commercial banks is not only to finance because the Debswana programme affords them an opportunity to learn about the mining value chain and to be able to tailor-make products suitable for players in that space, thus improving efficiency and aiding beneficiation.
At some point, the moderator Randall asked about a suspicion or belief that the Debswana CEEP or beneficiation in general could result in job losses. Gomolemo Basele, a quantitative analyst with First National Bank Botswana, said although there may be job losses, the bigger picture is that the benefits outweigh the losses. He spoke of upskilling workers involved in the mining value chain through the beneficiation, thus enabling them to be employable even outside Botswana. Further, Basele said through opportunities created by the beneficiation programme, there is an opportunity for Botswana to position itself as a manufacturing hub, especially for components needed in the value chain, and take advantage of the African Free Trade Area (AFTA) and target the export market.
Access Bank’s Monnaatsile added that it is critical for financiers like commercial banks and development finance institutions (DFIs) to remove bottlenecks around ease of access to funding, if the full benefits of the CEEP are to be enjoyed.
P20bn set aside to create over 20 000 jobs
An assortment of measures is already in place. Chief among them is creating a citizen spend value of P20 billion by 2021. This initiative is expected to create around 20 000 jobs by 2024. Through this undertaking Debswana will ensure that in all its procured products and services, 30 percent is locally manufactured, delivering the intended socio-economic impact to communities.
Debswana CEEP opportunities
Through the CEEP, Debswana says it wants to help the government reduce Botswana’s import bill by growing a manufacturing sector in the country. According to Statistics Botswana (SB), the country spends an average of P6 billion on imports every month. Debswana believes this is the money that should be chanelled into citizen enterprises to help industrialise the economy. It is for this reason that Debswana devised CEEP to help capacitate the manufacturing industry, feed local demand and help reduce imports.
Achieving import substitution through manufacturing
Debswana strongly believes that the idea of a deliberate reduction in imports of capital goods can help an economy by increasing demand for domestically produced goods, which is otherwise known as import substitution. From its P20 billion budget that was estimated to be spent in 202, the Debswana CEEP has identified 10 commodities identified for manufacturing, which would be financed with over P500 million over a period of three years.
Further, from its P20 billion budget Debswana CEEP has allocated P1 billion to finance manufacturing of equipment and localised services. From this budget, the Debswana CEEP will capacitate citizen enterprises to manufacturer rollers and idlers, vibrating screens, radiators and components, HDPE pipes, poly screen panels, drill rigs, machine consumables, nuts and bolts and so on.
The Debswana CEEP will also help create a robust chemical manufacturing and service sector. Under the programme, Debswana will allocate P1.5 billion annually for procurement of such chemicals produced locally. The citizen empowerment programme also entails providing financial assistance to local manufacturers and service providers. Ore process chemicals, industrial gases, high performance lubricants as well as dust suppressants are targeted.
Fuel and logistics
Furthermore, Debswana CEEP will spend a total of P1 billion per year on procurement of petroleum products and logistics. As an example, Debswana announced a new partnership with Botswana Oil Limited (BOL), the state owned oil company, which is aimed at ensuring citizen participation in the petroleum industry. The partnership is expected to result in beneficiation to several local fuel companies.
Transformation & rebuild centre commitment
Debswana wants Original Equipment Manufacturers (OEM) to commit to ensuring that 30 percent of their shares end up held by Botswana citizens. OEMs are companies that manufacture products which are then sold to Botswana companies. The local companies would then resell to Debswana under their own branding. However, larger profit margins are enjoyed by the OEMs. Debswana, in its quest to empower citizen participation in this area, wants these OEMs to transform into joint ventures with Botswana owned companies at least with a minimum of 30 percent held by citizen shareholders. A total of P1 billion per year has been allocated to this initiative by the Debswana CEEP to ensure that they set up (as joint ventures) major components assemblies in the Botswana. By ensuring that OEMs create joint ventures with locals, Debswana believes it will also play a role in attracting foreign investors to set up shop in Botswana, which will complement efforts of the Botswana Investment and Trade Centre (BITC) to attract Foreign Direct Investment (FDI).
Consequently, this initiative shall also be undertaken in partnership with the BITC to facilitate Investment in Repairs and Maintenance in Botswana. BITC is housed under the Ministry of Investment Trade and Industry (MITI), which will also play a role in ensuring the advancement of the National Support Development Programme.
A further P3bn for OEM maintenance
In addition to facilitating citizen companies to own up to 30 percent shareholding in the OEMs, Debswana will spend a further P3.3 billion in maintenance contracts for all the OEM in fixed and mobile plants. In return, the OEMs are expected to commit to a minimum of 50 percent in value to local repairs. Further, they are expected to play a role in the tertiary supplier space to allow citizen participation in other areas of the value chain.
Botswana has also partnered with the Botswana Innovation Hub, which will assist in luring young entrepreneurs to benefit from the CEEP through the Business to Youth (B2B) initiative. Further, the CEEP has partnered with the United Nations Development Programme (UNDP) for capacity building.