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May 18, 2012 | 09:59 GMT

Special Series (Part 3): Botswana's Limited Coal Transportation Options

Stratfor
Summary

Editor's Note: The following is the third installment of a series assessing the infrastructure required for southern Africa — South Africa, Mozambique and Botswana — to capitalize on its coal production potential. 

Like South Africa and Mozambique, Botswana has massive amounts of estimated coal reserves. Located primarily in the country's Central District, these reserves total approximately 210 billion tons, giving Botswana a potential export capacity of 80 million tons per year.

But unlike the other countries surveyed in this series, Botswana is landlocked. Without direct access to the sea, any route to bring Botswanan coal to port must traverse at least one other country. While there is no short-term solution to Botswana's transportation infrastructure problem, the government in Gaborone has a few options to improve infrastructure in the long term. But every option is fraught with drawbacks; they are expensive and time-consuming and could therefore complicate foreign investment.

Botswana is looking to coal to reduce its reliance on nickel, gold and diamond exports, which accounted for roughly 80 percent of total exports in 2010. The problem is that transporting a heavy ore like coal requires a more robust infrastructure network; nickel, gold and diamonds have never required heavy-haul transportation infrastructure. To capitalize on its coal-export potential, Botswana must first build up its transportation infrastructure and bring its coal shipments to port.

Currently under consideration are three potential routes, which would take coal shipments through Namibia, Mozambique or South Africa. While all of these routes could prove successful in the long term, they all face short-term challenges.

Three Options

One project being considered is the Trans-Kalahari corridor project, which links Johannesburg and Pretoria in South Africa to the Namibian port of Walvis Bay by way of Botswana. The project entails the construction of a new 1,500-kilometer (930-mile) rail line by which Botswana could transport its coal to the Atlantic coast. In Namibia, the existing rail line runs from Walvis Bay to the city of Gobabis, about 100 kilometers short of the Botswanan border.

The obvious drawback to the route is that it runs through the Kalahari Desert. At about $10 billion, the proposed cost of developing and maintaining such a long stretch of railway may be prohibitively expensive. In addition, most coal destination markets — India and China, for example — are located off Africa's east coast, so exporting from Walvis Bay would add as much as a week in transit.

Southern African Coal Export Infrastructure

Another potential route for transporting coal would pass through Zimbabwe before turning south into Mozambique, where it could end at either Maputo or the new port of Ponta Techobanine. The project would require an initial investment in excess of $7 billion, which would be applied toward the new port and the construction of 1,100 kilometers of rail line. Ponta Techobanine's export capacity is unknown, but Botswana has announced that it plans to export roughly 20 million tons of coal per year from southern Mozambique.

The main disadvantage to the Mozambican route is that it would have to pass through three countries, requiring open borders between each one. This would be problematic in Zimbabwe, which has long been marred by political instability. While financing for the deal has not been determined, Zimbabwe likely would be unable to pay for the construction and maintenance on its portion of the rail line. All these factors could scare off potential investors.

The third route for bringing Botswanan coal to port would pass through South Africa, a country that has a more robust transportation network than its neighbors. Botswana and South Africa are exploring a feasibility study for a rail line connecting Botswanan coal mines to South Africa's coal-rich Waterberg region. From Waterberg, the coal would be shipped to the Richards Bay Coal Terminal (RBCT), South Africa's largest export facility. The project would include two heavy-haul coal lines: one that could be finished by 2020, and one that could be finished after 2026.

On the surface, this route seems to make the most sense for Botswana; some of the requisite infrastructure is already in place, and South Africa has the capital to fund its portion of the project. However, this route is far from ideal. A rail line connecting Waterberg to the Ermelo-RBCT heavy-haul coal line has yet to be completed. Moreover, the line has an 80 million-ton-per-year capacity, meaning Botswana would have to compete for space with mining companies in Waterberg and Ermelo. As long as there is coal in South Africa, Pretoria will favor domestic coal over foreign coal. But in the long term, Botswana could acquire more space once Ermelo's coal mines near depletion.

In April 2012, Botswana conducted an export test run, moving some 25 tons of coal through Zimbabwe and to Maputo, Mozambique, on the existing rail network. The test shows that Botswana can perform small-scale exports on the existing regional rail network until they pursue one of the three aforementioned options.

Long-Term Results

Botswana's choice puts the southern African nation in a unique position. Its decision could redefine its relationship with its powerful southern neighbor. Were Botswana to choose either the Namibian or Mozambican option, it could alter regional dynamics by eroding South Africa's traditional domination of transportation corridors. At the very least Botswana could decrease its dependency on South African import and export lanes.

Botswana may have more coal reserves than any other country in the region, but without a coastline it has few options in moving its coal to market. Thus, improved infrastructure is essential if Botswana wants to maximize its profits. But each option brings its own disadvantage, and whichever choice Gaborone makes will take at least a decade to implement. Prolonged development could scare off potential investors, especially if they anticipate a drop in coal prices.

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