Southern African Nations Sign Rail and Port Project Deal to Unlock Botswana's Coal Wealth

In a pivotal development that could significantly boost the southern African economy, Botswana has taken a substantial step toward monetizing its considerable coal reserves. The leaders of Botswana, Mozambique, and Zimbabwe have officially endorsed plans to initiate a comprehensive rail and port project. This project is designed to allow landlocked Botswana to transport and export its coal through a Mozambican port. The African Development Bank is set to fund a feasibility study, estimating the cost at approximately $4 million, as revealed by Mozambique’s Minister of Transport and Communications, Mateus Magal, during a ceremony that was broadcast via state television.

This collaboration will encompass the refurbishment of existing rail lines that traverse through the three involved nations, coupled with the construction of new railway links. It also envisions a modern deep-water port to be constructed to the south of Maputo, which is situated proximal to a national park that serves as a sanctuary for wildlife such as elephants and cheetahs.

Botswana, which possesses a staggering 212-billion tons of coal reserves as cited by the World Energy Council, is racing against time. The urgency stems from a desire to capitalize on these assets before the global pivot towards renewable energy potentially diminishes their value, leaving them unexploited. However, this plan, which has been dormant for decades, is now confronted by significant financing challenges, chiefly due to the decline in funding availability for new coal ventures. Financial institutions are increasingly divesting from coal, the most polluting of fossil fuels, thereby complicating funding prospects for such projects.

Looking to Mozambique, the scenario with Ncondezi Energy exemplifies the increasingly inhospitable landscape for coal-based initiatives. After entering a construction agreement with China Machinery Engineering Corp. for a 300MW coal-fired power plant, optimism for Chinese financial backing was quashed in light of China's revised policy. Chinese President Xi Jinping's declaration of an end to funding overseas coal projects left the project in limbo. Consequently, Ncondezi Energy pivoted, transitioning to a solar power producer and undergoing a corporate rebrand to Solgenics.

While the signing of the rail and port project represents a historic and strategic move for the landlocked nation of Botswana, its success hinges on overcoming the considerable financial barriers in an era increasingly averse to fossil fuels. The outcome of the feasibility study and the subsequent steps to secure the necessary capital for this venture will be critical determinants of whether Botswana can realize the potential of its coal reserves before they lose economic viability due to the energy transition.