Courtesy of africalive.net
Shumba Energy is the only locally-owned coal and energy development company in Botswana, Mashale Phumaphi (MP), owner and managing director of Shumba Energy, tells AfricaLive.net (AL).
AL: Please give us a bit of a background on your company and tell us what you wish to achieve?
MP: We started this company back in 2010 at a time when South African power utility Eskom faced many power-production challenges. Being from Botswana, I saw an opportunity to exploit our vast coal resources both for the export market, as well as for addressing our energy shortage in the region. Talking of development, developing a coal energy plant takes some time. You first have to determine whether the deposits are economically viable, look at the market and get the right technical know-how. We are very cognisant of the prevailing global argument, which is all about sustainability and environmental-consciousness. One of our first goals as Shumba Energy is to ensure that we create energy sources that are first of all sustainable not only from a production perspective but also from an environmental perspective.
One of our businesses is a coal to fuel facility, and we have partnered with two of the leading companies out of China. One of the companies is Power China, and the other Wison Group. These partnerships will help us exploit our coal resources without any harmful emissions. We are currently looking at releasing 40% less carbon dioxide than the conventional coal to liquids process. We want the world to know that we are aware of the adverse effects coal has on the environment. Despite the risks to the environment, we cannot just sit on vast coal resources. Our goal as Shumba Energy is to find ways to exploit these mineral deposits in the cleanest way possible. We are also approaching hydroelectricity generation and solar power generation in the same way.
AL: Speaking of solar energy, we have read that you are interested in going deep into that. How true is this?
MP: Our interest in exploring solar energy is real. As you may know, Botswana has enormous potential in solar energy. The challenge with solar, is that as it currently stands, the cost of storage is pretty prohibitive. Pursuing solar is a great idea, but we are dealing with an uncompetitive cost of storage compared to other forms of energy such as coal, hydro, and geothermal. We have to examine the most practical energy sources to exploit in our region. There are enormous opportunities for hydroelectricity outside Botswana in places like Zambia and the DRC though there are vulnerabilities involved due to climate change. While we wait for sources of energy like wind and solar to become more affordable to store, we have to utilise coal in the most sustainable way possible.
Fortunately, we have the likes of Tesla who are working day and night to slash the costs of storage. We estimate that in the next fifteen to twenty years, the cost of storage will have gone down to a level competitive with fossil fuel sources. In the interim, if we can get coal-based electricity in a carbonneutral way, why not continue to utilise this vast resource?
Our focus is being sustainable and thoughtful about how we exploit our coal deposits to avoid negatively impacting the environment. It is with that mentality that we are producing cleaner diesel. This drive is not just about energy sustainability but also about taking care of the citizenry. We have to reduce unemployment from double to single-digit numbers just like the countries in the Eurozone.
AL: You have talked about your efforts to minimise the carbon footprint in line with the global mood. What other trends do you see coming up in the future that will affect the energy sector?
MP: We are already starting to see the private sector play a more significant role than it used to. The private sector is stepping in because state enterprises are bogged down by many issues which include infrastructure building, unemployment control and other headaches. Our governments also don’t have the capital required to develop the energy industry the way it should be. We have to create new energy sources that are clean to use, and that can lead to the rise of new industries. I see Independent Power Producers (IPPs) playing a more prominent role because of this in the future. We have set up two sites for our IPP project to address our power shortages. Soon you will see energy become more decentralised through off-grid power solutions, as IPPs continue to grow. Having independent power sources means security for the consumer as well as the lowering of electricity costs. I also see the private sector investing heavily in power storage. Adequate power storage stabilises transmission systems.
One of our significant challenges in this region is that after 22h00, our power consumption begins to drop off, and though it’s possible to reduce our power generation; there are challenges to doing that. One of the problems of lowering power generation is there is a tight limit to power reduction, the other issue is that if your economic model demands a certain level of production in a twenty-year period, you can’t reduce output because of a dip in demand. It is, therefore, better to have a reliable storage system that makes the entire power set up more stable. I also see energy becoming more mobile in the future. There will be no need to build costly power plants in remote areas; power distributors will have to have a central plant somewhere then put energy storage batteries on trucks and send them to service underserved regions regularly. Mobile energy will enable rural areas to function, on a fraction of the required investment. There have been murmurs about the viability of electric cars in the future. The big question about the prospect of electric vehicles is how and where will they be charged? I, therefore, see storage as the biggest issue in the energy industry now and in the near future.
AL: While at the Mining Indaba conference in Cape Town last year, the president of Ghana put forward his mission for mineral wealth to have more of a direct impact on the lives of people within the continent. Could you elaborate on the role mining can play in improving the lives of African people?
MP: The challenge we have in Africa is not so much how to reap the benefits of having minerals. Our challenge has more to do with not implementing the programs and setting up the industries that need to exist to extract maximum value.
A mineral is only worth about 10% of its final value before getting to the end consumer. Value chains are what determine who benefits from the minerals. African countries must, therefore, invest in industries that make those value chains local so that the middlemen, for the most part, can be our people. There is progress being made on this front because certain agreements that allow free trade among countries are in place. It means that if I am a producer in the SADC region, I have a market of three-hundred million people to sell to. We must have more creation and generation of locally finished products as well as regional custom unions to be able to take advantage of our mineral wealth. Ghana has also made steps to ensure that everyone with an African passport can enter their country. Ghana’s move is significant because as business people, we want to be able to travel freely so that we can invest and start businesses across countries.
“One of the problems of lowering power generation is there is a tight limit to power reduction.”
We have to remember that our borders as they are today are only a century old, and we did not create them. African borders may be entrenched in our constitutions and our minds, but we must keep in mind that these are artificial borders. The artificiality of our borders should make us rethink the stringent visa requirements and the need for integration.
AL: One of our main goals as a publication is to inform the international community on the realities of doing business in Africa. What would be your words of confidence to them, especially when it comes to risk?
MP: There are a few critical things about doing business in Africa. One of them is you can’t show up with a preconception that everyone is corrupt, and you must be unethical to do business. In our many years of operation, we have done business successfully without feeling the need to do anything underhand. Secondly, any foreign investor that does not feel confident enough to go at it by themselves would do well to partner with a local player and move through them. Investors must also have patience because though opportunities exist, many industries are still at their infancy, and they might struggle to find the competencies they require.
AL: You have travelled and lived in many different parts of the world. What made you want to go back to your native Botswana and set up shop there?
MP: Apart from wanting to develop my country and give back to the people that invested in me, I also saw the opportunities. I used to work in the European financial sector and in a mature market like that; opportunities are few and far between. An underdeveloped market like ours presents more of a chance to make a change. The icing on the cake is good weather, friendly people and great food.