Shumba Energy is an energy investment holding company based in Botswana and listed on the Botswana Stock Exchange. Shumba has, over the last couple of years, progressed from an exploration company to an energy development company, and sits on over 4.5 billion tonnes of thermal coal.
Established in 2011, Shumba now owns a significant portion of advanced energy projects in Botswana and is uniquely positioned with its strategy to develop energy projects that are unaffected by the volatility of global commodity prices.
Shumba is now beginning to reach the culmination of the first phase of its project company development, which is to establish a strong resource base in Botswana. The company has started to move into the second phase, which is to monetise the assets.
Through this phase, the company will be working with more strategic partners and creating long-term revenues from projects that it is working on, whether a mining operation or a power station, and whether coal trading or a petrochemicals facility. Managing director Mashale Phumaphi says Shumba Energy has been on a very interesting journey since inception in 2011.
The local energy sector as a whole, he says, has seen market fluctuations and a number of encouraging developments.
“Notably, we’ve seen Botswana coal become more competitive in the region. For example, Shumba is now – through its Trading Division – selling coal into South Africa. Such things were not happening before and, further, if you look at new mines opening, such as Minergy, you can tell that Botswana coal has become a lot more competitive. The previous stigma that it was uneconomical has lifted,” he explains.
“As a company, we undertook the strategy of diversifying our asset base, having started off with just one venture, the Sechaba project. In order to make sure that we minimise our risk, we have maintained our strategy of keeping our portfolio diverse. At the moment, we’ve got three coal projects and our Trading Division, and we’ve recently gone into the area of coal to liquids. In fact, we’ve recently added to our company a highly seasoned professional who has 21 years’ experience in the oil industry, during which he held various positions ranging from government and public affairs manager, to business development manager for BP. He is currently the general manager of Puma Energy Botswana and is coming on as a non-executive director at the moment,” Phumaphi explains.
The coal industry in Botswana saw a dip due to market conditions and characteristics of the sale of good coal in the region. However, Phumaphi believes the industry is now buoyant.
“Now is a really great time to be involved in Botswana coal, as the markets are really opening up for it. What is quite fascinating is that, from a pricing perspective, we’re seeing Botswana coal landing in South Africa cheaper than from traditional sources in South Africa itself. The competitiveness of the coal is coming into play and I think this has more to do with the cost of mining going up in South Africa due to higher labour costs and higher mining costs of the coal, given that the mines are a lot older,” he continues.
Shumba as a company has opted to focus its strategy on the entire energy sector, be it coal, petrochemicals or power.
“I think the future is bright, given the high growth of the African population and industry, particularly because there is a focus on increasing intercountry trade in Africa. And there is a lot of money being ploughed into the mining, power and petroleum sectors. I think, as an industry as a whole, things are looking positive,” he asserts.
The sustainability conversation
It is one thing to see an industry come out of a dip, but its sustainability is what really determines the future. Regarding this, Phumaphi says he’s in full support: “There are two aspects of sustainability, to my understanding. The first one is that, from a cost perspective, we need to make sure that our solutions are profitable in the long term to make sure that whatever projects we develop are in the lower quartile of the cost curve.
“Second, it’s about producing products that are friendly to the environment. We should do the best we can to make sure that whatever processes we undertake are as environmentally friendly as possible. As Shumba Energy, we conduct our environmental and social impact assessments to World Bank standards in order to make sure that when our projects are running, they are sustainable in the long term and can be seen to have a minimal impact on the environment,” he adds.
Phumaphi believes that, for the sake of future generations, it’s important that activities such as mining or power generation are able to first minimise the impact on their environment and then, once done, leave the environment in the same state as before mining, or even better off.
He is adamant that, for both companies and industry, there is a pressing need to have objectives that aim to improve the environments projects operate in.
“Sustainability is not just about maintenance; it’s also about finding ways to improve the operating environment. There are many ways that you can look at that, for example, when you rehabilitate the area that you have worked. In some cases, you can even find ways to actually improve on the biodiversity present before a project started,” Phumaphi insists.
Lessons only leadership can teach
Inside Mining asked Phumaphi what lessons he felt he had learnt throughout his journey with Shumba.
“The first lesson is that, in order to be sustainable as a business, you need to keep your overheads as low as possible. The second thing is to make sure that you’ve got a diverse business in order to minimise single project risk. And the third thing is to make sure that you work with partners to optimise the monetisation of your project.
“There’s only so much one company can do. But if you have the right strategic partners, it leads to you being able to achieve great things on the same project. From more of a strategic perspective, I have learned to be persistent, to never throw in the towel, and to make sure that I am optimistic in whatever the company does.
“There’s a saying that goes, ‘Whether you think you’re right or wrong, you’re correct’. I believe that success is the manifestation of belief in what you’re doing. I have learned to stick to the vision and to keep my belief through the difficult times,” he concludes.