Seven Years Left: Spending P1.4 Billion Before the Mine Closes
Tshwaragano District has depended on a single copper-nickel mine for 34 years. The mine pays 46% of district wages and buys P210 million of local services each year. The company has told the council that remaining ore will be exhausted in seven years. The district now holds P1.4 billion of development capital, one of the largest allocations in the country, and two proposals are on the table. Proposal A is a 900-hectare irrigated horticulture estate: capital cost P1.1 billion, projected to employ 1,700 people at peak and to earn foreign exchange from vegetable exports, but requiring 14 million cubic metres of water a year in a district where the dam is at 31% of capacity. Proposal B is a P150 million enterprise fund offering matching grants of up to P250,000 to 600 existing small firms (welding, transport, catering, agro-processing) plus P80 million for a vocational college. The closure is seven years away.
1. Recommend how the P1.4 billion should be allocated. State and justify your appraisal criteria before you apply them.
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Choose the yardstick first. A defensible appraisal weighs: (i) jobs created per pula of public capital; (ii) how soon benefits arrive relative to the seven-year closure; (iii) risk, including water risk; (iv) whether the activity survives once the mine stops buying local services.
Apply it. Proposal A: P1.1bn for 1,700 peak jobs is about P647,000 per job, and peak employment in horticulture is seasonal, so full-time-equivalent jobs are fewer. Benefits arrive only after three or four years of construction and first harvests. Its 14 million m³ demand is over half the basin's safe yield in a district whose dam is at 31%: the project fails if the drought continues. Proposal B: P230m across 600 firms; at two to three added jobs each that is 1,200-1,800 jobs at roughly P130,000-190,000 per job, delivered in 12-24 months, spread across sectors, using existing skills and no water. It is also reversible. A grant fund that underperforms can be redirected; a failed irrigation estate cannot.
Conclusion. Fund B in full and hold A. Do not commit the remaining P1.17bn to A until a basin water allocation is agreed and the enterprise fund has shown take-up. The strongest counter-argument is that horticulture earns foreign exchange and B does not, but foreign exchange from a project that cannot be watered is not a benefit.
2. A councillor argues: 'Proposal B is far too small to replace the mine's 3,200 jobs, so it is a waste of money.' Evaluate this argument.
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The argument sets a test that no realistic option can pass, and then applies it only to B.
Check A against the same test. A promises 1,700 peak jobs, not 3,200, and those are seasonal. If failing to replace 3,200 jobs disqualifies a proposal, A is disqualified too, at eight times the cost.
Distinguish replacement from substitution. The mine's 3,200 jobs will go whether or not anything is built. The real question is what each pula of public money adds. B's value is not that it substitutes for the mine but that it creates a layer of firms that already sell to the mine, to households and to the district, and that can keep selling after closure. The mine's own procurement, P210 million a year, is a ready market that can be shifted towards local suppliers now, while the mine still operates.
Where the councillor is right. B alone will not absorb 3,200 workers, and a P250,000 grant is not enough to build a firm capable of exporting. Small grants can also be captured by better-connected applicants and can fund firms that would have grown anyway.
Judgement. The argument confuses size with return. The correct conclusion is that B is necessary but insufficient, which is an argument for combining it with retraining and with negotiated closure arrangements, not for abandoning it.
3. Explain how the seven-year time horizon should shape the decision, and what the council should do with the mine before it closes.
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Seven years is short for a capital project and long for a policy window. Three implications follow.
Sequence, do not choose once. Spending everything now on a single long-lead project commits capital before information arrives. A staged approach - enterprise fund and college first, water decision and horticulture later - lets the district learn from early results and keeps options open as the closure date is confirmed or revised.
Use the operating mine as an asset while it still operates. The council should negotiate now: a closure and rehabilitation fund paid into annually, advance notice of redundancy dates, a supplier-development programme that shifts mine procurement towards district firms, and access to the mine's training centre for welders, electricians and drivers. These cost little and expire with the mine.
Avoid stranded assets. Buildings, irrigation works and a college built for a population that then shrinks are liabilities, not assets. Any investment should be modular, so it can be scaled down.
Watch the fiscal clock. Mineral revenue will fall before the closure, not after, so the district should not commit to recurrent costs (staff, maintenance, water charges) that it cannot fund from its own revenue once transfers decline.