The news that should come as early Christmas for Batswana is that the much anticipated projects of Special Economic Zones Authority (SEZA) are now showing signs of commitment, like an aircraft starting engine for take-off the Sir Seretse Khama International Airport (SSKIA) Special Economic Zone (SEZ) project is now ready for shovel on the ground work.
BusinessPost has established that already P100 million has been released to commit on a 1.8 kilometre road which is part of the Phase 1 strategic plan for the initial development of the Sir Seretse Khama International Airport (SSKIA) SEZ. According to SEZA, this project will open up a 90 hectares development near the SSKIA. The national airport has been declared as a multi-use SEZ and its boundary has been approved by Gaborone City Council (GCC), according to SEZA. A plan is that economic activities at the SSKIA-SEZ be more focused on innovation and diamond value addition; while also catering for opportunities in pharmaceutical manufacturing and distribution.
“Other miscellaneous economic activities will include industrial, commercial, air-related logistics and distribution. From a real estate, financial and fiscal standpoint it made sense to integrate the Innovation Hub and the Diamond Hub into the SSKIA-SEZ,” said SEZA Acting Chief Executive Officer Thatayaone Ndzinge in an interview with this publication.
The legislation enacted the Special Economic Zones Act in 2015 with a mandate, “to make provision for the establishment, development and management of special economic zones; for creating a conducive environment for local and foreign investment; to facilitate expansion of employment opportunities, attainment of economic growth targets and to provide for matters related therewith and incidental thereto.”
Government has zoned seven land spaces to be used as SEZs; Lobatse 70 hectares, Sir Seretse Khama International Airport 780 hectares, Fairgrounds 50 hectares, Palapye 500 hectares, Selibe Phikwe 1100 hectares, Francistown 700 hectares, Tuli Block 400 hectares and Pandamatenga 41000 hectares.
The SEZs has been divided into phases and in the first phase there is Sir Seretse Khama International Airport (added with the Diamond Hub as industrial and business transport zone); Selibe Phikwe(like base metal beneficiation, chemical manufacturing and agro business and Francistown(mining and logistics).
In the second phase there is; Lobatse(meat and leather hub), Palapye(coal benefication), Tuli Block(horticulture), Pandamatenga(agro-business) and Gaborone Fairgrounds(financial services hub.Last month Bothakga Burrow won tender number 014/03/2019 for constructing: “detailed urban scheme, detailed infrastructure services design and production of construction tender documentation for the designed Boulevard one of the Sir Seretse Khama International Airport Special Economic Zone (SSKI-SEZ East) in Gaborone.” This tender should be completed by next year August according to the contract.
According to SEZA, the project will also include a design scheme for provision of underground services like water, fiber, power and CCTV. “We are committed to delivering a quality project within time and budget. The success of this project will no doubt set the tone for the SSKIA-SEZ,” Ndzinge told BusinessPost.
Botswana’s SEZA was benchmarked from leading economies like Singapore, Malaysia, South Korea, Mauritius and China. Already P145 million has been approved for SEZA projects. Gabana Architects Consortium is awarded a tender to construct the P8 million Lobatse SEZ and is expected to finish this project next year June.
In Gaborone, apart from the SSKIA, SEZA has a zone at Fairgrounds commercial area where SEZA is headquarted and this tender was given Royal Haskoning at a tune of P13 million, also expected to have left the construction site by June 2020. Gabana Architects Consortium took another SEZ tender to construct the Selibe Phikwe economic zone before July 2020. Like Gabana, Royal Haskoning is lucky for the second time in snatching the building of the Francistown SEZ. However the Pandamatenga and Palapye SEZ projects are yet to be awarded. Ndzinge promised that early next year these projects will take off. He said at Palapye they are still marketing the area and awaiting an investor.
Land issue for SEZA
Last year September it was revealed by the SEZA’s Director Investor Attractions and Monitoring Joel Ramaphoi during the Business Botswana Annual General Meeting that the process of acquiring land and change or transfer of land use in Botswana has been delaying the Authority in doing its mandate. Ramaphoi said the issue of land allocation or availability of land to be zoned prove to be a big impediment before SEZA.
“Land acquisition has been a big problem. There are always delays in land acquisition and it is a big challenge. We need to get enough land which will enable to carry out our mandate,” said SEZA director, Ramaphoi who also gave an example of Lobatse where they struggled to acquire 200 hectres for SEZA as “it took too long to get land.”
During last year’s National Business Conference President Mokgweetsi Masisi said his government is working on legislation “that will fast track the processing of applications for the change of land use so that the land owners can benefit from its optimal utilization.” Masisi revealed that the target date for finalization of the legislation would December last year.
In an interview, Ndzinge said land is not a huge issue for SEZA, but there is a specific zone being the Tuli Block which could have been referred to by Ramaphoi. He said SEZA has a lot of land for SEZ safe for the Tuli Block area which is not necessarily a top priority area. He said land at Tuli Block is mostly privately owned hence the difficulty in its acquisition. But that is not a train smash according to Ndzinge as Tuli Block is not top on the list and SEZA cannot do all the eight zones at a go.
The legislative debate on SEZA
When telling Parliament of SEZ last year the then assistant Minister of Investment, Trade and Industry Moiseraele Goya said that year conferring of all the eight SEZs will be finalized during 2018 and land servicing of the seven sites was intended to be completed by December 2018 and March 2020 respectively. He further revealed that the sale and marketing of all sites started in April 2018.
This led to the debating of the Special Economic Zones Bill No. 10 of 2015 which was lauded by the former Sefhare-Ramokgonami legislator Dorcas Makgato saying the initiative of SEZs would expedite industries competitiveness in the global market, hence strengthening the country’s export earnings. Boteti East legislator Lelatisitswe Sethomo who supported the Bill wanted people in the SEZs to be empowered.
However the late Mochudi East NP Isaac Davids shot down the SEZ idea, saying that even though the Bill was a good initiative, it was going to be hampered by shortage of water and power in the country where the SEZs are located. The then Maun East MP Kostantinos Markus complained that his region was left out of the zoning even though it is a tourism attraction area. During last year Business Botswana AGM, SEZA director Ramaphoi said they have decided to start with 8 zones. He said they have been benchmarking on China which has only 4 SEZs but is successful economically.
SEZA already zoomed and zoned four investors
Ndzinge has also revealed that they have so far found four investors who are committing to convert soon and come do business in Botswana in April next year. He said their investor attraction mission which led them to Dubai, South Africa and Germany bore fruits as they talked to 30 investors, including the four who are almost ready to convert. He said most of businesses who are interested in coming to Botswana are impressed by regulations and reforms which were put in place for Doing Business.
Incentive packages for investors
On July this year cabinet approved that a company will be given 5 percent Corporate Tax incentive for its first ten years in Botswana. After ten years the incentive becomes ten percent. There will also be zero rated VAT on raw materials for manufacturing for export. Cabinet sought to put the issue of land shortage by allowing fast allocation of land for investors.
Foreign investors will also be offered long term renewal land leases. There will also be an advantage of a waiver on transfer duty on land and property and a Property Tax exemption for 5 years. Government will also duty free imports for specialist plants and machinery manufacturing purposes. Government of Botswana will ensure that there is no exchange controls but full repatriation of profits and capital.
Jwaneng Mine— by far the world’s richest diamond mine is not about stop any time soon — plans are underway to ensure more gem stones are birthed from the Prince of mines.
Owners and operators of the mine, Debswana, a 50-50 De Beers- Botswana Government joint venture intends to spend over P65 billion to breathe life into the mine beyond the current Cut 9 project. Cut 9, which is currently transitioning from outsourced contractor to in-house operation, will take Jwaneng to 2036.
Debswana, by far one of world’s leading rough diamond producer revealed in a media briefing on Friday morning that an ambitious project to transition Jwaneng from open pit mining to underground is on the cards.
The company top brass noted that studies are underway to guide this massive project. These entail desktop studies of available geoscience information, hydrogeological surveys to appreciate the underground stratigraphy, water table levels, geotechnical composition and of course kimberlites geology.
Lynette Armstrong, Debswana Acting Managing Director said the company will invest all the necessary resources required for prefeasibility studies to determine the best model for undertaking the multibillion Pula Project. “This is a complex project that will require high capital investment over a period of years, advanced skills and cutting edge technological advancements,” she said.
Armstrong stated that underground mining projects have been undertaken and successful delivered before. “It will not be a completely new thing, we will benchmark from other operations and learn how they have done it, we have a database of former BCL employees who worked for that underground mine , we will source skills locally, where there are no required skills in country we will source from outside,” Armstrong indicated.
The Acting MD further explained that the company is getting ready for the highly anticipated mega project in different key aspects required for the successful implementation. “We have seconded some of our employees and top talents to benchmark in our sister operations within De Beers Group, to prepare and ready our workforce mind-sets and also acquire the necessary skills,” she said. In terms of funding, Lynnette Armstrong revealed that Debswana would look into available options to fully resource the project.
“We have been discussing and exploring other available avenues that we could use to fund our life expansion projects, debt financing is one of them, it will obviously have to go through all our governance structures, internally and all the way to the board for approval,” she said.
Debswana Head of Projects revealed that an estimated cost of P65 billion would be required for the entire project from feasibility studies, engineering and scope development, construction, to drilling, sinking of shafts and all the way to transitioning, extracting the ore and feeding the processing plants. Meanwhile the process of transitioning Jwaneng Cut 9 project from Majwe Mining contract to an in-house hybrid model is underway.
The General Manager of Jwaneng Mine, Koolatotse Koolatotse, revealed that Debswana would not necessarily absorb all employees of the former CUT 9 contractor Majwe Mining. Speaking at the same virtual media briefing, Koolatotse said: “Debswana did not commit to absorbing Majwe Mining employees”
Majwe was in 2019 awarded the multi billon Pula contract to deliver the Jwaneng Cut 9 project, a significant investment by Debswana that intends to extend the life of Jwaneng Mine. The contract was however terminated due to “internal reasons.”
“Our contract with Majwe allowed for such termination , where one party on reasons best known to them could walk away from the contract without necessarily stating to the other party why it’s necessary to terminate.” Koolatotse further explained that Debswana has no obligation to re-hire Majwe Mining employees.
“In recruiting new skills for our new hybrid model we are publicly floating requests for expression of interest , that is to say anyone who has the skills we require for our new in-house model is welcome, it will not be based on whether you worked for Majwe or not,” he said.
Top development funding institutions amongst them World Bank investment arms have jumped into the much anticipated Botswana-Namibia Mega Solar Project. The multibillion dollar massive project was confirmed by authorities of the two countries late August last year.
The Southern African sovereigns, both of which enjoy massive natural solar exposure, have partnered with Power Africa- a United States government entity to deliver what will be one of the world’s largest solar power plants. The project will see installations built across both countries and the power produced will be exported to the Southern African region.
This week, information emerged that The African Development Bank, The International Finance Corporation and The International Bank for Reconstruction and Development have signed a Memorandum of Intent to open talks for financing the project.
The International Bank for Reconstruction and Development, and The International Finance Corporation are World Bank private Investment agencies that seek to support private sector growth across developing economies of its member States. According to sources, the Memorandum of Intent would support the pre-feasibility and related studies required to advance the project.
Botswana authorities revealed recently that the capital raising campaign involving the three mentioned financing organisations would help fund the studies and could be involved in supporting the actual project’s development. It is anticipated, based on previous experience on similar projects, that the feasibility study could cost up to P20 million.
Plans for the 5 GW solar energy capacity to be developed over the next 2 decades for both the African nations, Namibia and Botswana, were first formulated and shared by the World Economic Forum’s (WEF) Global Future Council on Energy and the US led Power Africa initiative, in August 2019.
There will be a multi-phased solar procurement program to help these countries get access to secure, reliable, inexpensive solar power at scale. Under phase 1, the idea would be to procure 300 MW to 500 MW capacity to cover future domestic demand only, phase 2 will see 500 MW to 1 GW capacity to be procured to cover regional demand within the South African Power Pool (SAPP) or through bilateral agreements.
Under phase 3, between 1 GW to 3 GW capacity will be procured to meet demand in SAPP and Eastern Africa Power Pool (EAPP), as per the plans shared last year. All this capacity will be developed through a competitive procurement process.
Botswana and Namibia were specifically chosen for this mega solar project because of their solar irradiation potential, large open spaces and low population density, strong legal and regulatory environment, and low-cost, efficient and smart power-trading potential to meet high regional demand.
“Southern Africa may have as much as 24,000 MW of unmet demand for power by 2040. The market for electricity produced by the mega-solar projects in Botswana and Namibia includes 12 other countries in the region that could be connected via new and/or upgraded transmission infrastructure. As battery storage technology advances and costs of solar storage drop below $0.10 per kilowatt hour, solar power becomes an even more cost-competitive solution,” the World Economic Forum said in 2019.
While the 5 GW capacity will help both the nations diversify their energy mix, it will also help bring down their dependence on South African national electricity utility, Eskom, which has problems of its own in financial and operational terms. Namibia and Botswana will be able to save their resources spent otherwise spent on energy import.
According to the Global Market Outlook for Solar Power 2020-2024 of Solar Power Europe (SPE), Namibia was among the few countries in Sub-Saharan Africa to have installed over 100 MW on-grid PV in 2019, with 130 MW added. The 5 GW project with Botswana, if realized, will help the country in its renewable energy target of 70% for its energy mix to be achieved by 2030.
Botswana and Namibia offer the potential to capture around 10 hours of strong sunlight per day for 300 days per year and have some of the highest solar irradiance potential of any country in Africa, which translates to highly productive concentrated solar power (CSP) and photovoltaic (PV) installations.
Both countries have sizeable areas of flat, uninhabited land not currently used for productive economic activity, which is conducive to building land-intensive solar PV and CSP installations. According to World Economic Forum (WEF) key investment challenge for power projects across sub-Saharan Africa is limited availability of foreign currency to permit repatriation of proceeds.
“Given the active diamond and mining industries in both countries, there should be sufficient foreign exchange available to facilitate outside investment,” a WEF report said in 2019. Botswana and Namibia are also working on conceptualisation of the ambitious ocean water distillation project to supply both counties with drinking water.
“We are happy with the prospects presented by this project, because we need water. However, our ministers and technocrats need to determine what is best for us keeping in mind our governance procedures,’’ aid President Masisi Masisi in one of his working visits to Namibia early this year.
An International Monetary Fund (IMF) report on the Regional Economic Outlook on Sub-Saharan Africa has revealed that the region will be the world’s slowest growing region in 2021, and risks falling further behind as the global economy rebounds.
Speaking at a virtual press briefing on the Regional Economic Outlook recently, Abebe Aemro Selassie, Director of the African Department of the IMF, highlighted that although the outlook of the Sub-Saharan Africa region has improved since October 2020, the -1.9% contraction in 2020 remains the worst performance on record.
Even during these unprecedented times of the pandemic, the IMF report reflects that the region will recover some ground this year and is projected to grow by 3.4 percent. On the other hand, per capita output is not expected to return to 2019 levels until after 2022.
“This economic hardship has caused significant social dislocation. In many countries, per capita incomes will not return to pre-pandemic levels until 2025. The number of people living in extreme poverty in sub-Saharan Africa is projected to have increased by more than 32 million. There has also been a tremendous ‘learning loss’ for young people. Students in the region have missed 67 days of instruction, more than four times the days missed by children in advanced economies,” said Selassie.
This is feared to risk reversing years of progress, and the region falling behind the rest of the world. The IMF report focusing on navigating a long pandemic has shown that financial stability indicators have displayed little change. But the longer the pandemic lingers, the more borrowers may find themselves compromised, with potentially significant implications for nonperforming loans (NPLs), bank solvency, and the triggering of public guarantees.
So far, financial soundness indicators do not point to any major deterioration in the financial system’s health, thanks, in part, to the exceptional policy support provided by local authorities. Botswana’s supervisory authorities, according to the report, have allowed their banks to use their countercyclical capital buffers to help deal with the crisis, however, the full impact of the crisis is still to be felt with Regulatory Forbearance scheduled to end in 2021.
This has perhaps prevented a number of non-viable loans from being captured properly in existing financial soundness indicators, the report indicated. The outlook for sub-Saharan Africa is expected to diverge from the rest of the world, with constraints on policy space and vaccine rollout holding back the near-term recovery. While advanced economies have deployed extraordinary policy support that is now driving their recoveries, for most countries in sub-Saharan Africa this is not an option.
“As we have observed throughout the pandemic, the outlook is subject to greater-than-usual uncertainty. The main risk is that the region could face repeated COVID-19 episodes before vaccines become widely available. But there are a range of other factors—limited access to the external financing, political instability, domestic security, or climate events—that could jeopardize the recovery. More positively, faster‑than‑expected vaccine supply or rollout could boost the region’s near-term prospects,” the report stated.
The IMF has called out Sub-Saharan nations to focus on policies and the priorities for nurturing recovery; such as saving lives that will require more spending to strengthen local health systems and containment efforts, as well as to cover vaccine procurement and distribution.
Selassie underscored that: “the next priority is to reinforce the recovery and unlock Sub-Saharan Africa’s growth potential. Bold and transformative reforms are therefore more urgent than ever. These include reforms to strengthen social protection systems, promote digitalization, improve transparency and governance, and mitigate climate change.”
Delivering on these reforms, while overcoming the scarring from the crisis will require difficult policy choices, according to Selassie. Countries will have to tighten their fiscal stance to address debt vulnerabilities and restore the health of public balance sheets—especially so for the seventeen countries in the region that are in debt distress or at high risk of it.
By pursuing actions to mobilize domestic revenue, prioritize essential spending, and more effectively manage public debt, policymakers can create the fiscal space needed to invest in the recovery. ‘‘The sub-Saharan region cannot do this alone; there is a crucial need for further support from the international community,’’ Selassie said.
Along with the international community, the IMF moved swiftly to help cover some of the region’s emergency funding requirements. This included support via emergency financing facilities, increased access under existing arrangements, and debt relief for the most vulnerable countries through the Catastrophe Containment and Relief Trust (CCRT).
“To boost spending on the pandemic response, to maintain adequate reserves, and to accelerate the recovery to where the income gap with the rest of the world is closing rather than getting wider. To do this, countries in sub-Saharan Africa will need additional external funding of around $425 billion over the next 5 years.
However, meeting the region’s total needs will require significant contributions from all potential sources: private capital inflows; international financial institutions; debt-neutral support via (Official Development Assistance) ODA; debt relief; and capacity development to help countries effectively scale up development spending,” said Selassie. All these issues are expected to be discussed at the forthcoming High-Level International Summit on Financing for Africa in May.