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‘African cities are not economically efficient’

World Bank’s Africa’s Cities: Opening Doors to the World report says typical African cities share three features that constrain urban development and create daily challenges for residents:

Crowded, not economically dense- investments in infrastructure, industrial and commercial structures have not kept pace with the concentration of people, nor have investments in affordable formal housing; congestion and its costs overwhelm the benefits of urban concentration.
Disconnected- cities have developed as collections of small and fragmented neighbourhoods, lacking reliable transportation and limiting worker’s job opportunities while preventing firms from reaping scale and agglomeration benefits.

Costly for households and for firms- high nominal wages and transaction costs deter investors and trading partners, especially in regionally and internationally tradable sectors; workers’ high food, housing and transport costs increase labor costs to firms and thus reduce expected returns on investment. The report underlined that 55% of African households face higher costs relative to their per capita GDP than do households in other regions- much of it accounted for by housing, which costs them a full 55 per cent more in this comparison.

In eight representative African cities, the report cited that roads occupy far lower shares of urban land than in other cities around the world.it said 20% of African cities are more fragmented than are Asian and Latin American ones. In Harare, Zimbabwe, and Maputo, Mozambique, more than 30 per cent of land within 5 kilometres of the central business district remains unbuilt.

According to the World Bank report, 472 Million people live in urban areas. That number will double over the next 25 years as more migrants are pushed to cities from the countryside. The largest cities grow as fast as 4 per cent annually. Urbanisation benefits people and businesses by increasing economic density. A worker in an economically dense area can commute more easily and consume a broader range of products. Firms clustered in cities can access a wider market of inputs and buyers. Scale economies reduce firms’ production costs- in turn benefiting consumers.

Population density is indeed strongly correlated with indicators of liveability- in sub-Saharan Africa as elsewhere. Yet Africa’s cities are not economically dense or efficient. They are crowded and unliveable. The report indicated that most urban residents are packed into low-rise, informal settlements without adequate infrastructure or access to basic services. Two of every three people in Lagos, Nigeria dwell in slums. Thus, even though households in densely populated areas of Africa are better supplied with services than rural households, the mere fact of higher population density does not imply a liveable environment.

Why do a majority of people in Africa’s cities live in slums? The immediate explanation is that the urbanization of people has not accompanied by the urbanization of capital. Housing, infrastructure, and other capital investments are lacking, especially outside the city center. Urban building stocks have low replacement values. Across Africa, housing investment lags urbanization by nine years.

It was shared that the population density of African cities is similar to that of many cities elsewhere. What is holding these cities back is their low economic density- the lack of thriving urban markets that depend on adequate infrastructure and conveniently connected clusters of residential and commercial structures. A dearth of capital and capital investment keeps Africa’s cities inefficient and less productive than they should be, limiting firms and workers to the production of goods and services for small and local hinterland markets locking them out of much more lucrative regional and international markets.

Many of Africa’s urban workers live in crowded quarters near the city center. In Dar es Salaam, Tanzania, 28% of residents are living at least three to a room; in Abidjan, Cote d’Ivoire, the figure is 50%. According to the report, the reason for this crowding is that most people must live near the downtown district or industrial zones if they hope to work. They cannot conveniently commute from outlying areas, because little or no affordable transportation is available. Africa’s cities also suffer from a lack of adequate formal housing around the urban core.

Consequently, people settle in relatively central informal settlements that are densely populated, ill served by urban infrastructure, and, by many measures, unliveable. Paradoxically, Africa’s cities are sparsely built and laid out but feel crowded. The report highlighted that the crowdedness of African cities is most apparent in their slums. On average, 60% of Africa’s urban population is packed into slums- a far larger share than the average 34% seen in other developing countries.

It shared that high rates of slum living within urban areas are characteristic of most African countries. Only two countries, Zimbabwe and South Africa, fall below the non-African average. The proportion of Africans living in slums is not high because Africa has higher urban population densities than other countries. The average population density of African cities tracks the global average; it ranks third among seven global regions.

Further, it was underlined in that report that people are clustering downtown locations not because of the amenities or decent jobs they can access in central locations. These patterns reflect broader dysfunctional ties in land markets as well as limited investments in transport infrastructure, limiting the choices that people can make on where to live and how to access jobs.

Capital investment in Africa over the past 40 years has averaged about 20% of GDP. In contrast, urbanizing countries in East Asia- China, Japan, and Korea-stepped up capital investment during their periods of rapid urbanization. The report said between 1980 and 2011, China’s capital investment rose from 35% of GDP to 48%; during roughly the same period, the urban share of its population rose from 18% to 52%. In East Asia as a whole, the report noted, capital investment remained above 40% per cent of GDP at the end of this period, helping the region become very dense economically.

The report said these contrast underline that Africa is urbanizing when poor- indeed, strikingly poorer than other developing regions with similar urbanization levels. It said supporting rising population densities in African cities will require investments in buildings, and complementary physical infrastructure: roads, drainage, street lighting, electricity, water, and sewerage, together with policing, waste and health care. In the absence of higher levels of capital investment at around Asian levels, the potential benefits of Africa’s cities are being overwhelmed by crime, disease, and squalor.

Furthermore, overcrowding increases exposure to communicable diseases. Inadequate drainage increases the risk of malaria, and lack of sanitation raises the risk of dengue. Lack of access to clean water is a leading cause of diarrhoea, which is responsible for an estimated 21% of deaths among children under five in developing countries- 2.5 million deaths a year, the report said.

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Business

MD, Board in BBS battle for supremacy

12th April 2021

Botswana Stock Exchange (BSE) moved swiftly this week to suspend BBS Limited from trading its securities following a brawl between Board of Directors and Managing Director, Pius Molefe, which led to corporate governance crisis at the organisation.

In an interesting series of events that unfolded this week, incumbent board Chairperson, Pelani Siwawa-Ndai moved to expel Molefe together with board Secretary, Sipho Showa, who also doubles up as Head of Marketing and Communications.  It is reported that Siwawa-Ndai in her capacity as the board Chairperson wrote letters of dismissals to Molefe and Showa.

Following receipt of letters, the duo sought and was furnished with legal opinion from Armstrong Attorneys advising them that their dismissals were unlawful hence they were told to continue to report to work and carry out their duties.

Documents seen by BusinessPost articulate that in the meeting which was held on the 1st of April, the five outgoing board members, unlawfully took resolutions to extend their contracts by a further 90 days after April 30 2021 as they face tough competition from five other candidates who had expressed interest to run for the elections.

Moreover, at the said meeting, management explained that neither management nor the board have the authority to decline nominations submitted by shareholders or the interested parties which is in line with Companies Act and also BBS Limited constitution.

Molefe also revealed that as management they cautioned the board that it was conflicted and it would be improper for it to influence the election process as it seems they intended to do so.
“Nonetheless, in a totally unprecedented move in the history of BBSL, the board then collectively passed the unlawful resolutions below. Leading to the illegitimate decisions, the board had brazenly directed that its discussions on the Board elections should not be recorded totally violating sound corporate governance,” reads the statement released by management this week.

When giving their legal advice, Armstrong Attorneys noted that notice for the AGM should state individuals proposed to be elected to the board and directors have no legal authority to prevent the process.

Armstrong Attorneys also noted that, “due process” cited by board members are simply to ensure that the five retiring Directors avoid competition from interested candidates to be appointed to the BBS Limited board.  The law firm further opined that the resolution of the 90 day extension of term of the five directors pending re-election or election was unlawful.

Molefe expressed with regret that BBS has been suspended from trading by BSE until the current matter has been resolved. “I am concerned by this development and other potentially harmful actions on the business. As management, we are engaging with stakeholders to mitigate any negative impact on BBS Limited,” expressed a distressed Molefe.

He assured shareholders and the rest of Management that they are working very hard to ensure that the issues are being dealt with in a mature manner.  BBS which hopes to become the first indigenous commercial bank has seen its shares halted barely four months after BSE lifted the trading suspension of shares for BBS following submission of their published 2019 audited financial statements.

According to Chief Executive Officer (CEO) of the local bourse, Thapelo Tsheole said the halting of shares of BBSL is to maintain fair, efficient and orderly securities trading environment. “The securities have been suspended to allow BBS to provide clarity to the market concerning the recent allegations which have been brought to the attention of the BSE relating to the company’s Board of Directors and senior management,” said Tsheole.

Meanwhile in their audited financial statements for the year ended 31 December 2020, BBS recorded a loss of P14.6 million as at 31 December 2020 compared to the loss of P35.7 million for the comparative year ended 31 December 2019. According to Molefe the year under review was the most challenging for the bank, its shareholders and customers endured the difficult economic environment and the negative impact of the coronavirus.

He revealed that as the bank, they were forced to put in place several measures to ensure that the business withstands the impact of coronavirus and also to cushion mortgage customers from the effects of the pandemic. “Since April 2020 up to the end of December 2020, BBS assisted 555 mortgage customers with a payment holiday,’’ he said.

This is the bank whose total balance sheet declined by 12 percent from P4, 626 billion for the year ended. 31 December 2019 to P4, 088 billion as at 31 December 2020. As if things were not bad enough, total savings and deposits at the bank declined by 14 percent from a balance of P2, 885 billion as at 31 December 2019 to P2, 494 billion as at 31 December 2020.

On a much brighter side, BBSL mortgage loans and advances improved from P3, 401 billion to P3.408 billion with impairment allowance significantly improving to P78, 648 million from P102, 532 million for the year under review, representing a positive variance of 23 percent. BBS maintained a strong capital base with capital adequacy ratios of 26.32% for the year ended 31 December 2020.

Molefe was optimistic and anticipated a positive outcome during the implementation of the new BBS corporate strategy, whose main drive is commercialization of operations, which is in full force.
“It will be spurred on by the positive results we have achieved for the year ended 31 December 2020, and our planned submission of our banking license application to Bank of Botswana which we anticipate to operate as a commercial bank in the third quarter of 2021,” he alluded.

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Mphathi promises people centred, environmentally sensitive new BCL

12th April 2021
CEO of Premium Nickel Resources Botswana: Montwedi Mphathi

Chief Executive Officer (CEO) of Premium Nickel Resources Botswana (PNRB), Montwedi Mphathi, has said his company will resuscitate the formerly owned BCL assets and deliver a new, sustainable and cutting edge mining operation.

The new mine which will leverage on modern and next generation technology, will be environmentally sensitive and cognisant of the needs of its people and that of the communities around the area of influence.

In a statement last week, Premium Nickel Resources Botswana and its parent company, the Canadian headquartered Premium Nickel Resources announced that they have now completed the Exclusivity Memorandum of Understanding (MOU) with the Liquidator.

The MOU will govern a six-month exclusivity period to complete its due diligence and related purchase agreements on the Botswana nickel-copper-cobalt (Ni-Cu-Co) assets formerly operated by BCL Limited (BCL), that are currently in liquidation.

On February 10, 2021, Lefoko Moagi, the Minister of Mineral Resources, Green Technology and Energy Security of Botswana, affirmed in Parliament a press release by the Liquidator for the BCL Group of Companies, stating that PNR was selected as the preferred bidder to acquire assets formerly owned by BCL.

“This is encouraging for the company and for Botswana. Our ambition in this new project dubbed “Tsholofelo” is to redevelop the former BCL assets into a modern, environmentally sensitive, efficient NI-Cu-Co-water producer where sustainability and the people are at the forefront of the decisions we make,” said Mphathi in a statement last Thursday.

“We also understand that no matter how successful we are at building the “New BCL” , our success will only be measured at our ability to create local wealth , skills and support the continued transition of local economy to a longer term sustainable base.”

The next step during the exclusivity period will be the completion of the definitive agreement. Simultaneous to this the PNRB will be conducting additional investigative work on site to further its understanding of the potential of these assets.

Specifically the company will complete an environmental assessment, a metallurgical study, a review of legal and social responsibilities, a review of the mine closure and rehabilitation plans and an on-site inspection of the legacy mining infrastructure and equipment that has been under care and maintenance.

Mphathi said they continue to monitor the global Covid-19 developments noting that they are committed to working with health and safety authorities as a priority and in full respect of all government and local Covid-19 protocol requirements. PNRB has developed Covid-19 travel, living and working protocols in anticipation of moving forward to on site due diligence.

“We will integrate these protocols with the currently applicable protocols of Ministry of Health & Wellness as well as District Health Management Team ( DHMT) and surrounding communities,” reads a statement released by the Gaborone based Premium Nickel Resources team.

PNRB is looking to become a catalyst in participating and building a strong economy for Botswana, with a purpose where respect and trust are core to every single step that will be taken. “Our success will mean following international best-in-class practices for the protection of Botswana’s environment and the focus on its people, building partnerships and earning respect, through cooperation and collaboration,” explains PNRB on its website.

“We are committed to Governance through transparent accountability and open communication within our team and with all our stakeholders.” Mphathi, a former BCL Executive, is widely celebrated for achieving unprecedented profitability at the mine during his tenure as General Manager.

The Serowe-born mining guru obtained a Diploma in Mining Technology from Haileybury School of Mines in Canada. He later obtained a B.Eng. Mining degree from the Technical University of Nova Scotia. Mphathi went on to City University in London, UK and obtained a M.Sc. in Industrial and Administrative Sciences.

Before ascending to the top country managerial role of Premium Nickel Resources. Mphathi was General Manager of Botswana Ash (Botash), Southern Africa’s leading salt and soda ash producer.
He was at some point linked to Debswana top post, which is still to date not substantively filled following the death of Managing Director, Albert Milton, in August 2019.

With Mphathi out of the race and now leading the rebuilding of his former employer, the top post at De Beers- Botswana joint venture is likely to be filled by current acting Managing Director Lynette Armstrong, a seasoned finance executive with unparalleled experience in the extractive industry.

“We are happy to hear that former General Manager of BCL, Mr Montwedi Mphathi, has a relationship with the new Company that intends to resuscitate the mine, he is an experienced Mining Executive who knows BCL better, we want the mine to be brought back to life so that our people can be employed ” said Dithapelo Keorapetse Member of Parliament for Selibe Phikwe West recently in Parliament.

BCL was liquidated in October 2016 following a series of losses and government bailout occasioned by low Copper prices and allegedly poor Investment decisions and maladministration. Recently PNR CEO, Keith Morrison said his team of seasoned experts both from Canada and Botswana are committed to resuscitate the BCL assets and deliver a high performance mining operation.

“The World, Botswana and the mining industry have changed dramatically since mining first started at the former BCL assets in the early 1970s. The nickel-copper-cobalt resources remaining at these mines are now critical metals, required for the continued development of a decarbonized and electrified global economy,” he said.

Morrison added: “As we move forward, it is our goal to demonstrate the potential economics of re-developing a combination of the former BCL assets to produce Ni-Cu-Co and water in a manner that is inclusive of modern environmental, social and corporate governance responsibilities.”

He explained that to attain this, extensive upgrades to infrastructure will be required with an emphasis on safety, sustainability and the application of new technologies to minimize the environmental impact and total carbon footprint for the new operations.

“Our team remains committed to working with the local communities and all of the stakeholders throughout this period and we encourage anyone with questions or feedback to reach out to us directly,” he noted.

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Business

Lucara extends sales deal with Belgian diamond cutter

12th April 2021
Lucara extends HB Antwerp’s contract Signum technologies

Lucara Diamond Corporation, the Canadian 100% owners of iconic Karowe mine, this week announced the extension of its supply deal with Belgian diamond midstream giant HB Antwerp.

The definitive supply agreement is in respect of all diamonds produced in excess. of 10.8 carats in size from its rare gem producing Karowe diamond mine located in the Boteti district of Botswana.
Large, high value diamonds in excess of 10.8 carats in size account for approximately 70% of Lucara’s annual revenue.

Though the Karowe mine has remained fully operational throughout the COVID-19 pandemic, Lucara made a deliberate decision not to tender any of its +10.8 carat inventory after early March 2020 amidst the uncertainty caused by the global crisis.

Under the terms of this novel supply agreement with HB, extended to December 2022, the purchase price paid for each +10.8 carat rough diamond is based on the estimated polished outcome, determined through state of the art scanning and planning technology, with a true up paid on actual achieved polished sales thereafter, less a fee and the cost of manufacturing.

“Lucara is beginning to see the benefits of this strategy in accessing a broader marketplace and delivering regular cash flow based on final polished sales,” said Lucara CEO, Eira Thomas on Wednesday.

“We believe these early results warrant an extension of the arrangement for at least 24 months to determine if superior pricing and market stability for our large, high-value diamonds can be sustained longer term.”

The Canadian junior miner initiated a supply agreement with HB for large stones from its Botswana Karowe mine in July 2020, after pausing its tenders shortly after the Covid-19 pandemic began.
The deal enables Lucara to sell the rough diamonds to HB at a price based on an estimate of the polished outcome, which the companies determine using diamond scanning and planning technology.
Once HB sells the goods, it adjusts the price that Lucara receives based on the actual selling price of the polished, minus a fee and manufacturing costs.

The extended supply deal will follow the same payment terms as the initial agreement, and will be in effect through to December 2022. Lucara said in a statement this week that the agreement also provides increased tax revenue and beneficiation opportunities for the government of Botswana, and creates a streamlined supply chain for Karowe’s rough.

“More than a supply agreement, this collaboration structurally embeds a new transparent and sustainable way of working in the diamond-value chain,” said HB CEO, Oded Mansori.
“For the first time, different partners of the value chain are fully aligned, sharing data and information throughout the process from mine to consumer.”

Mansori added: “We are truly proud with this innovative and straightforward collaboration that has proven itself through the volatile and uncertain reality of 2020. We are confident to achieve even better results during the term of this new contract and demonstrate the power of a true partnership.”

Lucara, which early this year secured extension of Karowe mining license to 2040, announced over P2.4 billion funding for Karowe underground mining expansion project a fortnight ago. The Vancouver headquartered top large diamond producer says this supply agreement deal extension with HB will bring about regular cash flow for Lucara using polished pricing mechanism. Furthermore, the company says the deal has potential revenue upside, particularly suited for Lucara’s large, exceptional diamonds.

In the main, Botswana will benefit increased tax revenue and additional beneficiation opportunities for the Government and communities around Karowe mine. A streamlined supply chain that achieves alignment between Lucara and HB to maximize the value of each +10.8 carat diamond produced at Karowe.

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