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Debswana to remain focused on diamond mining for now

Leading rough diamonds producer Debswana, a joint venture between Government of Botswana and De Beers Group, will in the near term to midterm remain focused on solely doing the business of mining diamonds. This was emphasized by De Beers Group Chief Executive Offer and Debswana Board Chair Mr Bruce Cleaver and Permanent Secretary in the Ministry of Mineral Mmetla Masire at a media briefing on the side lines of the 2019 Diamond Conference in Gaborone on Tuesday.

GENESIS OF THE ISSUE

Observers,  commentators  and  some political leaders have opined in various platforms that Debswana as the Botswana ‘s largest private company  and one of the most widely celebrated Public Private Partnerships across the world needed to take the lead in Botswana’s economic transformation and diversification agenda. Suggestions has been that in the interest of the national social investment agenda of job creation, economic diversification, and industrialization Debswana should venture into other commercially viable enterprises outside the business of mining diamonds.

Debswana is the largest private sector employer and the second after government, with a total workforce pool of around 5000 direct employees and additional thousands in contractors and service providers. Recently towards the buildup of Government negotiations with De Beers aimed at renewing sales vows it emerged that there were talks within the government enclave calling for the two parties to have a conversation around allowing the partly state owned diamond giant invest in other sectors of the economy.

The argument brought forward by those who believe in this is that Debswana has the necessary capital, technical capacity and shrewd corporate governance to do that “There are discussions that Debswana should lead economic diversification by investing in solar energy, plant and equipment assembly and machinery equipment amongst others” shared a source from the highest corridors of government enclave last month.

Debswana has over the years of its existence invested in other establishments outside diamond mining. Morupule Coal Mine was a wholly owned Debswana operation before it was disposed to government owned Mineral Development Company in 2017. Botswana Accountancy College, the country’s premier business academic institution was established as a joint venture between Debswana, Ministry of Finance and Economic Planning and the Botswana Institute of Accountants in 1996.Within its fold Debswana also wholly owns Sesiro Insurance Company, a bespoke insurance services outfit for its employees.

During the Presidential Debates of the just passed general Elections President of the Alliance for Progressives Ndaba Gaolathe noted that Debswana one capable company that has grown into a successful business with admirable corporate governance over the years “We should replicate this Debswana DNA across other economic sectors and even other countries, for our benefit as developing country that wants to industrialize and transform its economy,” he said.

GOVERNMENT- DE BEERS RESPONSE

When responding to this  suggestions at the media briefing, representing De Beers Group, CEO Bruce Cleaver said the issue was a conversation the two parties would open up to discussing at board level in the long run and coming future “We are open to such conversations because we want to support government as well with economic diversification but for now Debswana is primarily a diamond mining entity that is battling with industry challenges and predominantly expanding its operations which are highly technical and capital intensive,” he said.

Bruce Cleaver further added that the Cut 3 and Cut 9 project s will require Debswana management teams to be completely focused to deliver production peaks and high value return of investment,   “Investing in other businesses in other sectors of the economy is not something completely out of the outlook but our priority as of now is rubberstamping the company’s position as a leading rough diamond producer amid industry challenges.”

Bruce Cleaver who is Chairman of Debswana Board said the shareholders would open up to a conversation about this in future” We are currently also focusing on some operating models transformation, building a high performance team with unparalleled capacity and ability to take this company which is the cornerstone of our business to greatest heights that are presented by both the challenges and opportunities we are seeing in the horizon.”

Representing Government, Permanent Secretary in the Ministry of Mineral Resources,  Mmetla Masire explained that investing in other business outside mining would require serious due diligence and proper assessment to avoid risking the revenue profile of the company, “ Remember Debswana is the cornerstone of our economy so as much as we would be interested in looking around for other ventures under the investment dispatch of Debswana , we would also need to be extra cautious because we don’t want to danger the very  entity that is  holding our economy as country,” he said.

For his part Country Manager of De Beers Botswana, Neo Moroka who has been a Member of Debswana at various levels shared that the company will continue supporting government efforts through Small Medium Enterprises Development, supporting local suppliers and services providers. “Debswana has a clear Corporate Social Investment policy, Citizen Economic Empowerment windows that we believe are pushing the economic transformation already, dispatching millions of pulas through doing business with local companies that hire our people,” he said.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020
Botswana-on-high-alert-as-AML-joins-Covid-19-to-plague-mankind-

This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.

The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.

He was speaking in  Parliament on Tuesday delivering  Parliament’s Finance Committee report after assessing a  motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.

The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.

The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.

The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.

This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.

Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.

Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.

However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.

Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.

When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.

This  as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.

The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.

Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.

In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.

Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.

Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.

Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.

Acknowledging the need to draw down from GIA no more, current Minister of Finance   Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”

He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”

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