Global economic growth hits record low since 2008/09 recession
Business
The International Monetary Fund, a global economic think tank based in Washington, United States has projected global economic growth at 3.0 percent for 2019, its slowest pace since the 2008/09 global financial crisis. This according to the World Economic Outlook report released by IMF on Tuesday is a serious climb-down from 3.8 percent in 2017, when the world was in a synchronized upswing.
The subdued growth is attributed to rising trade barriers; elevated uncertainty surrounding trade and geopolitics; idiosyncratic factors causing macroeconomic strain in several emerging market economies; and structural factors, such as low productivity growth and aging demographics in advanced economies. Global growth in 2020 is projected to improve modestly to 3.4 percent, a downward revision of 0.2 percent from the IMF April projection. However the World Economic Outlook states that unlike the synchronized slowdown, this recovery is not broad based and is said to be precarious. Growth for advanced economies is projected to slow to 1.7 percent in 2019 and 2020, while emerging market and developing economies are projected to experience a growth pickup from 3.9 percent in 2019 to 4.6 percent in 2020.
About half of this is driven by recoveries or shallower recessions in stressed emerging markets, such as Turkey, Argentina, and Iran, and the rest by recoveries in countries where growth slowed significantly in 2019 relative to 2018, such as Brazil, Mexico, India, Russia, and Saudi Arabia. A notable feature of the sluggish growth in 2019 is the sharp and geographically broad-based slowdown in manufacturing and global trade.
In depth the IMF says factors driving this are higher tariffs and prolonged uncertainty surrounding trade policy which has dented investment and demand for heavily traded capital goods. The automobile industry is contracting owing also to idiosyncratic shocks, such as disruptions from new emission standards in the euro area and China that have had durable effects.
Consequently, trade volume growth in the first half of 2019 is at 1 percent, the weakest level since 2012. In contrast to weak manufacturing and trade, the services sector across much of the globe continues to hold up; this has kept labor markets buoyant and wage growth healthy in advanced economies.
International Monetary Fund Economist, Gita Gopinath observed in the report that the world economy has been slowing sharply in the last three quarters of 2018 with the pace of global economic activity remaining weak. “Momentum in manufacturing activity, in particular, has weakened substantially, to levels not seen since the global financial crisis,” he said.
Gopinath further notes that rising trade and geopolitical tensions have increased uncertainty about the future of the global trading system and international cooperation more generally, taking a toll on business confidence, investment decisions, and global trade. “A notable shift towards increased monetary policy accommodation through both action and communication has cushioned the impact of these tensions on financial market sentiment and activity, while a generally resilient service sector has supported employment growth, the outlook in the entirety remains precarious,” he said.
The IMF says a projected slowdown in China and the United States, and prominent downside risks, a much more subdued pace of global activity could well materialize, recommending that to forestall such an outcome, policies should decisively aim at defusing trade tensions, reinvigorating multilateral cooperation, and providing timely support to economic activity where needed. “To strengthen resilience, policymakers should address financial vulnerabilities that pose risks to growth in the medium term. Making growth more inclusive, which is essential for securing better economic prospects for all, should remain an overarching goal” advices the US based think tank.
Over the past year, global growth has fallen sharply. Among advanced economies, the weakening has been broad based, affecting major economies, the United States and especially the euro area and smaller Asian advanced economies. The slowdown in activity has been even more pronounced across emerging market and developing economies, including Brazil, China, India, Mexico, and Russia, as well as a few economies suffering macroeconomic and financial stress. Furthermore the IMF analyses that regional disparities in real output, employment, and productivity in advanced economies have attracted greater interest in recent years against a backdrop of growing social and political tensions.
Regional disparities in the average advanced economy have risen since the late 1980s, reflecting gains from economic concentration in some regions and relative stagnation in others. On average, lagging regions have worse health outcomes, lower labor productivity, and greater employment shares in agriculture and industry sectors than other within country regions. Moreover, adjustment in lagging regions is slower, with adverse shocks having longer lived negative effects on economic performance.
Trade shocks in particular greater import competition in external markets do not appear to drive the differences in labor market performance between lagging and other regions, on average. By contrast, technology shocks proxied by declines in the costs of machinery and equipment capital goods, raise unemployment in regions that are more vulnerable to automation, with more exposed lagging regions particularly hurt.
In recommendation IMF says National policies that reduce distortions and encourage more flexible and open markets, while providing a robust social safety net, can facilitate regional adjustment to adverse shocks, dampening rises in unemployment. “Place based policies targeted at lagging regions may also play a role, but they must be carefully calibrated to ensure they help rather than hinder beneficial adjustment,” advices the World Economic Outlook.
On the reforms fronts the IMF says, the pace of structural reforms in emerging market and developing economies was strong during the 1990s, but it has slowed since the early 2000s. The Washington headquartered economic think tank says a reform push in such areas as governance, domestic and external finance, trade, and labor and product markets could deliver sizable output gains in the medium term.
The World Economic Outlook posts that a major and comprehensive reform package might double the speed of convergence of the average emerging market and developing economy to the living standards of advanced economies, raising annual GDP growth by about 1 percentage point for some time. “At the same time, reforms take several years to deliver, and some of them easing job protection regulation and liberalizing domestic finance may entail greater short-term costs when carried out in bad times; these are best implemented under favorable economic conditions and early in authorities’ electoral mandate.”
The outlook also observes that reform gains also tend to be larger when governance and access to credit two binding constraints on growth are strong, and where labor market informality is higher because reforms help reduce it. “These findings underscore the importance of carefully tailoring reforms to country circumstances to maximize their benefits,” it says.
Business
New Khoemacau owners commit to mine’s multibillion Pula expansion
The future of Botswana’s largest copper and silver operation, Khoemacau Copper Mining, looks promising as the new owners, MMG Group, commit to the mine’s expansion plans. MMG, an Australian headquartered company owned by China, has expressed its dedication to doubling Khoemacau’s production and transforming it into one of the most significant high-grade copper operations in Africa.
Nan Wang, the Executive General Manager for Australia and Africa at MMG, stated that while the immediate focus is on maintaining a consistent production level of 60ktpa, there are solid plans to increase Khoemacau’s production capacity. The company aims to double its production from 3.65Mtpa to 8.15Mtpa, resulting in an increase in payable copper from approximately 60ktpa to around 130ktpa.
To achieve this expansion, Khoemacau has completed a pre-feasibility study on the project and a solar power initiative. The next step is to conduct a feasibility study, which will pave the way for increased production capacity. Additionally, Khoemacau has identified extensive exploration opportunities across its license area, positioning the company for an exciting new phase of development.
The current Khoemacau operation reached full production and nameplate capacity in December 2022, following over a decade of investment totaling over P10 billion. This significant investment allowed for an intense exploration program, resulting in the development of the most automated underground mining operation in Botswana. The first concentrate was produced in June 2021, and the product entered the export market in July of the same year. Throughout 2022, the company has been working on the pre-feasibility study for the expansion project, with the feasibility study scheduled for the following year.
The expansion plans will involve the construction of a new world-class process plant in Zone 5, where the current mining of ore takes place. This new plant will be larger than the existing one in Boseto, which currently receives ore from Zone 5. The expansion will also involve the development of new underground mines, including Mango, Zone 5 North, and Zeta North East. These additional mines will bring the total number of underground shafts at Khoemacau to six. The ramp-up of production from the expansion is expected to occur in 2026.
Khoemacau, which acquired assets in the Kalahari Copper Belt after the liquidation of Discovery Metals in 2015, currently employs over 1500 people, with the majority being Batswana. The Khoemacau Mine is located in north-west Botswana, in the emerging Kalahari Copperbelt. It boasts the 10th largest African Copper Mineral Resource by total contained copper metal and is one of the largest copper sedimentary systems in the world outside of the Central African Copperbelt.
The mine utilizes underground long hole stoping as its mining method and conventional sulphide flotation for processing. Resource drilling results have shown the existing resources to have continuity at depth, and there are several exploration targets within the tenement package that have the potential to extend the mine’s life or increase productivity.
The Zone 5 mine has already ramped up production, and further expansion in the next five years will be supported by the deposits in the Zone 5 Group. The estimated mine life is a minimum of 20 years, with the potential to extend beyond 30 years by tapping into other deposits within the tenement package.
In conclusion, the commitment of MMG Group to Khoemacau’s expansion plans signifies a bright future for Botswana’s largest copper and silver operation. With the completion of pre-feasibility and feasibility studies, as well as significant investments, Khoemacau is poised to become one of Africa’s most important high-grade copper operations. The expansion project will not only increase production capacity but also create new job opportunities and contribute to the economic growth of Botswana.
Business
Khoemacau Copper Mining to be acquired by MMG Limited
Khoemacau Copper Mining, a leading copper mining company, has recently announced its acquisition by MMG Limited, a global resources company based in Australia. This acquisition marks a significant milestone for both companies and demonstrates their commitment to continued investment, growth, and sustainability in the mining industry.
MMG Limited is a renowned mining company that operates copper and other base metals projects across four continents. With its headquarters in Melbourne, Australia, MMG has a strong track record in mining and exploration. The company currently operates several successful mines, including the Dugald River zinc mine and the Rosebery polymetallic mine in Australia, the Kinsevere copper mine in the Democratic Republic of Congo, and the Las Bambas Mine in Peru. MMG’s extensive experience and expertise in mining operations make it an ideal partner for Khoemacau.
MMG’s commitment to sustainability aligns perfectly with Khoemacau’s values and priorities. Khoemacau has always placed a strong emphasis on safety, health, community, and the environment. MMG shares this commitment and applies the principles of good corporate governance as set out in the Corporate Governance Code of the Hong Kong Listing Rules. As a member of the International Council on Mining and Metals (ICMM), MMG adheres to sustainable mining principles, ensuring responsible and ethical practices in all its operations.
Over the past 12 years, Khoemacau’s current shareholders have made significant investments in the development of the company. With approximately US$1 billion deployed in the project, Khoemacau has successfully transformed from an exploration and discovery phase to a fully-fledged operating copper mine. The completion of the ramp-up of the Zone 5/Boseto operations has set the stage for the next phase of expansion.
With the acquisition by MMG, Khoemacau is poised for an exciting new chapter in its development. The completion of a pre-feasibility study on the Khoemacau expansion and a solar power project has paved the way for increased production capacity. The feasibility study will be the next step in doubling the production capacity from 3.65 million tonnes per annum (Mtpa) to 8.15 Mtpa, resulting in a significant increase in payable copper from approximately 60,000 tonnes per annum (ktpa) to 130,000 ktpa. Additionally, Khoemacau has extensive exploration opportunities across its license area, further enhancing its growth potential.
The CEO of Khoemacau, Johan Ferreira, expressed his gratitude to the current owners for their stewardship of the company and their successful transformation of Khoemacau into a fully operational copper mine. He also highlighted the company’s focus on the expansion study and its vision for the future with MMG. Ferreira emphasized that the partnership with MMG will ensure Khoemacau’s long-term success, delivering employment, community benefits, and economic development in Botswana.
MMG Chairman, Jiqing Xu, echoed Ferreira’s sentiments, stating that the acquisition of Khoemacau aligns with MMG’s growth strategy and vision. Xu emphasized MMG’s commitment to creating opportunities for all stakeholders, including shareholders, employees, and communities. He expressed confidence in Khoemacau’s expansion potential and the company’s ability to realize its full potential with the support of MMG.
The sale of Khoemacau to MMG is subject to certain conditions precedent and approvals, with the expected closing date in the first half of 2024. This acquisition represents a significant step forward for both companies and reinforces their commitment to sustainable mining practices, responsible resource development, and long-term growth in the mining industry.
In conclusion, the acquisition of Khoemacau Copper Mining by MMG Limited signifies a new era of investment, growth, and sustainability in the mining industry. With MMG’s extensive experience and commitment to responsible mining practices, Khoemacau is well-positioned for future success. The partnership between the two companies will not only drive economic development but also ensure the safety and well-being of employees, benefit local communities, and contribute to the overall growth of Botswana’s mining sector.
Business
BPC Signs PPA with Sekaname Energy
The Botswana Power Corporation (BPC) has taken a significant step towards diversifying its energy mix by signing a power purchase agreement with Sekaname Energy for the production of power from coal bed methane in Mmashoro village. This agreement marks a major milestone for the energy sector in Botswana as the country transitions from a coal-fired power generation system to a new energy mix comprising coal, gas, solar, and wind.
The CEO of BPC, David Kgoboko, explained that the Power Purchase Agreement is for a 6MW coal bed methane proof of concept project to be developed around Mmashoro village. This project aligns with BPC’s strategic initiatives to increase the proportion of low-carbon power generation sources and renewable energy in the energy mix. The use of coal bed methane for power generation is an exciting development as it provides a hybrid solution with non-dispatchable sources of generation like solar PV. Without flexible base-load generation, the deployment of non-dispatchable solar PV generation would be limited.
Kgoboko emphasized that BPC is committed to enabling the development of a gas supply industry in Botswana. Sekaname Energy, along with other players in the coal bed methane exploration business, is a key and strategic partner for BPC. The successful development of a gas supply industry will enable the realization of a secure and sustainable energy mix for the country.
The Minister of Minerals & Energy, Lefoko Moagi, expressed his support for the initiative by the private sector to develop a gas industry in Botswana. The country has abundant coal reserves, and the government fully supports the commercial extraction of coal bed methane gas for power generation. The government guarantees that BPC will purchase the generated electricity at reasonable tariffs, providing cash flow to the developers and enabling them to raise equity and debt funding for gas extraction development.
Moagi highlighted the benefits of developing a gas supply industry, including diversified primary energy sources, economic diversification, import substitution, and employment creation. He commended Sekaname Energy for undertaking a pilot project to prove the commercial viability of extracting coal bed methane for power generation. If successful, this initiative would unlock the potential of a gas production industry in Botswana.
Sekaname Energy CEO, Peter Mmusi, emphasized the multiple uses of natural gas and its potential to uplift Botswana’s economy. In addition to power generation, natural gas can be used for gas-to-liquids, compressed natural gas, and fertilizer production. Mmusi revealed that Sekaname has already invested $57 million in exploration and infrastructure throughout its resource area. The company plans to spend another $10-15 million for the initial 6MW project and aims to invest over $500 million in the future for a 90MW power plant. Sekaname’s goal is to assist BPC in becoming a net exporter of power within the region and to contribute to Botswana’s transition to cleaner energy production.
In conclusion, the power purchase agreement between BPC and Sekaname Energy for the production of power from coal bed methane in Mmashoro village is a significant step towards diversifying Botswana’s energy mix. This project aligns with BPC’s strategic initiatives to increase the proportion of low-carbon power generation sources and renewable energy. The government’s support for the development of a gas supply industry and the commercial extraction of coal bed methane will bring numerous benefits to the country, including economic diversification, import substitution, and employment creation. With the potential to become a net exporter of power and a cleaner energy producer, Botswana is poised to make significant strides in its energy sector.