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The Electric Car Revolution

Trusted think tank Moody’s paints a gloomy picture on Sub-Sahara Africa potential to rise to the occasion and position itself on the coming huge advent of electric vehicles which will arouse a massive demand for its metals subsequently feeding the sovereigns GDPs.

For Botswana, a big state owned copper and nickel mine has been closed causing a backlash on government’s inability to catch the wave of metal-demanding EV revolution. International explorers, especially will the eye for copper like the ones from Austrialia, might save face for Botswana as they are currently descending on the unexplored and untapped area of Kalahari Copper Belt. The Kalahari Copper Belt is said to contain millions of tonnes of copper and silver resources inside the 1,000-kilometre belt running south west to north east and foreign companies are already pouring billions of Pula in investment. Copper is said to be highly needed for production of EVs.

But there is a lot do for the Sub-Saharan Africa sovereigns to join and enjoy the EV fiesta, according to Moody’s who were currently analyzing the shift to electric vehicles raising battery metal revenue. The US based think tank also looks at the topic of sovereigns readiness to metal demand with relation to issues of governance, infrastructure to shape realization of potential.  

“Potential is much smaller for the other sovereigns that produce the metals used in EV batteries in relation to the size of their economies, exports and government revenue.” This recent statement by Moody’s strikes home, as most of Sub-Saharan Africa nations have smaller economies, exports and government-their potential is lower despite these sovereigns producing most metals used in EV batteries.

According to Moody’s latest report, the EV transformation is driving higher demand for the raw materials used in their batteries, in particular lithium, nickel, cobalt and copper. “We expect demand for these metals to grow rapidly into the late 2020s and beyond. In this report, we identify the sovereigns that could see credit benefits from this trend, and explain some of the hurdles that will likely arise,” said Moody’s.

While the US based think tank sees Botswana and its Sub Saharan Africa counterparts to be meandering towards the posterity that comes with EV revolution, it has realized the huge potential of Democratic Republic of the Congo (DRC). Moody’s noted that if DRC’s potential is fully realized, cobalt production would total nearly 16 percent of DRC's 2018 GDP, more than half of its goods exports, and 133 percent of its government revenue by 2030.

However the think tank has seen investment challenges which might constrain credit-positive impact for DRC. According to Moody’s, very weak governance, poor infrastructure and persistent pockets of social instability in the DRC remain key challenges in ramping up metals production. “We find that while Democratic Republic of the Congo (DRC) has extremely large potential, governance and infrastructure limitations will significantly constrain the credit benefits,” said Moodys this week.

Botswana’s northern neighbor Zambia is said to be home to about 77 percent of Africa’s copper supply and is far and away the leading producer in Africa. In Sub Saharan Africa, Zambia is complimented by DRC in huge copper supply, boasting 13 percent of copper which is in the African soil. Botswana has a smaller copper-belt in Kalahari, but it is dwarfed by the gigantic production of the Central African Copperbelt of Zambia and the DRC.

Of the three metals considered for manufacturing EV batteries, DRC produces 5.8 percent of the global copper and 66 percent of cobalt. The country is not that renowned in production of nickel and lithium. The notorious in terms of poor governance DRC has 2.4 percent of copper reserves and 49.5 percent of cobalt.

Overlooking production of Sub-Saharan African countries, Chile is the world's top producer of copper and has the largest according to a 2018 Moody’s report. The same report said Indonesia and Philippines are the world's top producers of nickel, Australia has sizeable reserves. All the top African nickel and copper producers were lagging in both productions and reserves, which were less than 5 percent.

For cobalt DRC continues to be the world’s leading source of mined cobalt supplying more than 60% of global production, according to Moody’s. Its reserves, according to Moody’s, are also significant, accounting for almost half of the global total. “We expect global cobalt supply to increase more slowly than consumption and to remain limited in the near term. The rise in consumption is mainly driven by strong growth in the rechargeable battery and aerospace industries,” said Moody’s.

DRC is also on the top of estimated output value of battery-related metals by the world's top producers in 2030. Moody’s however is skeptical of DRC’s ability to improve its governance. “While its mineral resources provide significant potential for mining investment and flow on effects for the economy, the DRC's track record of very weak governance and recurrent conflict implies a material probability that much of the country's natural wealth potential will remain untapped.

Increasing global focus on the environmental and social aspects of mining provides another risk for the DRC's exploitation of its resources. The London Metals Exchange's announcement of responsible sourcing guidelines for companies mining in high risk or conflict zones illustrates that the country-specific elements of mining investment decisions will play an increasing role in driving the allocation of such investment across jurisdictions,” said Moody’s.

Also, Moody’s further states that sovereigns capable of producing more metal types for batteries have greater diversification and are subsequently less susceptible to shocks in individual markets. Moody’s mentioned Australia, China and Russia as one of those sovereigns and says they produce at least three of the four metals, and have sizeable reserve pools.

The debate of EVs surfaced this year when President Mokgweetsi Masisi promised to allow Batswana to tap into the EV revolution as a way of bringing meaningful jobs. The EV talk also reached the political debate table last month when a ruling party parliament aspirant put the strength of his argument on Botswana producing many engineers. But the opposition has always called this wishful thinking given lack or failure of investment on manufacturing let alone infrastructure and new technology development.

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China’s GDP expands 3% in 2022 despite various pressures

2nd February 2023
China’s Gross Domestic Product (GDP) expanded by 3% year-on-year to 121.02 trillion yuan ($17.93 trillion) in 2022 despite being mired in various growth pressures, according to data from the National Bureau Statistics.

The annual growth rate beat a median economist forecast of 2.8% as polled by Reuters. The country’s fourth-quarter GDP growth of 2.9% also surpassed expectations for a 1.8% increase.

In 2022, the Chinese economy encountered more difficulties and challenges than was expected amid a complex domestic and international situation. However, NBS said economic growth stabilized after various measures were taken to shore up growth.

Industrial output rose 3.6% in 2022 over the previous year, while retail sales slightly shrank by 0.2% data show that fixed-asset investment increased 5.1% over 2021, with a 9.1% hike in manufacturing investment but a 10% fall in property investment.

China created 12.06 million new jobs in urban regions throughout the year, surpassing its annual target of 11 million, and officials have stressed the importance of continuing an employment-first policy in 2023.

Meanwhile, China tourism market is a step closer to robust recovery. Tourism operators are in high spirits because the market saw a good chance of a robust recovery during the Spring Festival holiday amid relaxed COVID-19 travel policies.

On January 27, the last day of the seven-day break, the Ministry of Culture and Tourism published an encouraging performance report of the tourism market. It said that domestic destinations and attractions received 308 million visits, up 23.1% year-on-year. The number is roughly 88.6% of that in 2019, they year before the pandemic hit.

According to the report, tourism-related revenue generated during the seven-day period was about 375.8 billion yuan ($55.41 billion), a year-on-year rise of 30%. The revenue was about 73% of that in 2019, the Ministry said.

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Jewellery manufacturing plant to create over 100 jobs

30th January 2023

The state of the art jewellery manufacturing plant that has been set up by international diamond and cutting company, KGK Diamonds Botswana will create over 100 jobs, of which 89 percent will be localized.

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Investors inject capital into Tsodilo Resources Company

25th January 2023

Local diamond and metal exploration company Tsodilo Resources Limited has negotiated a non-brokered private placement of 2,200, 914 units of the company at a price per unit of 0.20 US Dollars, which will provide gross proceeds to the company in the amount of C$440, 188. 20.

According to a statement from the group, proceeds from the private placement will be used for the betterment of the Xaudum iron formation project in Botswana and general corporate purposes.

The statement says every unit of the company will consist of a common share in the capital of the company and one Common Share purchase warrant of the company.

Each warrant will enable a holder to make a single purchase for the period of 24 months at an amount of $0.20. As per regularity requirements, the group indicates that the common shares and warrants will be subject to a four month plus a day hold period from date of closure.

Tsodilo is exempt from the formal valuation and minority shareholder approval requirements. This is for the reason that the fair market value of the private placement, insofar as it involves the director, is not more than 25% of the company’s market capitalization.

Tsodilo Resources Limited is an international diamond and metals exploration company engaged in the search for economic diamond and metal deposits at its Bosoto Limited and Gcwihaba Resources projects in Botswana.  The company has a 100% stake in Bosoto which holds the BK16 kimberlite project in the Orapa Kimberlite Field (OKF) in Botswana.

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