Diversified energy and coal exploration outfit Maatla Energy has closed in a deal to acquire majority shareholding in Jindal BVI Ltd from Jindal Steel & Power Limited, a Mauritius conceived global energy conglomerate owned by Indian Billionaire Industrialist Naveen Jindal, Weekendpost has established.
Maatla Energy is a multibillion pula mid-tier coal mining company in Botswana wholly owned by Maatla Resources Limited. The company is currently developing a coal export mine in Mmamabula Coal Fields, 145 kilometers north of Gaborone. The Mmamabula Coal Project contains over 90Mt of high-grade thermal coal. Maatla Energy is also currently conducting feasibility study to explore setting up Coal- Liquefaction Plant in around the operation.
On the other hand Jindal BVI is an investment company incorporated in accordance with the Laws of the British Virgin Islands. It is controlled by Jindal Steel & Power Limited; an investment company registered in Mauritius.Jindal BVI is involved in the mining and metallurgy industry with subsidiaries in Barbados, Bahamas, Mauritius and Botswana. In Botswana, Jindal BVI is present through Jindal Resources (Pty) Ltd a coal exploration and mining company, Trans Africa Rail (Pty) Ltd a railway construction company and Jindal Energy Botswana (Pty) Ltd a power and energy Management outfit.
Jindal BVI ‘s other subsidiaries in Botswana are Meepong Group of Companies encompassing Meepong Resources (Pty) Ltd a mining and management company , Meepong Energy (Pty) Ltd power station operation company in Mmamabula, as well as ,Meepong Services (Pty) Ltd and Meepong Water (Pty) Ltd focusing on infrastructural and water abstraction respectively. All these subsidiaries under Jindal BVI were set up as operation companies for the Mmamabula Coal projects.
Reports from global media outfits indicate that Maatla Energy has put a price offer of $150 million for the acquisition of 97.44% of issued share capital in Jindal BVI a holding company housing all the above subsidiaries. In March this year Competition Authority Botswana as a regulatory requirement floated a merger notice in the market calling for expression of any opposition against the proposed acquisition.
Reports confirming Jindal Steel & Power Limited (JSPL) divestment from Jindal BVI suggests the transaction is predominately motivated by JSPL‘s quest to pare debt at group level.JSPL is reported to have a total outstanding debt of Rs 40,000 crore(over $5.6 billon) as on March 2019.
Company Executives have confirmed that JSPL has entered into a share purchase agreement to divest its stake in the Botswana project for a consideration of around $150 million as part of its international portfolio rationalization, an undertaking focusing at disposing some of JSPL mines and minerals assets across Australia, Asia and Africa.
“The assets are being rationalized and monetized keeping in view their long-term viability, the raw material security for JSPL and the profitability of each of these businesses. The Group has been combing each asset, with a view of either exiting it or building it, to add to the bottom-line,” disclosed JSPL on various market platforms.
Jindal Africa, a subsidiary of JSPL, bought the coal explorations which are also around Mmamabula from CIC Energy for $116 million in 2012, as part of its global expansion. The project plan also included setting up a 1,200-Mw power plant in the area. The company has investment and business ventures in other Southern African markets such as Mozambique, Namibia, Zambia, Tanzania and Madagascar. However, with rising debt and global slowdown in the coal and steel market over the past few years, JSPL is selling off its international ventures to reduce its debt burden.
Maatla Energy exploration parameter, Mmamabula is one of the main coalfields in Botswana and contains more than 90 million tonnes of high grade thermal coal. Maatla’s Mmabula flagship mine has a life in excess of 25 years and is targeting initial production of 50 000 t/m, ramping up to 100 000 t/m within the first year of production. Currently site establishment and construction activities are underway with first coal sales expected in 2019.
There is an upward movement in the international coal price and an increasing demand for the high grade sized coal in the Southern Africa inland market. The Mmamabula coal mine will produce high grade coal for cement and lime producers, paper mills, chemical industries, brick works, breweries, sugar estates, hospitals and for general boiler applications in Southern Africa.
Maatla Resources says its mission is to develop the coalfields of Mmamabula to generate and supply coal which will power Botswana’s economy and assist in achieving energy security in the long term. With this acquisition Maatla Energy now stands to be a major player in the Mmamabula Coal exploration rush and Botswana’s coal industry as a whole.
Botswana’s Coal Industry
Botswana has over 200 billion tonnes of coal deposits underground, though the world is moving to green technology experts say the lucrative deposits cannot go unnoticed and be left untapped. Briton Billionaire Global Entrepreneur Sir Richard Branson also shared the same sentiments when headlining the 2017 Global Expo. He urged Botswana to explore coal deposits for industrialization, economic diversification and most importantly creation of much needed jobs as well as GDP growth in the interim while the country seeks environmental friendly energy generation alternatives.
Amongst international companies who are exploring the coal business and its value chain in Botswana are Tlou Energy, Shumba Energy, and Minergy all which are listed on Botswana Stock Exchange. Currently the only operating coal mine is Morupule Colliery founded by mining giant Debswana Diamond Company. Morupule is now wholly owned by government through Mineral Development Corporation (MDC).
The recent study on youth entrepreneurship in Botswana has identified difficult access to funding, land, machinery, lack of entrepreneurial mindset and proper training as serious challenges that continue to hamper youth entrepreneurship development in this country.
The study conducted by Alliance for African Partnership (AAP) in collaboration with University of Botswana has confirmed that despite the government and private sector multi-billion pula entrepreneurship development initiatives, many young people in Botswana continue to fail to grow their businesses into sustainable and successful companies that can help reduce unemployment.
University of Botswana researchers Gaofetege Ganamotse and Rudolph Boy who compiled findings in the 2022 study report for Botswana stated that as part of the study interviews were conducted with successful youth entrepreneurs to understand their critical success factors.
According to the researchers other participants were community leaders, business mentors, Ministry of Trade and Industry, Ministry of Youth, Gender, Sport and Culture, financial institutions, higher education institutions, non-governmental institutions, policymakers, private organizations, and support structures such as legal and technical experts and accountants who were interviewed to understand how they facilitate successful youth entrepreneurship.
The researchers said they found that although Botswana government is perceived as the most supportive to businesses when compared to other governments in sub-Saharan Africa, youth entrepreneurs still face challenges when accessing government funding. “Several finance-related challenges were identified by youth entrepreneurs. Some respondents lamented the lack of access to start-up finance, whereas others mentioned lack of access to infrastructure.”
The researchers stated that in Botswana entrepreneurship is not yet perceived as a field or career of choice by many youth “Participants in the study emphasized that the many youth are more of necessity entrepreneurs, seeing business venturing as a “fall back. Other facilitators mentioned that some youth do not display creativity, mind-blowing innovative solutions, and business management skills. Some youth entrepreneurs like to take shortcuts like selling sweets or muffins.”
According to the researchers, some of the youth do not display perseverance when they are faced with adversity in business. “Young people lack of an entrepreneurial mindset is a common challenge among youth in business. Some have a mindset focused on free services, handouts, and rapid gains. They want overnight success. As such, they give up easily when faced with challenges. On the other hand, some participants argue that they may opt for quick wins because they do not have access to any land, machinery, offices, and vehicles.”
The researchers stated that most youth involved in business ventures do not have the necessary training or skills to maintain a business. “Poor financial management has also been cited as one of the challenges for youth entrepreneurs, such as using profit for personal reasons rather than investing in the business. Also some are not being able to separate their livelihood from their businesses.
Lastly, youth entrepreneurs reported a lack of experience as one of the challenges. For example, the experience of running a business with projections, sticking to the projections, having an accounting system, maintaining a clean and clear billing system, and sound administration system.”
According to the researchers, the participants in the study emphasized that there is fragmentation within the entrepreneurial ecosystem, whereby there is replication of business activities without any differentiation. “There is no integration of the ecosystem players. As such, they end up with duplicate programs targeting the same objectives. The financial sector recommended that there is a need for an intermediary body that will bring all the ecosystem actors together and serve as a “one-stop shop” for entrepreneurs and build mentorship programs that accommodate the business lifecycle from inception to growth.”
Botswana Housing Corporation (BHC) is said to have recorded an operating surplus of P61 Million, an improvement compared to the previous year. The housing, office and other building needs giant met with stakeholders recently to share how the business has been.
The P61 million is a significant increase against the P6 million operating loss realized in the prior year. Profit before income tax also increased significantly from P2 million in the prior year to P72 million which resulted in an overall increase in surplus after tax from P1 million prior year to P64 million for the year under review.
Chief of Finance Officer, Diratsagae Kgamanyane disclosed; “This growth in surplus was driven mainly by rental revenue that increased by 15% from P209 million to P240 million and reduction in expenditure from P272 million to P214 million on the back of cost containment.” He further stated that sales of high margin investment properties also contributed significantly to the growth in surplus as well as impairment reversals on receivables amounting to P25 million.
It is said that the Corporation recorded a total revenue of P702 million, an 8% decrease when compared to the P760 million recorded in the prior year. “Sales revenue which is one of the major revenue streams returned impressive margins, contributing to the overall growth in the gross margin,” added Kgamanyane.
He further stated professional fees revenue line declined significantly by 64% to P5 million from P14 million in the prior year which attributed to suspension of planned projects by their clients due to Covid-19 pandemic. “Facilities Management revenue decreased by P 24 million from P69 million recorded in prior year to P45 million due to reduction in projects,” Kgamanyane said.
The Corporation’s strength is on its investment properties portfolio that stood at P1.4 billion at the end of the reporting period. “The Corporation continues its strategy to diversify revenue streams despite both facilities management income and professional fees being challenged by the prevailing economic conditions that have seen its major clients curtailing spending,” added the CEO.
On the one hand, the Corporation’s Strategic Performance which intended to build 12 300 houses by 2023 has so far managed to build 4 830 houses under their SHHA funding scheme, 1 240 houses for commercial or external use which includes use by government and 1 970 houses to rent to individuals.
BHC Acting CEO Pascaline Sefawe noted that; BHC’s planned projects are said to include building 336 flat units in Gaborone Block 7 at approximately P224 million, 100 units in Maun at approximately P78 million, 13 units in Phakalane at approximately P26 million, 212 units in Kazungula at approximately P160 million, 96 units at approximately P42 million in Francistown and 84 units at approximately P61 million in Letlhakane. Emphasing; “People tend to accuse us of only building houses in Gaborone, so here we are, including other areas in our planned projects.”
Researchers from some government owned regulatory institutions in the financial sector have projected that the banking sector’s profitability could increase, following Bank of Botswana Monetary Policy Committee recent decision to increase monetary policy rate.
In its bid to manage inflation, Bank of Botswana Monetary Policy Committee last month increased monetary policy rate by 0.50 percent from 1.65 percent to 2.15 percent, a development which resulted with commercial banking sector increasing interest rate in lending to household and companies. As a result of BoB adjustment of Monetary Policy Rate, from 1.65 percent to 2.15 percent commercial banks increased prime lending rate from 5.76 percent to 6.26 percent.
Researchers from Bank of Botswana, the Non-Bank Financial Institutions Regulatory Authority, the Financial Intelligence Agency and the Botswana Stock Exchange indicated that due to prospects of high inflation during the second half of 2022, there is a possibility that the Monetary Policy Committee could further increase monetary policy rate in the next meeting in August 25 2022.
Inflation rose from 9.6 percent in April 2022 to 11.9 percent in May 2022, remaining above the Bank of Botswana medium-term objective range of 3 – 6 percent. According to the researchers inflation could increase further and remain high due to factors that include: the potential increase in international commodity prices beyond current forecasts, logistical constraints due to lags in production, the economic and price effects of the ongoing Russia- Ukraine conflict, uncertain COVID-19 profile, domestic risk factors relating to possible regular annual administered price adjustments, short-term unintended consequences of import restrictions resulting with shortages in supplies leading to price increases, as well as second-round effects of the recent increases in administered prices “Furthermore, the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices could add upward pressure to inflation,” said the researchers.
The researchers indicated that Bank of Botswana could be forced to further increase monetary policy rate from the current 2.15 percent if inflation rises persistently. “Should inflation rise persistently this could necessitate an upward adjustment in the policy rate. It is against this background that the interest rate scenario assumes a 1.5 percentage points (moderate scenario) and 2.25 percentage points (severe scenario) upward adjustment in the policy rate,” said the researchers.
The researchers indicated that while any upward adjustment on BoB monetary policy rate and commercial banks prime lending rate result with increase in the cost of borrowing for household and compnies, it increase profitability for the banking sector. “Increases in the policy rate are associated with an overall increase in bank profitability, with resultant increases in the capital adequacy ratio of 0.1 percentage points and 0.2 percentage points for the moderate and severe scenarios, respectively,” said the researchers who added that upward adjustment in monetary policy rate would raise extra capital for the banking sector.
“The increase in profit generally reflects the banking industry’s positive interest rate gap, where interest earning assets exceed interest earning liabilities maturing in the next twelve months. Therefore, an increase of 1.5 percentage points in the policy rate would result in industry gains of P71.7 million (4.1 percent increase), while a 2.25 percentage points increase would lead to a gain of P173.9 million (6.1 percent increase), dominated by large banks,” said the researchers.