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Coal miner, Minergy to triple production, exports this month

The Botswana Stock Exchange (BSE) listed company, Minergy, has set its sights on increasing its coal production and exports from the current 39 000 tonnes per month to 110 000 tonnes this August at its Masama Coal Project in the Mmambula Coalfield.

Buoyed by the high demand for industrial coal supplies in neighbouring South Africa and Namibia, Minergy said it envisaged that a steady state of operations will be reached next month. In an operational update on the company released this week by the Minergy’s new chief executive, Morne du Plessis, the company said demand for coal was high as a result of the short supply of coal specifically into the South African industrial market.  

“From August this year it is envisaged that Minergy will be mining 110 000 tonnes of run mine (ROM) per month.  The same quantities will be put through the washing plant and this should result in saleable coal of between 70 000 to 80 000 tonnes, increasing to 100 000 tonnes per month next year.  It is envisaged that a steady state of operations will be reached in September 2019,” du Plessis said. He said the mining company, situated 50kms north of Gaborone, had in excess of 340 000 tonnes of coal exposed and only need to be blasted, equating to three months of feedstock.

“We have come such a long way and are pleased with developments at the mine site.  We are extremely excited about the future of the project, our ability to supply coal in the region as well as our capacity towards a viable coal sector in Botswana. “The mine is now fully operational, producing saleable coal.  The Masama Coal Project has an excellent quality coal product within sustainable coal seams, and as such, has received significant interest from regional companies.  Minergy has successfully moved product to South Africa and Namibia.  The smaller Botswana market is also targeted and Minergy believes it will be able to provide competitive pricing,” said du Plessis.

Market for the coal product was readily available in South Africa where production has declined by 20 million tonnes as some coal mining companies stopped production and demand increased. “In addition, it is believed that Eskom will suffer a shortfall in coal supply of 470 million tonnes by 2030.  Large players in the sector, Anglo American and South 32, are respectively withdrawing from the coal sector and disposing of their coal assets, meaning the supply will tighten even more,” the Minergy CEO added.

Minergy was also exploring various options for off-take, ranging from longer-term agreements for the “finer duff product to spot deals for the bigger fractions”. “The big-ticket items have been spent.  These included ensuring the mine had power and water, and that the mine box cut and the processing plant were established.  For the next six months all that we foresee is spend on water, new road construction and the maintenance and surrounding roads to the mine,” he indicated.

On funding, du Plessis said despite extremely difficulties experienced in accessing funding, Minergy, had successfully managed to raise funding of P90 million from the Botswana Corporation (BDC) and from the Minerals Development Corporation of Botswana (MDCB).
“Initial funding includes bridging finance provided by both parties amounting to P70 million for a period of six months.  This will be refinanced through long-term agreements with both parties.  All necessary regulatory approvals are in place and agreements have been signed,” he said.

Minergy is 100 percent owned by the Masama project, operates open cast mining and it is near rail, road and water infrastructure.  It is at the advance stage of listing on the London-based Alternative Investment Market (AIM). The mine employs 250 people with 92 percent being local citizens while one-third is from the local Kweneng district. 

As part of its corporate and investment programme, Minergy has facilitated for electricity connectivity to the village, clinic, kgotla and local school. The company is the first to hold a mining licence for an open pit coal mine in Botswana where diamond mining has dominated the economy.  The mine has a life of 100 years and is expected when fully operational, to produce 2.4 million tonnes a year.

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P230 million Phikwe revival project kicks off

19th October 2020
industrial hub

Marcian Concepts have been contracted by Selibe Phikwe Economic Unit (SPEDU) in a P230 million project to raise the town from its ghost status.  The project is in the design and building phase of building an industrial hub for Phikwe; putting together an infrastructure in Bolelanoto and Senwelo industrial sites.

This project comes as a life-raft for Selibe Phikwe, a town which was turned into a ghost town when the area’s economic mainstay, BCL mine, closed four years ago.  In that catastrophe, 5000 people lost their livelihoods as the town’s life sunk into a gloomy horizon. Businesses were closed and some migrated to better places as industrial places and malls became almost empty.

However, SPEDU has now started plans to breathe life into the town. Information reaching this publication is that Marcian Concepts is now on the ground at Bolelanoto and Senwelo and works have commenced.  Marcian as a contractor already promises to hire Phikwe locals only, even subcontract only companies from the area as a way to empower the place’s economy.

The procurement method for the tender is Open Domestic bidding which means Joint Ventures with foreign companies is not allowed. According to Marcian Concepts General Manager, Andre Strydom, in an interview with this publication, the project will come with 150 to 200 jobs. The project is expected to take 15 months at a tune of P230 531 402. 76. Marcian will put together construction of roadworks, storm-water drains, water reticulation, street lighting and telecommunication infrastructure. This tender was flouted last year August, but was awarded in June this year. This project is seen as the beginning of Phikwe’s revival and investors will be targeted to the area after the town has worn the ghost city status for almost half a decade.

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IMF projects deeper recession for 2020, slow recovery for 2021

19th October 2020

The International Monetary Fund (IMF) has slashed its outlook the world economy projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.

On Wednesday when delivering its World Economic Outlook report titled “A long difficult Ascent” the Washington Based global lender said it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April.  For 2021, IMF experts have projected growth of 5.4%, down from 5.8%. “We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” said Gita Gopinath Economic Counsellor and Director of Research.

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Botswana partly closed economy a further blow of 4.2 fall in revenue

19th October 2020

The struggle of humanity is now how to dribble past the ‘Great Pandemic’ in order to salvage a lean economic score. Botswana is already working on dwindling fiscal accounts, budget deficit, threatened foreign reserves and the GDP data that is screaming recession.

Latest data by think tank and renowned rating agency, Moody’s Investor Service, is that Botswana’s fiscal status is on the red and it is mostly because of its mineral-dependency garment and tourism-related taxation. Botswana decided to close borders as one of the containment measures of Covid-19; trade and travellers have been locked out of the country. Moody’s also acknowledges that closing borders by countries like Botswana results in the collapse of tourism which will also indirectly weigh on revenue through lower import duties, VAT receipts and other taxes.

Latest economic data shows that Gross Domestic Product (GDP) for the second quarter of 2020 with a decrease of 27 percent. One of the factors that led to contraction of the local economy is the suspension of air travel occasioned by COVID-19 containment measures impacted on the number of tourists entering through the country’s borders and hence affecting the output of the hotels and restaurants industry. This will also be weighed down by, according to Moody’s, emerging markets which will see government losing average revenue worth 2.1 percentage points (pps) of GDP in 2020, exceeding the 1.0 pps loss in advanced economies (AEs).

“Fiscal revenue in emerging markets is particularly vulnerable to this current crisis because of concentrated revenue structures and less sophisticated tax administrations than those in AEs. Oil exporters will see the largest falls but revenue volatility is a common feature of their credit profiles historically,” says Moody’s. The domino effects of containment measures could be seen cracking all sectors of the local economy as taxes from outside were locked out by the closure of borders hence dwindling tax revenue.

Moody’s has placed Botswana among oil importers, small, tourism-reliant economies which will see the largest fall in revenue. Botswana is in the top 10 of that pecking order where Moody’s pointed out recently that other resource-rich countries like Botswana (A2 negative) will also face a large drop in fiscal revenue.

This situation of countries’ revenue on the red is going to stay stubborn for a long run. Moody’s predicts that the spending pressures faced by governments across the globe are unlikely to ease in the short term, particularly because this crisis has emphasized the social role governments perform in areas like healthcare and labour markets.

For countries like Botswana, these spending pressures are generally exacerbated by a range of other factors like a higher interest burden, infrastructure deficiencies, weaker broader public sector, higher subsidies, lower incomes and more precarious employment. As a result, most of the burden for any fiscal consolidation is likely to fall on the revenue side, says Moody’s.

Moody’s then moves to the revenue spin of taxation. The rating agency looked at the likelihood and probability of sovereigns to raise up revenue by increasing tax to offset what was lost in mineral revenue and tourism-related tax revenue. Moody’s said the capacity to raise tax revenue distinguishes governments from other debt issuers.  “In theory, governments can change a given tax system as they wish, subject to the relevant legislative process and within the constraints of international law. In practice, however, there are material constraints,” says Moody’s.

‘‘The coronavirus crisis will lead to long-lasting revenue losses for emerging market sovereigns because their ability to implement and enforce effective revenue-raising measures in response will be an important credit driver over the next few years because of their sizeable spending pressures and the subdued recovery in the global economy we expect next year.’’

According to Moody’s, together with a rise in stimulus and healthcare spending related to the crisis, the think tank expects this drop in revenue will trigger a sizeable fiscal deterioration across emerging market sovereigns. Most countries, including Botswana, are under pressure of widening their tax bases, Moody’s says that this will be challenging. “Even if governments reversed or do not extend tax-easing measures implemented in 2020 to support the economy through the coronavirus shock, which would be politically challenging, this would only provide a modest boost to revenue, especially as these measures were relatively modest in most emerging markets,” says Moody’s.

Botswana has been seen internationally as a ‘tax ease’ country and its taxes are seen as lower when compared to its regional counterparts. This country’s name has also been mentioned in various international investigative journalism tax evasion reports. In recent years there was a division of opinions over whether this country can stretch its tax base. But like other sovereigns who have tried but struggled to increase or even maintain their tax intake before the crisis, Botswana will face additional challenges, according to Moody’s.

“Additional measures to reduce tax evasion and cutting tax expenditure should support the recovery in government revenue, albeit from low levels,” advised Moody’s. Botswana’s tax revenue to the percentage of the GDP was 27 percent in 2008, dropped to 23 percent in 2010 to 23 percent before rising to 27 percent again in 2012. In years 2013 and 2014 the percentage went to 25 percent before it took a slip to decline in respective years of 2015 up to now where it is at 19.8 percent.

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