Botswana 2019 elections to delay fiscal consolidation efforts
Rating agency Moody's hawk-eyed prediction sees Botswana going at a snail’s pace in fiscal consolidation efforts and this could increase policy uncertainty ahead of the 2019 general elections. “Ahead of elections in Botswana, the authorities now envisage a more gradual pace of fiscal consolidation…” the rating agency said in an outlook this week.
Botswana is bracing for national elections in eight months. According to Moody’s, upcoming elections could increase policy uncertainty and delay fiscal consolidation efforts in countries like Botswana who are having elections this year. Elections will take place in a number of Sub Saharan Africa countries, including South Africa, Nigeria, Senegal, Botswana, Namibia, Cameroon and Mozambique in 2019.
Moody’s is of the view that some of the factors that are constraint to credit quality is political ranging from domestic civil unrest, conflicts, succession risk, or simply from policy unpredictability and their credit implications vary across the region. The rating agency also believes that political risk is an ever present credit constraint in Sub-Saharan Africa. However, Moody’s expects limited election-related policy uncertainty in Botswana, Namibia, Senegal and Ghana, “given their track records of political stability.”
“Overall, we expect the pace of fiscal adjustments to remain gradual at best as growth implications, political considerations and budget rigidities complicate consolidation efforts in some countries. (eSwatini, Namibia, Kenya), while in others, spending pressures ahead of elections may delay fiscal consolidation plans like in Botswana,” says Moody’s outlook. Moody’s also expects fiscal balances to improve or stabilize in most countries, with the median fiscal deficit of our rated Sub-Saharan Africa sovereigns narrowing to 3.1 percent of GDP in 2019 from an estimated 3.7 percent in 2018.
The rating agency also states that commodity exporters will achieve the largest deficit reduction in 2019 while some fiscal deterioration will occur across non-resource rich countries. Moody’s outlook for sovereign creditworthiness in 2019 in Sub-Saharan Africa remains negative overall, reflecting the rating agency expectations for the fundamental credit conditions that will drive sovereign credit over the next 12-18 months.
The negative outlook reflects still present credit challenges stemming from fiscal and external vulnerabilities amid tightening global liquidity conditions and intensifying global trade tensions, despite gradually improving growth prospects, according to Moody’s. Despite predicting that spending pressures ahead of elections may delay fiscal consolidation plans, Moody’s further stated that “we expect government debt ratios to deteriorate only marginally or stabilize in 2019, reflecting ongoing fiscal consolidation and the positive impact of higher growth rates on the denominator of debt-to-GDP.”
Moody’s Assistant Vice President Daniela Re Fraschini said: “Our negative outlook for sovereigns in Sub-Saharan Africa is driven by persistent credit challenges related to their ongoing fiscal and external vulnerabilities. That said, we expect credit pressures to ease relative to previous years, despite a more challenging external environment, as credit profiles display some resilience at their lower rating levels."
In this elections year, public servants expect government to increase their salaries and the sitting President Mokgweetsi Masisi soon after becoming a state head last year rode in that promise, experts and observers believe this will increase spending pressures ahead of this year’s general elections. In his maiden State of the Nation Address Masisi hinted that he is going to increase public servants salaries.
"I wish to inform this August House that Government has appointed a consultant (PEMANDU Associates SDN.BHD of Malaysia) to, among others, review the current Public Service remuneration system in terms of salaries, allowances and benefits. The consultancy work is expected to be concluded before the end of December this year. Once the PEMANDU report has been finalized, Government will engage Public Sector Unions on the recommendations thereto,” said Masisi who is expected to heed the political pressure by increasing public servants salaries.
Last year Masisi also appointed a commission mandated to review salaries of senior government officials and politicians. This commission is mandated to inquire into salaries, Conditions of Service and Other Entitlement of the President, Vice President, The Speaker of the National Assembly, Ministers, Deputy Speaker, Assistant Ministers, Leader of Opposition, Members of Parliament, Chief Justice, President of the Court of Appeal, Justices of Appeal, Judges of the High Court, Chairman of Ntlo ya Dikgosi, Members of Ntlo ya Dikgosi, Chairpersons of District Councils, Mayors, their Deputies, Chairpersons of Sub-Councils and their Deputies and Councillors. Masisi also said to the commission, "don't be intimated, feel free to recommend salary deductions if you feel so.”
“The Commission is expected to submit its recommendations in December this year (2018). It is the wish of Government for any recommendations agreed upon to be budgeted for and effected on 1st April, 2019,” said Masisi in his State of the Nation Address. Unemployment remains Masisi’s government’s biggest task towards this year’s elections and creation of jobs has been perpetually high on the incumbent president’s campaign card. Unemployment rate in Botswana is estimated to be around 19 percent.
Masisi’s administration has come with a National Employment Policy (NEP) which will come with implementable solutions to address the unemployment problem facing the country. “The goal of the NEP is to assist the country to achieve productive, gainful and decent employment for all, to contribute to the reduction of income inequality and as well as to support Government’s poverty eradication efforts.
To develop the NEP, Government obtained financial and technical support from the World Bank,” said Masisi in his first State of the Nation Address. Masisi added that the Draft National Employment Policy for Botswana is expected to be delivered by March, 2019, seven month before the general election in October 2019.
Business
LLR transforms from Company to Group reporting
Botswana Stock Exchange listed diversified real estate company, Letlole La Rona Limited (“LLR” or “the Company” or “the Group”), posted its first set of group financial statements which comprise the Company and Group consolidated accounts, which show strong financial performance for the six months ended 31 December 2023, with improvements across all key metrics.
The Company commenced the financial year with the appointment of a Deputy Chairperson, Mr Mooketsi Maphane, in order to bolster its governance and enhance leadership continuity through the development of a Board and Executive Management Succession Plan.
At operational level, LLR increased its shareholding in Railpark Mall from 32.79% to 57.79% and proudly took over the management of this prime asset.
The CEO of LLR, Ms Kamogelo Mowaneng commented “During the period under review, our portfolio continued to perform strongly, with improvements across all key metrics as a result of our ongoing focus on portfolio growth and optimisation.
“We are pleased to report a successful first half of the 2024 financial year, where we managed to not only grow the portfolio through strategic acquisitions and value accretive refurbishments but also recycled capital through the disposal of Moedi House as well as the ongoing sale of section titles at Red Square Apartments. The acquisition of an additional 25% stake in JTTM Properties significantly uplifted the value of our investment portfolio to P2.0 billion at a Group level. Our investment portfolio was further differentiated by the quality of our tenant base, as demonstrated by above market occupancy levels of 99.15% and strong collections of above 100% for the period”.
The growth in contractual revenue of 9% from the prior year’s P48.0 million to the current year P52.2 million, increased income from Railpark Mall, coupled with high collection rates, has enabled the company to declare a distribution of 9.11 thebe per linked unit, which is in line with the prior year.
In line with its strategic pillars of ‘Streamlined and Expanded Botswana Portfolio’ as well as ‘Quality African Assets’, the Group continuously monitors the performance of its investments to ensure that they meet the targeted returns.
“The Group continues to explore yield accretive opportunities for balance sheet growth and funding options that can be deployed to finance that growth” further commented the CEO of LLR Ms Kamogelo Mowaneng.
Ms Mowaneng further thanked the Group’s stakeholders for their continued support and stated that they look forward to unlocking further value in the Group.
Business
Botswana’s Electricity Generation Dips 26.4%
The Botswana Power Corporation (BPC) has reported a significant decrease in electricity generation for the fourth quarter of 2023, with output plummeting by 26.4%. This decline is primarily attributed to operational difficulties at the Morupule B power plant, as per the latest Botswana Index of Electricity Generation (IEG) released recently.
Local electricity production saw a drastic reduction, falling from 889,535 MWH in the third quarter of 2023 to 654,312 MWH in the period under review. This substantial decrease is largely due to the operational challenges at the Morupule B power plant. Consequently, the need for imported electricity surged by 35.6% (136,243 MWH) from 382,426 MWH in the third quarter to 518,669 MWH in the fourth quarter. This increase was necessitated by the need to compensate for the shortfall in locally generated electricity.
Zambia Electricity Supply Corporation Limited (ZESCO) was the principal supplier of imported electricity, accounting for 43.1% of total electricity imports during the fourth quarter of 2023. Eskom followed with 21.8%, while the remaining 12.1, 10.3, 8.6, and 4.2% were sourced from Electricidade de Mozambique (EDM), Southern African Power Pool (SAPP), Nampower, and Cross-border electricity markets, respectively. Cross-border electricity markets involve the supply of electricity to towns and villages along the border from neighboring countries such as Namibia and Zambia.
Distributed electricity exhibited a decrease of 7.8% (98,980 MWH), dropping from 1,271,961 MWH in the third quarter of 2023 to 1,172,981 MWH in the review quarter.
Electricity generated locally contributed 55.8% to the electricity distributed during the fourth quarter of 2023, a decrease from the 74.5% contribution in the same quarter of the previous year. This signifies a decrease of 18.7 percentage points. The quarter-on-quarter comparison shows that the contribution of locally generated electricity to the distributed electricity fell by 14.2 percentage points, from 69.9% in the third quarter of 2023 to 55.8% in the fourth quarter. The Morupule A and B power stations accounted for 90.4% of the electricity generated during the fourth quarter of 2023, while Matshelagabedi and Orapa emergency power plants contributed the remaining 5.9 and 3.7% respectively.
The year-on-year analysis reveals some improvement in local electricity generation. The year-on-year perspective shows that the amount of distributed electricity increased by 8.2% (88,781 MWH), from 1,084,200 MWH in the fourth quarter of 2022 to 1,172,981 MWH in the current quarter. The trend of the Index of Electricity Generation from the first quarter of 2013 to the fourth quarter of 2023 indicates an improvement in local electricity generation, despite fluctuations.
The year-on-year analysis also reveals a downward trend in the physical volume of imported electricity. The trend in the physical volume of imported electricity from the first quarter of 2013 to the fourth quarter of 2023 shows a downward trend, indicating the country’s continued effort to generate adequate electricity to meet domestic demand, has led to the decreased reliance on electricity imports.
In response to the need to increase local generation and reduce power imports, the government has initiated a new National Energy Policy. This policy is aimed at guiding the management and development of Botswana’s energy sector and encouraging investment in new and renewable energy. In the policy document, Minister of Mineral Resources, Green Technology and Energy Security Lefoko Moagi stated that the policy aims to transform Botswana from being a net energy importer to a self-sufficient nation with surplus energy for export into the region. Moagi expressed confidence that Botswana has the potential to achieve self-sufficiency in electric power supply, given the country’s readily available energy resources such as coal and renewable sources.
Business
MMG acquires Khoemacau in a transaction valued at P23Bn
MMG Limited, the Hong Kong-based mining company specializing in base metals, has successfully concluded the acquisition of Khoemacau Copper Mine, a state-of-the-art, world-class copper asset nestled in the northwest of Botswana.
On Monday, MMG announced that the acquisition of Khoemacau Mine in Botswana was finalized on 22nd March 2024. “This acquisition enriches the company’s portfolio with a top-tier, transformative growth project and signifies a monumental milestone in the Company’s journey,” MMG communicated in an official statement published on the Hong Kong Stock Exchange.
Upon completion of the acquisition, MMG remitted to the Sellers an Aggregate Consideration of approximately US$1,734,657,000 (over P23 billion), a sum subject to potential adjustments post-Completion.
In addition to the Aggregate Consideration, MMG, in accordance with the Agreement, advanced an aggregate amount of approximately US$348,580,000 (over P4.5 billion) as the Aggregate Debt Settlement Amount, to settle certain debt balances of the Target Group (Cuprous Capital/Khoemacau).
On November 21, 2023, Khoemacau announced that the shareholders of its parent company [Cuprous Capital] had agreed to sell 100% of their interests to MMG Limited.
MMG is a global resources company that mines, explores, and develops copper and other base metals projects on four continents. The company is headquartered in Melbourne, Australia, and has a significant shareholder, China Minmetals Corporation, which is China’s largest metals and minerals group owned by the Government of the People’s Republic of China.
On December 22, 2023, Khoemacau Copper Mining (Pty) Ltd received the approval from the Minister of Minerals and Energy of Botswana regarding the transfer of a controlling interest in the Project Licenses and Prospecting Licenses associated with the Khoemacau Copper Mine, a result of the Acquisition.
The Botswana Competition & Consumer Authority (CCA) on January 29, 2024, notified the market that it had given its approval for the takeover of Khoemacau Copper Mining by MMG Limited.
On January 29, 2024, the CCA issued a merger decision to the market, stating that after conducting all necessary assessments, it was ready to proceed.
The Competition Authority affirmed that the structure of the relevant market would not significantly change upon implementation of the proposed merger as the proposed transaction is not likely to result in a substantial lessening of competition, nor endanger the continuity of service in the market of mining of copper and silver ores and the production, and sale or supply of copper concentrate in Botswana.
Furthermore, the CCA stated that the proposed merger would not have any negative impact on public interest matters in Botswana as per the provisions of section 52(2) of the Competition Act 2018.
Earlier this month, Minister of Minerals & Energy, Lefoko Maxwell Moagi, informed parliament that his Ministry was endorsing the Khoemacau acquisition by MMG Limited. He noted that not only was the company acquiring the existing operation but also committing to an expansion program that would cost over $700 million to double production, create more jobs for Batswana, and increase taxes and royalties paid to the Government.