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Botswana Railways, courts investors for P15 billion mega rail projects

Botswana Railways (BR) in collaboration with Business Botswana and the Botswana Investment and Trade Centre (BITC) held an interactive session with potential investors, where it was revealed that the country’s railway line is looking P15 billion worth of investment in its ambitious infrastructure development plan.

As Botswana yearns to advance into high income economy by taking advantage of available natural resources and exploring possible partnerships models to develop industrial and labour-intensive sectors that can absorb many of its unemployed citizenry, infrastructures registers as one of the key missing factors that are desperately imperative in connecting the puzzle in realising the nations ‘s economic aspirations.

Infrastructure facilitates trade, linking production sites to regions of demand and the market, in the process unlocking other value chain business opportunities and support industries.  Among investors which BR engaged were also experts and leading personalities and entrepreneurs from Banking, Mining, Assert and Property Management, Fund Managers, Construction and Railway Lines from neighbouring countries and abroad to engage on key national rail projects that Botswana seeks to embark on.

 It emerged at this Breakfast briefing held in Masa Square, Central Business District (CBD) Gaborone that these multibillion-pula projects if undertaken and effectively delivered would go a long way into unlocking various economic sectors, deliver higher GDP value and create much needed employment for Batswana especially the youth.

The two projects are the Mosetse –Kazungula and Mmamabula –Lephalale railways links. These projects which are estimated at P15 billion stands to push amongst others Botswana Coal industry which is currently at infant stage despite increasing global demand. The coal resources in Botswana are estimated at over 200 billion tonnes of deposits underground. Currently not even a quarter is unearthed as only Morupule Coal mine is an operating mine with salable coal reaching the market.

 When giving an overview of Botswana Railways’ ambition with these projects, Chief Executive Officer Leonard Makwinja   reiterated that adequate physical rail Infrastructure is instrumental to the growth and competitiveness of Botswana given its strategic geographical location at the Centre of Southern Africa.  “By developing enabling infrastructure, the Government can achieve the goal of transforming the country into a regional hub for Foreign Direct Investment by tapping into both neighbouring and international markets” he said.

P13 billion Mosetse –Kazungula rail project

The Mosetse-Kazungula project is positioned to provide a railway line from Mosetse in Botswana, connecting to Zambia and beyond through the Kazungula bridge. The rail line is part of the North South Corridor (NSC) with numerous benefits such as being gate-way to North African markets promoting inter regional trade, connecting North African region to maritime ports in South Africa, reduction of haulage traffic on roads amongst others.

Botswana railways chief added that the project cultivates an opportunity for tourism industry by providing for tourist trains as it runs through a wildlife rich area with various attractive landscapes and natural beauty of Chobe region. “This also provides alternative transport mode for Agricultural products from Pandamatenga Farms, remember agriculture also comes as one of the sectors we intend to develop as a country to diversify from the mineral revenue dependence,” added Makwinja

He explained that Botswana Railways is open to partner with potential investors noting that the recent State Visit to China by President Masisi has indicated capacity and willingness to participate by Chinese Government. On November 12th Minister of Finance and Economic Development, Kenneth Matambo together with Vice Chairman of China International Development Cooperation Agency signed the letter of Exchange on the technical Survey for projects submitted during the state visit to China by His Excellency President Masisi.

It was explained that as part of the assessment for the projects submitted, it is a requirement to undertake a technical Survey that will guide on the feasible projects after which negotiations for funding will commence between the two Governments. The Mosetse-Kazungula Railway line is one of the earmarked projects under consideration with others including Francistown- Nata Road, Nata-Gweta-Sehithwa-Gumare-Etsha-Mohembo roads.

At the singing of letters of exchange Minister Matambo reiterated that no commitment of funding of these projects was yet sealed, explaining that discussions will ensue once the technical Surveys have been completed for projects deemed feasible. Botswana Railways Chief revealed at the investor briefing that Chinese government might avail only a certain percentage of the total estimated cost considering the fact that there are a number of other key earmarked projects of high imperative competing for the funds such as the Francistown-Nata road which is currently in a poor state.

The Mosetse–Kazungula railway project is estimated to P 13 billion excluding rolling stock requirements with estimated initial tonnage at 2 million tons and is expected to grow to 4 million tons. Makwinja explained that 14 locomotives will be required with traffic geared to mostly be transit with wagons supplied from point of origin. “Line is designed as cape gauge, heavy haul at 26 ton/axle for 367 Km, the line goes through wildlife and agricultural areas and stations will be at Mosetse, Nata, Pandamatenga and Kazungula” he explained.

Mmamabula-Lephalale Rail Link Project

Estimated at P 2 billion to erect, the 56 km Mmamabula Lephalale Rail Link which will connect Mmamabula/Dibete in Botswana to Lephalale in South Africa aims to link Botswana’s over 200 billion coal deposits to South African’s  heavy haul lines.  One key feature of the project is a bridge across Limpopo River of Chief Executive Makwinja revealed that Botswana Railways and its South African counterparts are to sign a Memorandum of Understanding to facilitate progress of the project.

 He further explained that the railway line would be a gate way to South African ports for the coal market providing for a shorter route for North South Corridor coupled with Mosetse-Kazungula line. The rail way line which will be designed as cape gauge, heavy haul at 26 ton/axle with two years initial tonnage estimated at 10.5 MTPA will link the Masama coal fields which are currently explored by Botswana Stock Exchange (BSE) listed Minergy to South African market.

Permanent Secretary in the Ministry of Transport and Communication, Kabelo Ebineng shared that the earmarked undertakings are capital intensive projects that needed Government to think outside the box and approach the private sector so as synergies and areas of collaboration can be identified. “You are all aware that the Kazungula Bridge which has both the road and rail components is nearing completion hence the need for us to give impetus to the Mosetse-Kazungula Rail Line construction,”he said.

“These projects are central to us as a government. I am also aware of the high appetite for Mmamabula- Lephalale within the coal mining entities as this will represent the shortest route for the North South Corridor. As Botswana government we consider all these projects  very strategic  to our  quest for regional integration as a country.”

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Business

Diamond industry crises not over yet – De Beers Chief

13th January 2021
De Beers Group Chief Executive Officer: Bruce Cleaver

Following a devastating first half of the year 2020 due to COVID-19, the global diamond industry  started gaining  positive momentum towards the end of the year as key markets entered into  thanks giving and holiday season.

However Bruce Cleaver, Chief Executive Officer of De Beers Group cautioned that the industry is not out of the woods yet, citing prevailing challenges ahead into 2021.

The first half of 2020 was characterized by some of the worst challenges in history of global diamond trade.

The midstream, where rough diamonds are traded in wholesale and bulk to cutters and polishers, was for the most part of second quarter 2020, suffocated by international travel restrictions as countries responded to the contagious Corona Virus.

This halted movement of buyers and shipment of  the rough goods , resulting  in unprecedented decline of sales, in turn  ballooning stockpiles as the upstream  operations produced with little uptake by the midstream.

The situation was exacerbated by muted demand in the downstream where jewelry industries and tail end retailers closed to further curb the spread of COVID-19.

However towards the end of third quarter getting into the last quarter of the year, demand in both midstream and downstream started to steadily pick up as countries relaxed COVID-19 restrictions.

De Beers, the world’s largest diamond producer by value started reporting significant recovery in sales in the sixth and seventh cycle, figures began to reflect an upswing in sentiment as well as increase in uptake of rough goods by midstream.

Sales for the sixth cycle amounted to $116 Million, following a sharp downturn in the previous cycles, significant jump was realized during the seventh cycle, registering $320 million, an over 175 % upswing when gauged against the proceeding cycle.

De Beers noted that diamond markets showed some continued improvement throughout August and into September as Covid-19 restrictions continued to ease in various locations.

“Manufacturers focused on meeting retail demand for polished diamonds, particularly in certain product areas, accordingly, we saw a recovery in rough diamond demand in the seventh sales cycle of the year, reflecting these retail trends, following several months of minimal manufacturing activity and disrupted demand patterns in all major markets,” said De Beers Chief Executive, Bruce Cleaver in September last year.

The diamond mining behemoth continued to register impressive sales in the eighth and ninth cycle signaling the industry could end the year on a positive note.

The momentum was indeed carried into the last cycle of the year. The value of rough diamond sales (Global Sightholder Sales and Auctions) for De Beers’ tenth sales cycle of 2020 amounted to $440 million, a significant increase from the 2019 tenth sales cycle value.

Against what seemed like a positive year end that would split into the New Year Bruce Cleaver, CEO, De Beers Group, however warned the industry not to count eggs before they hatch.

“Positive consumer demand for diamond jewellery resulting from the holiday season is supporting the continuation of retail orders for polished diamonds from the diamond industry’s midstream sector. This in turn supported steady demand for De Beers’s rough diamonds at our final sales cycle of 2020,” Cleaver had said in December.

In caution the De Beers Chief noted that “While the diamond industry ends the year on a positive note, we must recognise the risks that the ongoing Covid-19 pandemic presents to sector recovery both for the rest of this year and as we head into 2021.”

All segments of the supply chain were severely impacted by the global lockdown measures introduced in response to the Covid-19 pandemic in the first half of 2020.

After a strong US holiday season at the end of 2019, the rough diamond industry started 2020 positively as the midstream restocked and sentiment improved.

However, from February 2020, the Covid-19 outbreak began to have a significant impact on diamond jewellery retail sales and supply chain, with many jewelers suspending all polished purchases and/or delaying payments to their suppliers.

Rough diamond sales were materially affected by lockdowns and travel restrictions, delaying the shipping of rough diamonds into cutting and trading centers and preventing buyers from attending sales events.

These resulted in significant decline in total revenue for the business in the first six months of 2020. Total revenue decreased by 54% to $1.2 billion from $2.6 billion registered in the prior half year period ended 30 June 2019.

For the entire first six (6) months of the year 2020 De Beers Rough diamonds sales fell drastically to $1.0 billion from $2.3 billion in the prior H1 period ended 30 June 2019. Sales volumes decreased by 45% to 8.5 million carats compared to 15.5 million carats registered in the prior period.

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Business

Gov’t coffers depleting to record low levels 

13th January 2021
Dr Matsheka

Next month Minister of Finance & Economic Development, Dr Thapelo Matsheka will face the nation to deliver Botswana‘s first budget speech since COVID-19 pandemic put the world on devastating economic trajectory.

The pandemic that broke out in late 2019 in China has put the entire world on unprecedented chaos ,killing over P1 million people across the globe , shattering economies and almost rendering  the year 2020 – a 12 months stretch of complete setback.

The 2021/22 budget speech will come at time when Botswana’s economy is still trying to emerge out of this.

National lockdowns and local travel restrictions have hit small medium enterprises hard, while international travel restrictions halted movement of both good and people, delivering by far some of the heaviest and worst catastrophic blows on the diamond industry and tourism sector, the likes of which this country has never seen before on its largest economic sectors.

As Minister Matsheka faces parliament next month, the reality on the ground is that Botswana’s national current cash resource, the Government Investment Account (GIA) is depleting at lightning speed.

On the other hand the COVID-19 economic mess is  prevailing,  the virus is reported to have taken a new dangerous shape of a deadly variant, spreading like fueled veld fire and causing some of the world’s super powers back to tough restrictions of lockdown.

According official figures released by Bank of Botswana, in October 2020 the GIA was running at P6 billion compared to the P18.3 billion held in the account in October 2019.

However reports indicate that the account could be currently holding just about P3 billion.  The draw down from the GIA has been by exacerbated by declining diamond revenue, the country‘s largest cash cow. The sector was experiencing significant revenue decline even before COVID-19 struck.

 

When the National Development Plan (NDP) 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at a budget deficits.

This as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively, since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances.

Taking into account the COVID-19 economic mess in 2020/21 financial year, the budget deficit could add up to P20 billion after revised figures.

Drawing down from government cash balances to finance these budget deficits meant significant withdrawals from the Government Investment Account, hence the near depletion of this buffer.

Meanwhile  should Botswana’s revenue streams completely dry up to zero levels; the country would only have 11 months, before calling out for humanitarian  aids and international donors, because  foreign reserves are also on slow down.

During 2019, the foreign exchange reserves declined by 8.7 percent, from Seventy One Billion, Four Hundred Million Pula (P71.4 billion) in December 2018 to Sixty Five Billion, Three Hundred Million Pula (P65.3 billion) in December 2019.

The reserves declined further in 2020, falling by 2.3 percent to Sixty Three Billion, Seven Hundred Million Pula (P63.7 billion) in July 2020.  This was revealed by President Masisi during State of the Nation Address in November last year.

The decrease was mainly due to foreign exchange outflows associated with Government obligations and economy-wide import requirements.

However latest statistics(October 2020)  from Bank of Botswana reveal that Botswana’s foreign reserves are estimated at P58.4 billion, with  government’s share of these funds significantly low.

Government has since introduced several measures to contain costs and control expenditure with the most recent intervention being the halting of recruitment in government departments and parastatals.

Furthermore, Value Added Tax has been signaled to go up  from 12% to 14% in April this year with more hikes and service fees anticipated as government embarks on unprecedented domestic revenue mobilization.

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Business

Cresta signs lease agreement for Phakalane golf estate hotel. continues with growth agenda despite covid-19 impact

13th January 2021

Botswana Stock Exchange listed hotel group Cresta Marakanelo Limited (“CML” or “the Company”) announced the signing of a lease agreement for Phakalane Golf Estate Hotel & Convention Centre, which will see CML extend its footprint by adding the 4 star Gaborone property to its already impressive portfolio.  The agreement is subject to regulatory approvals therefore the effective date of the transaction is expected to be 1 February 2021.

 

CML brings a wealth of expertise to the lease and despite the difficult year for the tourism and hospitality industry, due to the impact of the COVID-19 pandemic, CML remains confident in the recovery of the sector and the need to invest in expanding the Company’s footprint.

CML Managing Director, Mr Mokwena Morulane commented: “Our continued efforts to improve our offerings, understand the market dynamics and modern day trends in the face of global challenges, means we are ready for the changing face of tourism and international travel, and this addition to the Cresta portfolio signals our confidence in the future.  

 

“Despite the headwinds faced in 2020, Management has continued to focus on projects that enhance CML’s product offering such as the refurbishments at Cresta Mowana Safari Resort & Spa in the tourism capital Kasane and the ongoing refurbishment of Cresta Marang Residency in Francistown. The signing of the lease for the 4 star Phakalane Golf Estate Hotel & Conference Centre is a great addition to the Cresta portfolio and will unlock shareholder value in the future.

 

“We remain vigilant to value-enhancing opportunities including acquisitions or leases, after having reconsidered our pipeline against current and expected market conditions.”  

 

Commenting on the lease agreement, the Chief Executive Officer, Mr S Parthiban, speaking on behalf of Phakalane  noted; “No hotel chain holds as much expertise in the region, understands our local culture and tastes and what hospitality is about better than Cresta Marakanelo Limited. We believe that the renovations done to the property has made Phakalane Hotel and Convention Centre a unique product in Botswana and at par with international facilities.  We believe that this lease will benefit not only us as Phakalane , but the market in general as Cresta has run hotels successfully in Botswana for over 30 years and is therefore expected to bring new offerings that appeal to the local and international markets as well as the residents and visitors to the Golf Estate. We look forward to a long mutually beneficial relationship with Cresta.” 

 

CML like the rest of the tourism and hospitality industry and the entire value chain was hard hit by lockdowns  with the surge of COVID-19. By investing during the low period, the company hopes to realise the future value of spending time in preparing for the new consumer dynamics and behaviour.  Despite business interruptions as a result of a six-month long state of emergency and several lock-down periods declared by the Government of Botswana to limit the spread of COVID-19, the Company is starting to record an increase in occupancies, which bodes well for the recovery of the industry and the Company’s future prospects.

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