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Friday, 19 April 2024

Domestic fuel price hike shakes up inflation

Business

Inflation for the last quarter of 2018 has been shaken up by a hike of 0.3 percent from 2.9 in September to 3.6 percent in October 2018, Bank of Botswana has revealed on Monday.

When delivering the Bank rate position formulated by Monetary Policy Committee (MPC), Bank of Botswana (BoB) executives indicated that inflation is expected to edge up slightly in the short term, by in large still attributable to increase in domestic fuel prices. Botswana has received back-to-back fuel prices increase within a month period with the last one being two weeks ago where, petrol went up by 0.33t per litre, while diesel increased by 0.36t per litre and paraffin 0.31t per litre up.

The Ministry of Mineral Resources, Green Technology and Energy Security has explained that the increase in retail pump prices was necessitated by the growing numbers of under recoveries since September 2017. Authorities further shared that the actual cost of importing petroleum products into Botswana has been higher than the regulated price aligned to the local retail pump prices as per international trends. The two petrol price increases in a month amount to 0.98t – which is still short from the recommended P1.14, mirroring another possible price hike in the not so far future.

Under recoveries is the difference between the cost of importing fuel and the price set by the government the retail that is to say if it costs companies such as Engen and Shell about P10 per litre to import petrol but then the government says petrol should be charged at P8 per litre at the filling station, it means there is an under recovery of P2 or loss of that amount to the companies. Previously   the differences or losses was paid for by the government through the NPF, which collects a certain amount when Batswana buy fuel.

 But since last year revelations that over P250 million was siphoned from NPF and diverted to the Directorate on Intelligence Security (DIS). While the matter is still before the courts, consumers are for the first time starting to feel the pinch without the protection of the NPF which has been depleted. This week BoB however indicated that the outlook for price stability remains positive as inflation is forecast to remain within the Bank’s 3 – 6 percent objective range in the medium term.

Subdued domestic demand pressures and the modest increase in foreign prices contribute to the positive inflation outlook in the medium term. BOB said the outlook is subject to upside risks emanating from the potential rise in administered prices domestic fuel prices and government levies and/or taxes beyond current forecasts.“However, restrained growth in global economic activity, technological progress and productivity improvement, along with modest wage growth, present downside risks to the outlook,” said Bank of Botswana Governor Moses Pelaelo.

Real GDP grew by 4.4 percent in the twelve months to June 2018, compared to a lower expansion of 3.2 percent in the year to June 2017. The improvement in performance reflects the recovery in the mining sector, which grew by 5.6 percent compared to a contraction of 10 percent in the previous year.

Growth in non-mining GDP moderated to 4.3 percent in the year to June 2018, from 5 percent in 2017. GDP growth is projected to improve in the short to medium term, driven largely by performance of the Services sectors and recovery in mining activity, in line with positive global economic prospects. Furthermore, the projected accommodative monetary conditions in the domestic economy and increase in government expenditure are expected to support growth of economic activity in the non-mining sectors.

 “Overall, it is anticipated that the economy will operate close to, but below full capacity in the medium term, thus posing no upside risk to the inflation outlook.” Global output growth is projected at 3.7 percent in 2018 and 2019, the same as in 2017. Protectionist trade policies, potential build-up of financial vulnerabilities induced by easy financial conditions and geopolitical tensions could negatively affect the medium-term prospects.

Regionally, economic prospects in South Africa are expected to remain subdued in the short term with growth of 0.6 percent in 2018 and 1.9 percent in 2019. Pelaelo noted that the current state of the economy and the outlook for both domestic and external economic activity suggest that the prevailing monetary policy stance is consistent with maintaining inflation within the objective range of 3 – 6 percent in the medium term.

Consequently, the MPC decided to retain the Bank Rate at 5 percent. This signals that consumers will continue with unchanged fees for serving existing bank loans while banks will remain with their existing operating margins. The Monetary Policy Committee meets on a recurring interval of about two months to decide on any movements of the bank rate, basing its decision on the local inflation and other macro-economic factors as well as global economic outlook and key commodities trends like oil prices. The bank rate underpins all other interest rates within the market and any adjustment to it affects indicators such as the prime rate, the deposit rate and others

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Business

LLR transforms from Company to Group reporting

9th April 2024

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.

 

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Business

Botswana’s Electricity Generation Dips 26.4%

9th April 2024

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.

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Business

MMG acquires Khoemacau in a transaction valued at P23Bn

9th April 2024

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.

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