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NBFIRA grants Tlou Energy “local asset” status

Non-Bank Financial Institution Regulatory Authority (NBFIRA) has granted Tlou Energy Limited, Botswana Stock Exchange(BSE) listed power and energy production company a “local asset’’ status, the company revealed this week.

NBFIRA is the oversight body responsible for the regulation and orderly market conduct of all non-bank financial Institutions registered in Botswana. The granting of 'local asset status' to Tlou mirrors a positive development, as investment and pension funds that are domiciled in Botswana can now invest in Tlou Energy’s coal bed methane (“CBM”) Gas‐to‐Power Project and in return Tlou Shares can now also be treated as part of the funds’ local allocation of investments.

The granting of the local asset status is expected to bolster Tlou Energy share demand by the local investment space and also spark investor confidence and positive performance of the company’s share price. Tlou Energy which listed on the Botswana Stock Exchange Limited main board late last year, is gearing itself tor being an instrumental developer of gas‐to‐power projects in Southern Africa using coal bed methane (“CBM”) natural gas from its gas field in Botswana.

Tlou Energy is also listed on the Australian Stock Exchange, the Alternative Investment Market (AIM) of the London Stock Exchange. This week Tlou Energy also announced the successful submission of a tender in response to the Request for Proposal from Ministry of Mineral Resources, Green Technology and Energy Security for the development of up to 100MW of CBM fueled pilot power plants in Botswana.

The gas‐to‐power project intends to drive the gas from the Tlou’s Lesedi CBM project for power generation, and this power sold into the power market within Botswana and across the Southern African Power Pool (SAPP). Tlou Energy Managing Director, Tony Gilby explained that an initial development of up to 10MW is planned.

This will start with the first 2MW of power which can be expanded as further drilling is conducted and additional gas becomes available. With significant gas reserves already in place, the Company intends to readily expand upon successful implementation of the initial project.

“We are delighted that the re‐submission of the tender has been completed and we look forward to a response from the Ministry. We have detailed what we believe is a very compelling and robust proposal. If successful this project can help start a new CBM industry in Botswana, create further employment, provide a much‐needed local clean power source, and bring a return for Tlou investors,” he said.

Tony Gilby highlighted that the Lesedi CBM project will require connection to the local power grid. This connection is planned to be made at Serowe, approximately 100 Km from the Lesedi CBM project. He explained that a draft transmission line route has been determined with negotiations ongoing with the regional and local land boards and the environmental impact assessment approval process continuing.

The MD also added that further more in addition to selling power through the Request For Proposal process, should that be successful, his company is also in discussions with groups in Europe and China with interests in developing Compressed Natural Gas or mini‐LNG facilities.

“The development of a fertilizer plant using Tlou’s gas has also been proposed. These discussions and proposals are at an early stage so the viability of these potential projects is uncertain at present,’’ observed Tlou MD. He also noted that his company is well placed, as the leading CBM Company in the region, to be able to deliver the project outlined in the submission. “We look forward to working closely with the Government to make it a success. I would like to thank all our staff and consultants for their time and effort working on this project. Our drilling program is due to commence very soon,” he said.

Since establishment, the Company has significantly de‐risked the project in consideration of its goal to become a significant gas‐to‐power producer. The Company flared its first gas in 2014, holds a Mining License and nine Prospecting Licences, covering an area of ~8,300Km 2 in total, and the Lesedi Project already benefits from significant independently certified Contingent Gas Resources of ~3.2 trillion cubic feet (3C) and independently certified Gas Reserves of ~261 billion cubic feet (3P).

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020

This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.

The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.

He was speaking in  Parliament on Tuesday delivering  Parliament’s Finance Committee report after assessing a  motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.

The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.

The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.

The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.

This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.

Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.

Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.

However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.

Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.

When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at 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. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.

The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.

Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.

In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.

Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.

Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.

Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.

Acknowledging the need to draw down from GIA no more, current Minister of Finance   Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”

He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”

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