China’s latest play for greater influence in Africa involves advancing $60 billion in aid and loans to African nations. Announced at the Forum on China-Africa Cooperation (FOCAC) last month in Beijing, the summit drew the attendance of more than 40 African Heads of State, including H.E President Mokgweetsi E.K Masisi – the first visit by a Motswana head of state in over 12 years.
The summit came hot on the heels of high-profile state visits to Africa by key Western leaders, including the UK’s Theresa May, Germany’s Angela Merkel and France’s Emmanuel Macron. For most observers, these developments are clear signals that competition for influence in Africa is intensifying. Over the past few months the continent has played host to Heads of State and senior diplomats from Brazil, Argentina, Russia, India and Turkey, to name just a few.
Botswana can leverage off this competition for her own advantage, but to truly understand Botswana’s options today, we must look beyond the East vs West dichotomy and first consider Botswana's own needs and ambitions. Like most countries on the continent, Botswana has a clear development and growth strategy but faces complex political and operational challenges in executing its plans.
What is less well understood is the array of options Botswana now has in addressing some of these challenges. Between 2010 and 2017, more than 65 countries increased their overall trade with sub-Saharan Africa, according to data from the International Trade Centre. All these countries, despite their divergent interests, seem to understand one thing: the future of their nations is linked to the partnerships they forge in Africa today.
This is a continent where 60% of the population is below 25 years of age and expected to double from 1.2 billion in 2017 to 2.4 billion in 2050 (representing a quarter of the world’s population), with 60% of the world’s uncultivated arable land, and which is growing robustly against the backdrop of tepid global economic growth – six of the ten fastest growing economies in 2018 are African, according to the IMF.
There are obvious challenges to overcome, which require proper policy and planning to address the urgency of job creation, climate change mitigation and adaptation and dismantling systemic inequality; but the fundamentals are compelling, particularly when viewed long term.
Amidst the surge in foreign interest in Africa, traditional partners such France and the US are finding it harder to protect and expand their spheres of influence on the continent. Aggressive nationalism within the current US administration has shaped a more inward-looking policy agenda which can appear indifferent – often even hostile – to interests outside US borders.
Meanwhile, the UK is trying to marry complex negotiations around Brexit with a concerted push to lay the foundations of stronger trade and investment ties outside Europe, including Africa, where the UK has set a goal to become the largest investor among the Group of seven most industrialized nations (G7) by 2020. The UK’s pivot away from Europe and her reinvigorated focus on partnerships with other parts of the globe – including Africa – presents good medium and long-term opportunities for nations like Botswana. It is noteworthy that President Mokgweetsi E.K Masisi will visit the UK this week.
In such a crowded landscape, competitive edge among bilateral partners will not be determined purely by capital or favourable trading terms but also by meaningful commitments to reciprocity. Nations and companies that want to succeed in Africa will need to think beyond what they want to export and access, and must seek to address the priorities of their African partners.
Botswana's long held agreement with DeBeers and the creation of Debswana remains a model which many seek to this day, For their part, foreign partners eager to gain traction in African markets should align their strategies with that of their local partners, and in so doing they will build the grounds for sustainability. They will experience less friction, build more brand equity and find doors open for constructive dialogue on operational issues, policies and regulations.
Companies’ ability to design and promote strategies that recognise the need for developmental impact and long-term commitment over quick-wins and fast-bucks will perform better. Such an approach moves relationships from transaction to transformation. Investors and senior management teams must put people, not just numbers, at the heart of decision-making and be equipped to communicate impact and create buy-in from the right stakeholders – governments, suppliers and communities. For their part, African governments must spend more time looking at long term development impact, not just short term commercial terms and outcomes.
Manufacturing holds great trans-formative potential for societies, provided the right approach is taken. In Gabon at the start of the decade, President Ali Bongo Ondimba announced the cessation of exports of raw timber. His announcement was met with a lot of criticism, but eight years later the benefits are clear for everyone to see. Manufacturers of processed wood and finished goods have emerged and new local value chains have been created for foreign investors and Gabonese SMEs, resulting in 10,000 new jobs. Gabon's shift in policy was accompanied by government interventions to equip the labour force with suitable skills for the industry.
In Botswana, economic diversification and manufacturing sector growth are being pursued with rewed vigor by this administration. They are matched by efforts to forge greater alignment between the private sector and government priorities. The last decade witnessed China becoming an increasingly active manufacturer in Africa. Western firms are following suit – their global strategies increasingly feature African nations as markets to service and export from.
Much of the appeal of African nations is being created by shifts in the economies of India and China. China’s evolution from an investment-led economy to a consumption-led economy has led to domestic wage growth, resulting in manufacturers leaving the country for other low-cost destinations. China is expected to lose between 85 million and 100 million low-cost labour-intensive manufacturing jobs by 2030, according to the World Economic Forum.
Some of the Chinese companies leaving the country are establishing operations in Africa, where the Chinese government has already rolled out infrastructure projects that make it easier for Chinese companies to do business and price their products competitively for global markets. In this vain, Zhao Yambo, the Chinese Republic's ambassador to Botswana recently encouraged Botswana to take advantage of China’s Belt and Road Initiative. This multi-billion dollar plan will see Chinese companies engaging in construction work in Africa and globally, on a scale never seen before.
The quest for jobs in Botswana, where the aspirations of Batswana youth are still not catered for by the employment market, has forged a deep desire by the Botswana government to play a more active role in diversifying the nation's economy. This is where the Chinese approach sometimes has its limits. Although China readily builds badly-needed infrastructure, they use their own financing, contractor firms, technology and even labour in some instances from end-to-end.
This deprives Batswana of meaningful stakes in projects or ownership of certain value chains and can fuel resentment and mistrust. There are many anecdotes about Chinese firms paying their employees offshore and sourcing goods and services from China. The extension of Sir Seretse Khama airport and Morupule B power station are two well-publicized examples of disaffection. While China has funded over 40 major projects in Botswana and is one of the country’s largest project contractors, Chinese companies have created 2,000 jobs in local communities- a small number given the scale of these projects.
Western companies generally have a better track record of working with local staff, including integrating them in key management positions. By being purposeful about skills, knowledge and technology transfer, and by asking African governments and companies what they need, then creating the right business models, products and services to achieve these goals, these companies will prosper. Only companies that exhibit these traits and deliver against them, should be granted access to African resources and markets, I believe.
Foreign companies wishing to succeed in African markets today must evolve their models of doing business from traditionally extractive ones, to ones that are additive. African governments that secure these terms of trade will take up their positions as a globally significant manufacturing hubs, consumer markets, talent pools and trading partners. With so much competition, it behoves African governments to establish clear visions for their economies and be selective when choosing their partners.
The stellar economic performance of Rwanda, Morocco and Ethiopia over the last decade did not happen by chance. It resulted from deliberate and concerted measures by their governments to pursue policies and strike agreements that opened new growth opportunities and export markets for their industries and their citizens.
About the authors:
Natalie Maule is a London-based Director at africapractice Group, a pan-African advisory firm headquartered in Botswana. Tigele Nlebesi is an Analyst at africapractice, based in Gaborone.
Botswana Stock Exchange (BSE) moved swiftly this week to suspend BBS Limited from trading its securities following a brawl between Board of Directors and Managing Director, Pius Molefe, which led to corporate governance crisis at the organisation.
In an interesting series of events that unfolded this week, incumbent board Chairperson, Pelani Siwawa-Ndai moved to expel Molefe together with board Secretary, Sipho Showa, who also doubles up as Head of Marketing and Communications. It is reported that Siwawa-Ndai in her capacity as the board Chairperson wrote letters of dismissals to Molefe and Showa.
Following receipt of letters, the duo sought and was furnished with legal opinion from Armstrong Attorneys advising them that their dismissals were unlawful hence they were told to continue to report to work and carry out their duties.
Documents seen by BusinessPost articulate that in the meeting which was held on the 1st of April, the five outgoing board members, unlawfully took resolutions to extend their contracts by a further 90 days after April 30 2021 as they face tough competition from five other candidates who had expressed interest to run for the elections.
Moreover, at the said meeting, management explained that neither management nor the board have the authority to decline nominations submitted by shareholders or the interested parties which is in line with Companies Act and also BBS Limited constitution.
Molefe also revealed that as management they cautioned the board that it was conflicted and it would be improper for it to influence the election process as it seems they intended to do so. “Nonetheless, in a totally unprecedented move in the history of BBSL, the board then collectively passed the unlawful resolutions below. Leading to the illegitimate decisions, the board had brazenly directed that its discussions on the Board elections should not be recorded totally violating sound corporate governance,” reads the statement released by management this week.
When giving their legal advice, Armstrong Attorneys noted that notice for the AGM should state individuals proposed to be elected to the board and directors have no legal authority to prevent the process.
Armstrong Attorneys also noted that, “due process” cited by board members are simply to ensure that the five retiring Directors avoid competition from interested candidates to be appointed to the BBS Limited board. The law firm further opined that the resolution of the 90 day extension of term of the five directors pending re-election or election was unlawful.
Molefe expressed with regret that BBS has been suspended from trading by BSE until the current matter has been resolved. “I am concerned by this development and other potentially harmful actions on the business. As management, we are engaging with stakeholders to mitigate any negative impact on BBS Limited,” expressed a distressed Molefe.
He assured shareholders and the rest of Management that they are working very hard to ensure that the issues are being dealt with in a mature manner. BBS which hopes to become the first indigenous commercial bank has seen its shares halted barely four months after BSE lifted the trading suspension of shares for BBS following submission of their published 2019 audited financial statements.
According to Chief Executive Officer (CEO) of the local bourse, Thapelo Tsheole said the halting of shares of BBSL is to maintain fair, efficient and orderly securities trading environment. “The securities have been suspended to allow BBS to provide clarity to the market concerning the recent allegations which have been brought to the attention of the BSE relating to the company’s Board of Directors and senior management,” said Tsheole.
Meanwhile in their audited financial statements for the year ended 31 December 2020, BBS recorded a loss of P14.6 million as at 31 December 2020 compared to the loss of P35.7 million for the comparative year ended 31 December 2019. According to Molefe the year under review was the most challenging for the bank, its shareholders and customers endured the difficult economic environment and the negative impact of the coronavirus.
He revealed that as the bank, they were forced to put in place several measures to ensure that the business withstands the impact of coronavirus and also to cushion mortgage customers from the effects of the pandemic. “Since April 2020 up to the end of December 2020, BBS assisted 555 mortgage customers with a payment holiday,’’ he said.
This is the bank whose total balance sheet declined by 12 percent from P4, 626 billion for the year ended. 31 December 2019 to P4, 088 billion as at 31 December 2020. As if things were not bad enough, total savings and deposits at the bank declined by 14 percent from a balance of P2, 885 billion as at 31 December 2019 to P2, 494 billion as at 31 December 2020.
On a much brighter side, BBSL mortgage loans and advances improved from P3, 401 billion to P3.408 billion with impairment allowance significantly improving to P78, 648 million from P102, 532 million for the year under review, representing a positive variance of 23 percent. BBS maintained a strong capital base with capital adequacy ratios of 26.32% for the year ended 31 December 2020.
Molefe was optimistic and anticipated a positive outcome during the implementation of the new BBS corporate strategy, whose main drive is commercialization of operations, which is in full force. “It will be spurred on by the positive results we have achieved for the year ended 31 December 2020, and our planned submission of our banking license application to Bank of Botswana which we anticipate to operate as a commercial bank in the third quarter of 2021,” he alluded.
Chief Executive Officer (CEO) of Premium Nickel Resources Botswana (PNRB), Montwedi Mphathi, has said his company will resuscitate the formerly owned BCL assets and deliver a new, sustainable and cutting edge mining operation.
The new mine which will leverage on modern and next generation technology, will be environmentally sensitive and cognisant of the needs of its people and that of the communities around the area of influence.
In a statement last week, Premium Nickel Resources Botswana and its parent company, the Canadian headquartered Premium Nickel Resources announced that they have now completed the Exclusivity Memorandum of Understanding (MOU) with the Liquidator.
The MOU will govern a six-month exclusivity period to complete its due diligence and related purchase agreements on the Botswana nickel-copper-cobalt (Ni-Cu-Co) assets formerly operated by BCL Limited (BCL), that are currently in liquidation.
On February 10, 2021, Lefoko Moagi, the Minister of Mineral Resources, Green Technology and Energy Security of Botswana, affirmed in Parliament a press release by the Liquidator for the BCL Group of Companies, stating that PNR was selected as the preferred bidder to acquire assets formerly owned by BCL.
“This is encouraging for the company and for Botswana. Our ambition in this new project dubbed “Tsholofelo” is to redevelop the former BCL assets into a modern, environmentally sensitive, efficient NI-Cu-Co-water producer where sustainability and the people are at the forefront of the decisions we make,” said Mphathi in a statement last Thursday.
“We also understand that no matter how successful we are at building the “New BCL” , our success will only be measured at our ability to create local wealth , skills and support the continued transition of local economy to a longer term sustainable base.”
The next step during the exclusivity period will be the completion of the definitive agreement. Simultaneous to this the PNRB will be conducting additional investigative work on site to further its understanding of the potential of these assets.
Specifically the company will complete an environmental assessment, a metallurgical study, a review of legal and social responsibilities, a review of the mine closure and rehabilitation plans and an on-site inspection of the legacy mining infrastructure and equipment that has been under care and maintenance.
Mphathi said they continue to monitor the global Covid-19 developments noting that they are committed to working with health and safety authorities as a priority and in full respect of all government and local Covid-19 protocol requirements. PNRB has developed Covid-19 travel, living and working protocols in anticipation of moving forward to on site due diligence.
“We will integrate these protocols with the currently applicable protocols of Ministry of Health & Wellness as well as District Health Management Team ( DHMT) and surrounding communities,” reads a statement released by the Gaborone based Premium Nickel Resources team.
PNRB is looking to become a catalyst in participating and building a strong economy for Botswana, with a purpose where respect and trust are core to every single step that will be taken. “Our success will mean following international best-in-class practices for the protection of Botswana’s environment and the focus on its people, building partnerships and earning respect, through cooperation and collaboration,” explains PNRB on its website.
“We are committed to Governance through transparent accountability and open communication within our team and with all our stakeholders.” Mphathi, a former BCL Executive, is widely celebrated for achieving unprecedented profitability at the mine during his tenure as General Manager.
The Serowe-born mining guru obtained a Diploma in Mining Technology from Haileybury School of Mines in Canada. He later obtained a B.Eng. Mining degree from the Technical University of Nova Scotia. Mphathi went on to City University in London, UK and obtained a M.Sc. in Industrial and Administrative Sciences.
Before ascending to the top country managerial role of Premium Nickel Resources. Mphathi was General Manager of Botswana Ash (Botash), Southern Africa’s leading salt and soda ash producer. He was at some point linked to Debswana top post, which is still to date not substantively filled following the death of Managing Director, Albert Milton, in August 2019.
With Mphathi out of the race and now leading the rebuilding of his former employer, the top post at De Beers- Botswana joint venture is likely to be filled by current acting Managing Director Lynette Armstrong, a seasoned finance executive with unparalleled experience in the extractive industry.
“We are happy to hear that former General Manager of BCL, Mr Montwedi Mphathi, has a relationship with the new Company that intends to resuscitate the mine, he is an experienced Mining Executive who knows BCL better, we want the mine to be brought back to life so that our people can be employed ” said Dithapelo Keorapetse Member of Parliament for Selibe Phikwe West recently in Parliament.
BCL was liquidated in October 2016 following a series of losses and government bailout occasioned by low Copper prices and allegedly poor Investment decisions and maladministration. Recently PNR CEO, Keith Morrison said his team of seasoned experts both from Canada and Botswana are committed to resuscitate the BCL assets and deliver a high performance mining operation.
“The World, Botswana and the mining industry have changed dramatically since mining first started at the former BCL assets in the early 1970s. The nickel-copper-cobalt resources remaining at these mines are now critical metals, required for the continued development of a decarbonized and electrified global economy,” he said.
Morrison added: “As we move forward, it is our goal to demonstrate the potential economics of re-developing a combination of the former BCL assets to produce Ni-Cu-Co and water in a manner that is inclusive of modern environmental, social and corporate governance responsibilities.”
He explained that to attain this, extensive upgrades to infrastructure will be required with an emphasis on safety, sustainability and the application of new technologies to minimize the environmental impact and total carbon footprint for the new operations.
“Our team remains committed to working with the local communities and all of the stakeholders throughout this period and we encourage anyone with questions or feedback to reach out to us directly,” he noted.
Lucara Diamond Corporation, the Canadian 100% owners of iconic Karowe mine, this week announced the extension of its supply deal with Belgian diamond midstream giant HB Antwerp.
The definitive supply agreement is in respect of all diamonds produced in excess. of 10.8 carats in size from its rare gem producing Karowe diamond mine located in the Boteti district of Botswana. Large, high value diamonds in excess of 10.8 carats in size account for approximately 70% of Lucara’s annual revenue.
Though the Karowe mine has remained fully operational throughout the COVID-19 pandemic, Lucara made a deliberate decision not to tender any of its +10.8 carat inventory after early March 2020 amidst the uncertainty caused by the global crisis.
Under the terms of this novel supply agreement with HB, extended to December 2022, the purchase price paid for each +10.8 carat rough diamond is based on the estimated polished outcome, determined through state of the art scanning and planning technology, with a true up paid on actual achieved polished sales thereafter, less a fee and the cost of manufacturing.
“Lucara is beginning to see the benefits of this strategy in accessing a broader marketplace and delivering regular cash flow based on final polished sales,” said Lucara CEO, Eira Thomas on Wednesday.
“We believe these early results warrant an extension of the arrangement for at least 24 months to determine if superior pricing and market stability for our large, high-value diamonds can be sustained longer term.”
The Canadian junior miner initiated a supply agreement with HB for large stones from its Botswana Karowe mine in July 2020, after pausing its tenders shortly after the Covid-19 pandemic began. The deal enables Lucara to sell the rough diamonds to HB at a price based on an estimate of the polished outcome, which the companies determine using diamond scanning and planning technology. Once HB sells the goods, it adjusts the price that Lucara receives based on the actual selling price of the polished, minus a fee and manufacturing costs.
The extended supply deal will follow the same payment terms as the initial agreement, and will be in effect through to December 2022. Lucara said in a statement this week that the agreement also provides increased tax revenue and beneficiation opportunities for the government of Botswana, and creates a streamlined supply chain for Karowe’s rough.
“More than a supply agreement, this collaboration structurally embeds a new transparent and sustainable way of working in the diamond-value chain,” said HB CEO, Oded Mansori. “For the first time, different partners of the value chain are fully aligned, sharing data and information throughout the process from mine to consumer.”
Mansori added: “We are truly proud with this innovative and straightforward collaboration that has proven itself through the volatile and uncertain reality of 2020. We are confident to achieve even better results during the term of this new contract and demonstrate the power of a true partnership.”
Lucara, which early this year secured extension of Karowe mining license to 2040, announced over P2.4 billion funding for Karowe underground mining expansion project a fortnight ago. The Vancouver headquartered top large diamond producer says this supply agreement deal extension with HB will bring about regular cash flow for Lucara using polished pricing mechanism. Furthermore, the company says the deal has potential revenue upside, particularly suited for Lucara’s large, exceptional diamonds.
In the main, Botswana will benefit increased tax revenue and additional beneficiation opportunities for the Government and communities around Karowe mine. A streamlined supply chain that achieves alignment between Lucara and HB to maximize the value of each +10.8 carat diamond produced at Karowe.