BoB assets declined by P3.3 billion
Financial results released by Bank of Botswana and presented before President Mokgweetsi Masisi and his cabinet last week revealed that the Central Bank’s total assets declined by P3.3 billion for the twelve months period ended 31st December 2017.
In the financial year ended December 2016 BOB‘s total assets were sitting at P77.6 billion, while by the end of December 2017 the bank’s asset had degraded to P74.3 billion. This includes the foreign exchange reserves which were registered as P73.7 billion by December 2017 compared to P76.8 billion in December 2016.
However in United States dollar terms, the level of reserves increased by 4.2 percent from USD7.2 to USD7.5 billion, while the SDR amount remained unchanged at SDR5.3 billion. Bank of Botswana executives told journalists on Friday that the reserves were equivalent to 18 months of import cover of goods and services. BOB Head of Finance, Daniel Loeto explained that the decrease in foreign exchange reserves in Pula terms reflects the net foreign exchange outflows and net foreign currency revaluation losses, mainly arising from the appreciation of the Pula against the US dollar.
Another notable decline was in the Bank’s net income of which over half a billion contraction was registered. In the period under review the BoB realized net income of 739.5 million pula compared to P1.4 billion in 2016, mirroring a massive depreciation of 660.5 million pula. The BoB Finance Chief deliberated that a total of 1.1 billion pula was transferred from the Currency Revaluation Reserve to cover the distributable currency revaluation losses. “After this transfer the distributable net income for 2017 was P1.9 billion in comparison to the P3.6 billion in 2016,” he said
BoB also explained that the monetary policy was implemented through Open Market Operations (OMO) to absorb excess liquidity in turn ensuring that levels of interest rates remain consistent with the policy stance. In that regard, the Bank introduced measures to improve market efficiency and effectiveness of monetary operations, in particular to better align market interest rates to the policy stance. Two of the key measures were the relaxation on the amount of Bank of Botswana Certificates used to mop up excess liquidity, which helped to alleviate downward pressure on short-term interest rates and correct the misalignment with the policy stance.
In addition, the range of securities eligible for use by commercial banks as collateral when accessing the Bank’s credit facility were broadened to include all government securities, regardless of maturity and Pula denominated bonds issued by the International Finance Corporation in the Botswana market. Commercial banks were, therefore, able to manage liquid assets more efficiently, with less reliance on BoBCs for collateral purposes.
According to the BoB Finance Head, this is viewed as a good move to potentially reduce the cost of monetary policy implementation. Further, financial figures from BOB state that outstanding value of Bank of Botswana Certificates (BoBCs) also realized a decline in the period ended December 2017.
As of December 2016 outstanding value of BoBCs was sitting at P7.9 billion while P6.3 billion was registered in the same period ended December 2017. Loeto explained that Repurchase Agreements (repos) and reverse repos were used during the year to manage liquidity between auctions, and P54 million worth of reverse repos was outstanding at the end of 2017 compared to P1.3 billion in December 2016. “There were no outstanding repos as at the end of 2017,” he said.
Following the measures that were implemented to improve on the efficiency and effectiveness of monetary operations, the 14-day BoBC weighted average yield increased from 0.84 percent in December 2016 to 1.45 percent in December 2017, while the yield on the 91-day BoBC increased from 1.01 percent to 1.41 percent in the same period. In line with the Bank’s commitment to encouraging savings, commercial banks continued to offer and advertise the 91-day deposit facility or equivalent deposit product which pays an interest rate that, at a minimum, is the prevailing Bank Rate less 3.5 percentage points, 2 with higher interest rates for longer-dated deposits.
BoB also reports that the P15 billion Government Bond Programme remains in place, with a focus on the development of the capital market, as well as providing an alternative source of government funding. Outstanding bonds of various maturities and Treasury Bills increased from P9.3 billion at the end of 2016 to P10.2 billion in December 2017. Primary Dealers and their customers held P3.9 billion,37.7% and P6.3 billion 62.1 %, respectively, of the government securities outstanding at the end of 2017, while, the Bank held P20 million (0.2 percent) of the total outstanding securities for possible repo transactions.
During 2017, Bank of Botswana also embarked on the design of a new polymer P10 banknote, which was subsequently launched in February 2018. Polymer banknotes generally last longer than the conventional cotton-based banknotes, are not easy to counterfeit and are more resistant to dirt and moisture.
On Friday BoB revealed that its administration and operations expenses registered a 15 million pula hike due to reprinting and reproduction of some bank notes. In the period under review the annual rate of growth of banknotes in circulation increased from 6.2 percent in 2016 to 10 percent in 2017. “Notably, the rate of increase in net issuance of the P20 banknote denomination increased from 5.1 percent in 2016 to 18.6 percent in 2017, while for the P10 banknotes, the rate of increase fell from 6.5 percent to 1.3 percent in the same period.”
BoB also highlighted that the increase in the net issuance of P20 banknotes during the period under review was largely driven by the need to compensate for the reduced demand for both the P50 and P10 banknotes. The P200 denomination continued to have the highest share of total issuance and quantity of banknotes at 29.6 percent in 2017.
Bank of Botswana Governor Moses Pelaelo observed that during the period under review Botswana continued to attain good ratings from international finance & economic organization as well as global fiscal policy analysis bodies. Both Moody’s Investors Service and S&P Global Ratings retained Botswana’s investment grade credit ratings of A2 and A-, respectively.
Pelaelo explained that the ratings affirmed Botswana Government’s strong financial position as underpinned by well-established prudent macroeconomic policies, the net external creditor position, low public debt and a well-managed economy. “The rating agencies also recognize the existence of robust institutional frameworks that facilitate prudent policy making and continuing political stability,” he said. Pelaelo however underscored that both rating agencies reiterated the concerns about the country’s narrow economic base, specifically heavy reliance on the diamond industry and the slow pace of economic diversification.
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.