Botswana Railways endorses Minergy’s rail line plan
In a quest to drive the development of the Botswana coal industry and to ensure acceptable returns for shareholders, Minergy has highlighted that it has made a notable progress on their projects, one of them being the approval by Botswana Railways for the construction of the Botswana rail siding.
The rail line is expected to connect the Botswana coal fields with the South African rail infrastructure to ease export access possibilities through the various South African ports. The progress, the company further states, came with the renewal of the Company’s prospecting license for coal and coal bed methane (“CBM”) for a further period of two years and the finalisation of the updated competent persons report (“CPR”) indicating improved results of their in situ qualities, strip ratios and yields.
Minergy has reported that Transnet Freight Rail (“TFR”), a South African rail logistics provider, is said to be targeting the end of May 2018 for the conclusion of a Memorandum of Understanding (MOU) with the Botswana government-owned Botswana Railways. Minergy remains in the development and exploration phase of its business plan albeit significant progress has been made towards operational status.
The management has noted that this development will be a game changer for the Botswana coal industry as it will cut 500 kilometers out of the current rail route thereby significantly reducing logistics costs to allow Botswana coal producers to compete in the international seaborne thermal coal market.
The executive has noted that they had excellent engagement with and assistance from the Botswana government at all levels and this has given us comfort that the license should be awarded by Q3 201. They noted that the process to appoint a suitable mining operator is at an advanced stage as they are currently in discussions with two suitable companies. Operations are expected to commence during July 2018 following the award of the mining license.
Through its condensed unaudited interim consolidated results for the period ending December 2017, Minergy has noted that it has once again managed to have its capital partners step up to the plate and subscribe for a further BWP27 million during a capital raising exercise undertaken late in 2017 bringing their total commitment to date to P 100 million. They note that the expenditure is relevant for the phase. The Group notes it has started expensing costs in the second half of the 2017 financial year and the comparative information for the comparative interim period for the statement of comprehensive income consequently reflects no activity.
The capital injection follows an exhaustive process to identify a company to build and operate the project. Minergy further explains that the contract was awarded to Pentalin Processing (Pty) Ltd. Pentalin, a South African based company with many years of experience in building and operating coal specific washing and processing plants. The final commissioning of the plant is scheduled for September 2018
It is noted that the major investors remain fully committed and supportive of the coal processing and washing plant. Extensive work and preparation they note has taken place for a second listing on the London based Alternative Investment Market (“AIM”). Minergy notes that the decision towards the second listing will be approved they have tested the investment appetite. The listing on AIM is planned for the end of 2018.
Internationally, coal continues to defy the market commentators who project falling prices and a diminishing industry. During February 2018 physical coal shipments from Richards Bay Coal Terminal traded at $US98 per ton, up 90% from the 2016 lows. This they note is driven by the lack of investment in new coal projects. The cutting off of 500 million tons per annum in production by China is said to have increased demand for coal from new coal fired plants.
On a regional level, the results show that prices are at levels not seen before due to the lack of investment in new projects in South Africa which remains the dominant coal producer. This lack of investment is partly due to policy uncertainty and the talk around resource nationalisation. However, Minergy notes coal demand continues to rise as it is still the most economical form of energy available. Regional end users are finding it difficult to source reliable and consistent supply as most producers are favoring the export market, they noted.
The Group results show that there was a surplus investment funds injected into short-term South African Rand (“ZAR”) denominated investments as these instruments yielded higher returns than the equivalent Pula investment. Interest earned for the six-month period was P1.1 million. The Evaluation and exploration assets which represent the Masama project, increased by P2.7 million, mostly relating to capitalised costs for environmental studies, a study shows.
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Botswana ranks most attractive for investment in mining
The Canadian research entity, Fraser Institute has ranked Botswana as the most attractive country for investment in mining in Africa.
In a new survey the entity assessed mineral endowments and mining related policies for 62 mining jurisdictions including Botswana.
The entity noted that in addition to mineral potential for mining jurisdictions, policy factors examined during the survey include uncertainty concerning the administration of current regulations, environmental regulations, regulatory duplication, the legal system & taxation regime, uncertainty concerning protected areas, disputed land claims, infrastructure, socio-economic & community development conditions, trade barriers, political stability, labor regulations, quality of the geological database, security, as well as labor & skills availability.
According to the survey Botswana is the highest ranked jurisdiction in Africa and the second-highest in the world for investment in mining, as a result of its favorable mining policy when compared to other jurisdictions. The survey report noted that Botswana increased its score in policy perception index and added that the score reflects decreased concerns over uncertainty concerning protected areas infrastructure, political stability, labor regulations & employment agreements. â€śBotswana is also the most attractive jurisdiction in Africa and top 10 in the world when considering policy and mineral potential. With the exception of Botswana, policy scores decreased in all African jurisdictions featured in the survey report.
The survey shows that Morocco is the second most attractive jurisdiction in Africa both for investment and when only policies are considered. However, Moroccoâ€™s policy perception index score decreased by almost 18 points and globally the country ranks 17th out of 62 mining jurisdictions this year, dropping out of the top 10 jurisdictions after ranking 2nd out of 84 jurisdictions in 2021 in terms of policy. The survey report noted that investors recently expressed increased concerns over the uncertainty of administration and enforcement of existing regulations, labor regulations & employment agreements, uncertainty concerning disputed land claims, socio economic agreements, community development conditions and trade barriers in the country.
The top jurisdiction in the world for investment in mining is Nevada, which moved up from 3rd place in 2021. At 100, Nevada has the highest policy perception index score this year, displacing the Republic of Ireland as the most attractive jurisdiction in terms of policy. Botswana ranked 31st last year, climbed 29 spots and now ranks 2nd. South Australia ranks 3rd, entering the top 10 jurisdictions in terms of policy after ranking 16th in 2021. Along with Nevada, Botswana, and South Australia, the top 10 ranked jurisdictions based on policy perception index scores are Utah, Newfoundland & Labrador, Alberta, Arizona, New Brunswick, Colorado, and Western Australia. â€śNevada ranked first this year with the highest PPI score of 100. Botswana took the second spot held by Morocco. The top 10 ranked jurisdictions are Nevada, Botswana, South Australia, Utah, Newfoundland & Labrador, Alberta, Arizona, New Brunswick, Colorado, and Western Australia. The United States is the region with the greatest number of jurisdictions (4) in the top 10 followed by Canada (3), Australia (2), and Africa (1).â€ť
In the survey report Fraser Institute noted that this year, Angola, Ivory Coast, Mozambique, South Sudan, and Zambia received enough responses to be included in the report. Eight African jurisdictions are ranked in the global bottom 10. Out of 62 mining jurisdictions, Zimbabwe ranks (62nd), Mozambique (61st), South Sudan (60th), Angola (59th), Zambia (58th), South Africa (57th), Democratic Republic of Congo (55th), and Tanzania (53rd). Zimbabwe has consistently ranked amongst the bottom 10 and has held that position for the previous nine years, according to the institute.
The institute noted that considering both policy and mineral potential Zimbabwe ranks the least attractive jurisdiction in the world for investment. â€śThis year, Mozambique, South Sudan, Angola, and Zambia joined Zimbabwe as among the least attractive jurisdictions. Also in the bottom 10 are South Africa, China, Democratic Republic of Congo (DRC), Papua New Guinea, and Tanzania. Zimbabwe, China, Democratic Republic of Congo, and South Africa were all in the bottom 10 jurisdictions last year. The 10 least attractive jurisdictions for investment based on policy perception index rankings are; (starting with the worst) Zimbabwe, Guinea (Conakry), Mozambique, China, Angola, Papua New Guinea, Democratic Republic of Congo (DRC), Nunavut, Mongolia, and South Africa.â€ť
The Fraser Institute on annual basis conducts an annual survey of mining and exploration companies to assess how mineral endowments and public policy factors affect exploration investment.
Over half of the respondents who participated in the recent survey (57 percent) are either the company President or vice-president, and 25 percent are either managers or senior managers. The companies that participated in the survey reported exploration spending of US$1.9 billion in 2022, according to the institute. The institute indicated that as part of the survey, questionnaires were sent to managers and executives around the world in companies involved in mining exploration, development, and other related activities, to assess their perceptions about various public policies that might affect mining investment.
The institute noted that the purpose of the survey is to create a report card that governments can use to improve their mining-related public policy in order to attract investment in their mining sector to better their economic productivity and employment.
The institute noted that while geologic and economic evaluations are always requirements for exploration, in todayâ€™s globally competitive economy where mining companies may be examining properties located on different continents, a regionâ€™s policy climate has taken on increased importance in attracting and winning investment. â€śThe Policy Perception Index or PPI provides a comprehensive assessment of the attractiveness of mining policies in a jurisdiction, and can serve as a report card to governments on how attractive their policies are from the point of view of an exploration manager.â€ť
Inflation drops to 7.9 percent in April
Botswanaâ€™s inflation rate dropped to 7.9 percent in April 2023, a 2.0 percentage drop 9.9 percent in March 2023, Statistics Botswanaâ€™s consumer price index reported on Monday.
The main contributors to the annual inflation rate in April 2023 were Transport (2.7 percent), Food & Non-Alcoholic Beverages (2.2 percent), and Miscellaneous Goods & Services (0.9 percent).
The inflation rates for regions between March 2023 and April 2023 indicated a decline of 2.3 percentage points for Cities & Townsâ€™, from 9.9 percent in March to 7.6 percent in April.
The Urban Villagesâ€™ inflation rate registered a drop of 1.8 percentage points, from 9.7 percent in March to 7.9 percent in April, whereas the Rural Villagesâ€™ inflation rate was 8.6 percent in April 2023, recording a decrease of 1.8 percentage points from the March rate of 10.4 percent.
The national Consumer Price Index realised a rise of 1.1 percent, from 128.2 in March 2023 to 129.7 in April 2023. The Cities & Towns index was 129.7 in April 2023, recording a growth of 1.2 percent from 128.2 in March.
The Urban Villages index registered an increase of 1.2 percent from 128.4 to 130.0 during the period under review, whilst the Rural Villages index rose by 0.9 percent from 127.9 in March to 129.0 in April 2023.
Four (4) group indices recorded changes of at least 1.0 percent between March and April 2023, specially; Miscellaneous Goods & Services (5.5 percent), Alcoholic Beverages & Tobacco (1.8 percent), Food & Non-Alcoholic Beverage (1.2 percent), and Recreation & Culture (1.2 percent).
The Miscellaneous Goods & Services group index registered an Increase of 5.5 percent, from 125.5 in March to 132.5 in April 2023. The rise was largely due to a growth in the constituent section indices of Insurance (11.2 percent) and Personal Care (2.1 percent).
The Alcoholic Beverages & Tobacco group index rose by 1.8 percent, from 126.5 in March 2023 to 128.7 in April 2023. The increase was owing to the rise in the constituent section indices of Alcoholic Beverages (1.9 percent) and Tobacco (1.1 percent).
The Food & Non-Alcoholic Beverages group index increased by 1.2 percent, from 136.6 in March to 138.2 in April 2023. The rise in the Food group index was attributed to the increases of; Vegetables (3.9 percent), Fish (Fresh, Chilled & Frozen) (1.7 percent), Coffee, Tea & Cocoa (1.5 percent), Milk, Cheese & Milk Products (1.5 percent) Fruits (1.4 percent) Meat (Fresh, Chilled & Frozen) (1.1 percent), Mineral Waters, Soft Drinks, Fruits & Vegetables Juices (1.1 percent) and Food Not Elsewhere Classified (1.0 percent).
The Recreation & Culture group index registered a growth of 1.2 percent, from 108.9 in March to 110.2 in April 2023. The rise was owed to the general increase in the constituent section indices, particularly; Recreational & Cultural Services (8.2 percent).
The All-Tradeables index recorded an increase of 0.9 percent in April 2023, from 134.2 in March 2023 to 135.4. The Non-Tradeables Index went up by 1.5 percent, from 120.1 in March to 121.8 in April 2023. The Domestic Tradeables Index moved from 131.8 in March to 133.3 in April 2023, registering a rise of 1.1 percent.
The Imported Tradeables Index realised a growth of 0.8 percent over the two periods, from 135.0 in March to 136.2 in April 2023. The All-Tradeables inflation rate was 10.3 percent in April 2023, registering a drop of 2.4 percentage points from the March 2023 rate of 12.7 percent.
The Imported Tradeables inflation rate went down by 3.1 percentage points from 12.4 percent in March to 9.3 percent in April 2023. The Non-Tradeables inflation was 4.6 percent in April 2023, a decline of 1.4 percentage points from the March 2023 rate of 6.0 percent. The Domestic Tradeables inflation rate registered a drop of 0.3 of a percentage point, from 13.4 percent in March to 13.1 percent in April 2023.
The Trimmed Mean Core inflation rate went down by 2.1 percentage points, from 9.2 percent in March 2023 to 7.1 percent in April 2023. The Core Inflation rate (excluding administered prices) was 8.3 percent in April 2023, a decrease of 0.6 of a percentage point from the March 2023 rate of 8.9 percent.
IMF warns of GDP decline in Sub Saharan Africa
A new report by International Monetary Fund (IMF) has warned that countries in Sub Saharan Africa including Botswana could record significant losses in Gross Domestic Product (GDP) as a result rising geo-political tensions among major economies in global trade.
Recent trends show that there is a deepening fragmentation in global economy, following US-led NATO war against Russia in Ukraine and trade war between US and China.
According to some local trade analysts the fragmentation of global economy leading to competing (US/EU bloc and China bloc could result with Sub Saharan Africa losing markets for some of its export commodities. The trade analysts noted that US & China are failing to implement an agreement, intended to stop the trade war and address some of the US fundamental concerns that instigated the war. USD34 billion worth of Chinese goods intended for the US market reportedly expired in July 2022 while US President Joe Biden administration was still reviewing import tariffs while another USD16 billion worth of goods expired in August, and a third batch of goods worth approximately USD100 billion expired in September. The analysts indicated that as a result of the trade war, the manufacturing sector at the US and China could lower production of goods, resulting with subdued demand for exports of raw materials and other commodities such as minerals from Botswana and other Sub Saharan countries.
In its April 2023 regional economic outlook report titled, â€śGeo-economic Fragmentation: Sub-Saharan Africa Caught between the Fault Linesâ€ť IMF indicated that recent data shows that rising geo-political tensions among major economies is intensifying economic and financial fragmentation in the global economy. The IMF cautioned that countries in Sub Saharan Africa could lose the most as a result of fragmented world.
The IMF stated that while countries in Sub-Saharan region benefited from increased global integration during the last two decades, the emergence of geo-economic fragmentation has exposed potential downsides. â€śSub-Saharan Africa has benefited from the expansion of economic ties over the past two decades. The region has formed new economic ties with non-traditional partners in the past two decades. Riding on the tailwinds of Chinaâ€™s globalization since the early 2000s, the value of exports from Sub-Saharan Africa to China increased tenfold over this period, largely driven by oil exports, according IMF adding that China has also emerged as an important source of external financing. Â The US and EU still supply most of the regionâ€™s foreign direct investment (FDI) stock, with China accounting for only 6 percent of it as of end-2020, according to IMF.
IMF stated that overall, the expansion and diversification of economic linkages with the major global economies benefited the region. â€śThe regionâ€™s trade openness measured as imports plus exports as share of GDP doubled from 20 percent of GDP before 2000 to about 40 percent. This doubling, together with buoyant commodity prices, among other factors, contributed to the growth take-off during this period, boosting living standards and development.â€ť
IMF noted that overall, sub-Saharan Africa is now almost equally connected with traditionally dominant (US and EU) and newly emerging (China, India, among others) partners and warned that the downside of increased economic integration is that sub-Saharan Africa has become more susceptible to global shocks. â€śSub-Saharan Africa stands to lose the most in a severely fragmented world compared to other regions. In the severe scenario of a world fully split into two isolated trading blocs, sub-Saharan Africa would be hit especially hard because it would lose access to a large share of current trade partners. About half of the regionâ€™s value of current international trade would be affected in a scenario in which the world is split into two trading blocs: one centered on the US and the EU (US/EU bloc) and the other centered on China.â€ť
IMF indicated that under a severe â€śgeo-economic fragmentationâ€ť scenario, trade flows would adjust over time. â€śBut as the region loses access to key export markets and experiences higher import prices, the median sub-Saharan African country would be expected to experience a permanent decline of 4 percent of real GDP after 10 years. Estimated losses are smaller than the losses during the COVID-19 pandemic but larger than those during the global financial crisis.â€ť
IMF warned that disruptions to capital flows and technology transfer could bring additional losses. â€śSeparately from the trade simulation results, in a world where countries were to cut off their capital flow ties with either bloc consistent with the preceding severe scenario, the region could lose about $10 billion of Foreign Direct Investment (FDI) and official development assistance inflows, equivalent to about half a percent of GDP a year, based on an average 2017â€“19 estimate. In the long run, trade restrictions and a reduction in FDI could also hinder much needed export-led growth and technology transfers.â€ť
IMF meanwhile said not all is bleak as some milder scenarios of shifting geopolitics may create new trade partnerships for the region. â€śIn a scenario in which ties are cut only between Russia and the US/EU while sub-Saharan African countries continue to trade freely (referred to as â€śstrategic decouplingâ€ť), trade flows would be diverted partly towards the rest of the world and intra-regional trade in sub-Saharan Africa may increase.â€ť
IMF recommended that countries in Sub Saharan Africa should build resilience that requires strengthening regional integration and expanding the pool of domestic resources to counter potential external shocks: According to IMF trade experts strengthening the ongoing regional trade integration under the African Continental Free Trade Area could help build resilience amid external shocks. Greater integration will require reducing tariff and non-tariff trade barriers, strengthening efficiency in customs, leveraging digitaliÂzation, and closing the infrastructure gaps, according to the experts.
The experts also recommended that countries in the region should deepen domestic financial markets as that can broaden the sources of financing and lower the volatility associated with excessive reliance on foreign inflows. â€śBy upgrading domestic financial market infrastrucÂture including through digitalization, transparency and regulation, and expanding financial product diversity, sub-Saharan African countries can expand financial inclusion, build a broader domestic investor base. Improving domestic revenue mobilization is critical to reducing the share of commodity-linked fiscal revenues.â€ť