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Botswana courts Dubai business community

In a bid to woo the international business community and attract global capital to Botswana, Ministry of Investment, Trade & Industry (MITI), Botswana Investment & Trade Centre (BITC) in collaboration with the Embassy of Botswana in Kuwait undertook a targeted investment and trade promotion mission to the United Arab Emirates from the 12th –15th March 2018.

The Botswana delegation was lead by Minister of Investment Trade & Industry Vincent Seretse. According to BITC the rationale of this undertaking was that the United Arab Emirates has over the years successfully transformed its economic landscape and positioned itself as the economic centre of the Middle East, having attracted multiple investments into the region.

BITC Director of Corporate Communication Kutlo Moagi told WeekendPost that over the next decade the UAE is expected to be one of Middle East's economic outperformers. “Its diversified economy and solid operational framework will see exports and investment continue to drive its growth.” Moagi said, adding that the UAE therefore presents potential for Botswana to attract foreign direct investment and take advantage of opportunities for joint venture partnerships and strategic alliances.  


She further explained that the main objective of the mission was to explore investment and trade opportunities, position Botswana as an investment destination of choice to the UAE business community, as well as facilitate for possible joint-venture arrangements between interested investors from both countries. Moagi also revealed to this publication that a total delegation of 17 private companies and government institutions with sectors of focus in Agriculture, Manufacturing, Mining, International Financial Services (IFSC), Tourism and Transport and Logistics embarked on the trip to Dubai.

“Engagements with the UAE business community were carried out through a Business Conference in partnership with the UAE Ministry of Economy and Dubai Chamber of Commerce and Industry. In addition, a series of pre-planned business to business meetings in both Dubai and Abu Dhabi took  place for participating companies to explore opportunities for mutually beneficial partnerships with their counterparts in the UAE,”  she said.

When delivering a key note address at the Business Conference Botswana Minister Seretse  said  Botswana stands to learn a lot from the United Arab Emirates, especially in the area of sustainable economic diversification.“We wish to learn how you have successfully managed to diversify your economy, by creating other thriving strategic sectors such as: Tourism, Financial and Business Services, Transport and Logistics, as well as Manufacturing, to name but a few. I have noted the firm resolves of the United Arab Emirates to have 64% of your GDP being derived from non-oil reserves by the year 2030,” Minister Seretse told the business conference.

He also added that given the negative trade balance in favour of Botswana, there were a lot of opportunities for the UAE to export more goods and services to Botswana. He that Botswana currently exported goods worth US$708 million per annum to the United Arab Emirates, mostly diamonds, while the United Arab Emirates exports US$21 million of diamonds and other consumables to Botswana. He encouraged the Arabs to consider locating a production facility in Botswana providing access to multiple preferential trade arrangements, such as the SADC-EU Economic Partnership Agreement, the Africa Growth and Opportunities Act (AGOA), the Southern Africa Customs Union (SACU), and Southern African Development Community (SADC).   

“We seek stronger strategic and commercial partnerships with a nation that has successfully moved from humble beginnings to become the globally recognized economic powerhouse that the United Arab Emirates clearly is today.  Beyond the partnerships, we are keen to see actual investments happening across our two nations.”


Seretse called on United Arab Emirates Investors to collaborate with Botswana companies in the area of manufacturing and services, including ICT, transport & logistics particularly aviation and pharmaceuticals among others. He cited Botswana’s beef industry saying the country already meets the agriculture stringent requirements of the European Union market and that it was compelling for Botswana to explore selling beef and livestock development solutions to the United Arab Emirates.   

The minister further promoted the country’s tourist sites, “In the area of tourism, I wish to invite you to Botswana’s UNESSCO listed world heritage sites, the pristine Okavango Delta, and the mystical Tsodilo Hills. Botswana with its diversified tourism offering, presents extensive opportunities for tourists, investors and tour operators in the United Arab Emirates to visit, invest, and explore the peace and tranquillity prevailing in the Botswana environment.”

For his part, Vice President of the Dubai Chamber of Commerce and Industry Hassan Al Hashemi underscored that Botswana offered plenty of attractive trade and investment opportunities in a variety of economic sectors. “The country has the potential to leverage its position in the region to serve as a gateway to the southern African market,” he said adding that Botswana has taken a proactive approach to diversifying its economy beyond commodities and attracting foreign direct investment.  

He shared that over the last five years, non-oil trade between Dubai and Botswana has nearly tripled to exceed $1 billion in the first nine months of 2017. Bilateral non-oil trade is currently dominated by pearls, precious/semi-precious stones and metals, valued at around $1 billion, followed by machinery and electrical equipment at $6 million, and transport equipment at $1.3 million.

“As one of the world’s largest producers and exporters of diamonds, Botswana can greatly benefit from strengthening its cooperation with the UAE, which has become a major re-export hub for diamonds. In fact, $10 billion worth of diamonds were re-exported through the UAE in the first half of 2017; accounting for 12% of the country’s total re-exports.  Yet, we see huge potential to expand the scope of bilateral trade and investment to other key sectors such as tourism, agriculture, healthcare, manufacturing and ICT,” said Al Hashemi.

He said that companies in Botswana can leverage on the UAE’s strategic geographical position between Africa, Asia and Europe, to attract new visitors.  “These are all advantages that can help us build on existing ties and take our trade relations to the next level.” He said that Dubai’s strong trade relationship with Botswana was symbolic of Dubai’s strategy of reaching out to promising markets of the world.

Al Hashemi said his organization was committed to protecting the interests of Dubai’s business community and providing all facilities and resources to ensure that that the emirate’s ties with Botswana continue to strengthen and develop. Keletsositse Olebile, the Acting CEO for Botswana Investment and Trade Centre said Botswana was finalizing the implementation of the enablers for investment such as double taxation avoidance both UAE companies in Botswana adding that UAE citizens going into Botswana were not required a Visa.

Olebile noted that a reciprocal arrangement by the UAE was being put in place to allow Botswana Citizens to access UAE without Visa requirements. Botswana Development Corporation Chief Executive Officer Bashi Gaetsaloe and SPEDU Head Dr Makubung Mokubung also presented on existing partnerships and investment opportunities facilitated by their respective organizations.

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4 Best crypto projects for Africans to invest in

25th January 2022
Bitcoin

Cryptocurrencies have become the talk of the town, a major bone of contention for some and an opportunity towards new investment frontiers for others.

For many African economies, cryptocurrencies like Bitcoin have become major game-changers, allowing vendors to avoid the evils of inflation, and allowing new and dynamic African investors to take advantage of crypto’s soaring prices.

Outside of Bitcoin, other crypto projects have also taken precedent and provided investors with new frontiers within the cryptocurrency realm. In this article, we explore the four best crypto projects in 2022 for Africans to invest in.

1.     Polkadot

Polkadot is often referred to as a ‘blockchain of blockchains’ whose main objective is to facilitate the building of new networks and make this easier for developers.

It allows users to develop new blockchains that work in concert with current ones without relying on complicated bridging protocols.

The network enables these chains to be entirely configurable without sacrificing the underlying security and safety. The most extensive capability of Polkadot, however, is powering the Web 3.0 revolution.

2.     Yellow Card

Yellow Card was launched in 2016 by Chris Maurice and Justin Poiroux with the intention of enabling Africans at home and abroad to purchase and sell Bitcoin using their local currency via bank transfer, cash, and mobile money.

The firm was formally launched in 2019 in Nigeria where it has over 35,000 merchants and was believed to have processed more than US$165 million in crypto remittances in 2020 alone. That same year, it expanded operations to South Africa and Botswana and raised $1.5m seed capital to offer its services in Kenya and Cameroon.

In 2021, Yellow Card will be adding new capabilities to facilitate more frictionless transactions. The app will support some local languages, including Igbo, Arabic, Afrikaans, French, Hausa, Luganda, Mandarin, Portuguese, and Swahili.

3.     Solana

Currently one of the fastest crypto networks around, Solana spearheads the research and implementation of contemporary technologies like dApps and smart contracts. It is one of the only tokens that can operate both on a proof-of-history and a proof-of-stake consensus scheme. The SOL network also handles more than 50,000 transactions every second, the quickest so far.

While Solana was not the first network to utilize smart contracts, it today has more than 350 distinct projects running on its network. It also restored more than 17,000 percent of its value in the previous 12 months, presently standing as one of the top 10 currencies by market cap, valued at $53 billion roughly.

4.     Akoin City

Akon is creating a futuristic $6 billion Akon City in Senegal, which will use the akoin cryptocurrency (AKN) as its primary currency.

As of November 11, 2020, akoin began trading on Bittrex Global versus BTC and USDT as a pilot for Akon Metropolis and was made available for payment in a tech city in Kenya the next year.

Estimated 20,000 workers are expected to be paid in the akoin cryptocurrency by the end of 2021, with 35,000 citizens and more than 2,000 retailers expected to use the system.

Also read: 8 Best Forex Brokers for Beginners in Botswana

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Business

Household credit increases to P44.8 billion 

24th January 2022
FNB

Commercial Banks credit increased by 7.4 percent  year-on-year in September 2021, higher than the 4.4 percent growth in the corresponding period in 2020, according to the Bank of Botswana’s Financial Stability report released last week.  The acceleration in commercial bank credit growth was largely due to the higher growth in household credit over the review period. 

In addition, credit growth has been trending upwards since the end of the 2021 first quarter, partly reflecting base effects associated with the fall in credit in the previous year 2020, and an improvement in demand for and supply of credit.  Household credit increased to P44.8 billion in September 2021, from P41.3 billion in September 2020, on the back of a significant increase of 11percent in personal loans.

Business loans, on the other hand, increased by 5.5 percent over the period under review, due to an increase in credit to parastatals and finance sectors.  However, loans extended to the mining, electricity and water, construction, trade, restaurants and bars, manufacturing and transport and communications sectors decreased.  The share of business credit to total credit decreased from 35.2 percent in September 2020 to 34.6 percent in September 2021, while that of households increased from 64.8 percent to 65.4 percent during the same period.

Total credit as a percentage of GDP grew steadily between 2010 and 2020, at an average rate of 12.4 percent. The Bank of Botswana says Credit growth is in line with its long-term trend and thus not likely to overheat the economy. “In this context, there is scope for increased, disciplined and prudent credit extension to support economic activity” experts at the Central Bank noted.  Commercial banks’ leverage ratio was 7.8 percent in August 2021, a decrease from the 8.5 percent in August 2020; but indicative of the banking sector’s strength to withstand negative shocks, according to BoB.

Furthermore, commercial banks’ average capital adequacy ratio was 18.5 percent in August 2021, thus according to the Bank of Botswana, indicating the sector’s resilience to unexpected losses.  The BoB says the banking industry’s strong capital base is further augmented by the modest level of non-performing loans (NPLs) to total loans ratio of 3.7 percent in August 2021 (4.5 percent in August 2020).  However, the full effects of the COVID-19 pandemic on corporate performance, banks’ level of NPLs, profitability and capitalization are yet to be observed.

Zooming into the household space the financial stability report observed that households’ vulnerability to sudden and sharp changes in financial conditions.  Household credit grew by 8.5 percent in the twelve months to September 2021, higher than the 7.4 percent growth recorded in the year to September 2020.  The relatively higher growth rate of household credit was due to base effects and an improvement in credit conditions, both supply and demand.

Credit to households continued to dominate total commercial bank credit, at P44.8 billion (65.4 percent) in September 2021 and was mostly concentrated in unsecured lending (72.5 percent).  The proportion of unsecured loans to total credit remains higher than the 24.4 percent and 30.8 percent reported in South Africa and Namibia, respectively.

Experts at the Central Bank have cautioned that the significant share of unsecured loans and advances has the potential to cause household financial distress, given the inherently expensive and short-term nature of such credit. “Therefore, households remain vulnerable to sudden and sharp tightening of financial conditions”  However, the BoB noted that household debt is aligned to trends in income. Household debt as a proportion of household income is estimated at 37.5 percent in the third quarter of 2021, a decrease from the 47 percent in the same period in 2020.

This ratio according to the BoB remains relatively low when compared to the 79.9 percent and 75 percent for Namibia and South Africa, respectively.  “In this respect, domestic household borrowing is in line with trends in personal incomes, implying a relatively strong debt servicing capacity” the bank said Consequently, the ratio of household NPLs to total household credit was modest at 3.5 percent in June 2021, slightly lower than the 3.9 percent in June 2020 and significantly better than the industry average of 4.1 percent in June 2021.

Household borrowing also dominates credit granted by the Non-Banking Financial Services (NBFIs) sector, although the level of household exposure in the sector remains relatively low compared to that of commercial banks.  The level of household indebtedness in Botswana is, however, considered low by international standards, at 24.9 percent of GDP in the first quarter of 2021, compared to, for example, 26.2 percent, 33.9 percent and 52.8 percent for Mauritius, Namibia and South Africa, respectively.

The quality of bank credit improved in August 2021 as indicated by the decline in the ratio of non-performing loans (NPLs) to total loans to 3.7 percent in August 2021, from 4.5 percent in August 2020.  The Bank of Botswana advised that to maintain low to modest NPLs and help vulnerable groups in the context of COVID-19 induced economic disturbances, there is need to keep in place targeted support to illiquid but solvent firms and affected households and make the support state-contingent or conditional to reduce moral hazard.

Experts at the Bank underscored that overall, “there is no indication of excessive and rapid credit growth that could threaten the stability of the financial system”  Average daily market liquidity in the banking system fell to P5.4 billion in October 2021 from P6.2 billion in September 2021.  The fall in market liquidity is due to persistent foreign exchange outflows. Nevertheless, banks continued to comply with the minimum liquid asset ratio requirement of 10 percent and supported moderate growth in demand for credit, with a financial intermediation ratio of 81.3 percent in August 2021, which is slightly above the desired range of 50 – 80 percent.

Commercial banks’ funding structure continues to be concentrated in a few large depositors, mainly business deposits, highlighting potential funding risks due to the undiversified deposit base.  This notwithstanding, funding risks are mitigated by the inherently long-term structure of bank deposits, mainly fixed deposits, thus giving banks an opportunity to respond accordingly in case of short-term funding shocks.

In August 2021, fixed deposits (including savings deposits) accounted for 46 percent of the deposit base and were further augmented by the 27 percent for checking/current accounts, which are behaviourally stable/core deposits. In terms of macro-financial interlinkages and contagion risk, banks continue to have significant linkages with the rest of the financial system and the real sector.

The strong interconnectedness between the banking system and NBFIs, as well as the non-financial sector (households and corporates) pose a risk of contagion in the domestic financial system, although effective regulation across the system, as well as proper governance and accountability structures moderate the risk.  Furthermore, most of the retail and household loans have credit life protection, mortgage repayment policies and retrenchment cover policies provided by insurance companies, effectively shifting banking risks to the insurance sector.

 

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Minergy pounces on market undersupply

24th January 2022
Minergy

As major mining companies leave the coal business, under pressure to comply with international campaigns of clean energy, local junior coal producer Minergy says it stands ready to rise to the occasion and service the demand in the regional market. 

On Thursday, the company, which unearths thermal coal from its wholly owned Masama Mine near Medie village in the South East District of Botswana provided a market update to its investors and stakeholders for the six months period ending December 2021.  Minergy is listed on the Botswana Stock Exchange, backed by Government investment arms Botswana Development Corporation (BDC) and Mineral Development Company Botswana (MDC), the company started producing first saleable coal from Masama in August 2019.

The company said it expects the international pricing for Southern Africa coal to remain high, driven by the continued China/Australian standoff and Indonesian export restrictions. “Coal supply is under pressure, with demand increasing as several majors divest from coal given the negative coal narrative. Minergy expects an undersupply in the regional market as a result,” said a statement from the company.  During the second half of the year 2021 substantial progress was made towards reaching nameplate capacity at the Masama Coal Mine.

Achievements included producing the highest six-monthly volumes across all disciplines since the inception of the mine. With support from its mining contractor, Minergy said is now capable of achieving nameplate capacity of 125,000 tonnes per month.  Overburden volumes increased fourfold versus the comparative six-month period. A similar trend was evident in the amount of coal that was extracted, with growth of 100% being achieved. Record tonnage in excess of 110,000 tonnes of coal was mined in October 2021.

Stage 4 of the Processing Plant (Rigid Screening and Stock Handling section) was also successfully commissioned. Plant construction is thus complete, and is now fully operational as designed.  Resulting benefits include savings in processing costs, a stabilised supply, and further support for achieving nameplate capacity.  Daily average feed rates increased significantly and are being consistently achieved. Processed volumes increased in line with mining data, with yields remaining stable, and a record throughput of 108,000 tonnes was achieved in October 2021.

However, lower volumes were recorded during November and December 2021, impacted by the new COVID-19 variant and the related effect on workforce availability and border access, as well as by rain interruptions and lower regional sales as explained below. Minergy said with the nameplate capacity now achievable, going forward strategic focus will now be on sales to support the increased saleable product.

This will enable Minergy to generate sufficient cash flow to stabilise the business. Major cement and steel producers have, however, notified Minergy of plant shutdowns early in 2022. Alternative placement of product will be sought. In terms of the secondary listing, the company says the listing on an internationally recognised stock exchange remains an important strategic objective.  “However, affordability and timing are key considerations, which are constantly being evaluated,” said Chief Executive Officer Morné du Plessis.

The ordinary share capital raise, approved by shareholders in February 2021, has garnered interest and Minergy is actively engaging with interested parties to progress this. Plessis noted that Eskom’s future strategy remains unclear, given the ambiguous messages broadcast by the power utility in recent months, and Minergy is waiting feedback on the requirements for coal supply into the South African power station market.

Minergy believes that countries such as Botswana and Namibia will pursue power independence from South Africa (illustrated by the Botswana tender and discussions with interested parties in Namibia) and finds itself located centrally to supply both South Africa and southern African countries.  Minergy is also basing its fortunes on multibillion pula coal fueled power plant deal with Botswana Government.

The Botswana Government, through the Ministry of Mineral Resources, Green Technology and Energy Security (“MMGE”), has invited the Minergy and three other selected local bidders to tender for the design, finance, construction, ownership, operation, maintenance and decommissioning at the end of its economic life (minimum 30 years) of a 300MW (Net) Greenfields Coal-Fired Power Plant in Botswana, as an Independent Power Producer (“IPP”).

This forms part of the government’s 11th National Development and Integrated Resources Plan. It is expected that the power plant would be operational by 2026. The closing date for the bid is currently 30 March 2022. Minergy is partnering with Jarcon Power to submit the bid.  If successful, Minergy Coal will be responsible for providing coal to the power plant for the duration of the Power Purchase Agreement of 30 years, and other income streams are also being envisaged.

This profitable sale of coal will have the benefit of ensuring a steady cash flow to  Minergy, utilisation of current uneconomical coal seams and diversifying income streams. Importantly, Minergy is the only bidder to have an operational mine.

 

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