African Energy, one of the companies exploring Botswana’s coal deposits has officially announced that it will delist from the Botswana Stock Exchange (BSE), a process that has began and expected to be completed by 16th February this year.
In a statement released to investors on Friday, January 19th African Energy Resources Limited which has been listed on the venture capital board of the BSE since October 2011 will delists and only remain listed on the Australian Stock Exchange (ASX). According to the statement there are currently 22 shareholders holding less that 0.3 % of the company’s shares on issues. The Company revealed in the statement that it no longer made business sense to remain listed on the BSE.
“While the company continues to pursue the development of the Sese JV Coal and Power Project, the Directors formed the view that the administrative costs and related obligations associated with maintaining the BSE listing are no longer justifiable,” underscores the statement. African Energy also explains that the shareholders subsequently voted in favour of the delisting from the BSE at the Annual General Meeting held on the 22nd of November last year. The details of the delisting further highlight that the process offers shareholders an opportunity to sell their shares through the BSE share Buyback.
Shareholders also have the alternative to retain their shares which could be transferred from the Botswana Register to ASX Register. “The BSE Share Buyback provides shareholders with the opportunity to sell their shares during period prior to the delisting of the shares from the BSE,” explains the statement. African Energy also says the date of delisting will be from the close of business on the 16 February and the BSE share Buy Back will be available to shareholders holding share in Botswana from 22 January 2018 until 09 February 2018.
African Energy Resources (AFR) Pty Ltd is Australian founded energy outfit which has operations in Botswana and Zambia. Recent report from the company reflects good progress in their multi million pula energy projects. The company is currently undertaking the development of multiple integrated power projects in Botswana to meet the increasing demand for power in the southern African region. Independent power producers like AFR are necessary to provide generation capacity to meet the current substantial supply deficits in the region and the forecast escalating demand.
The company has completed a Joint Venture Agreement with First Quantum Minerals Ltd to jointly develop power generation capacity at the Sese coal project. Sese is located in close to existing transmission infrastructure and can supply power anywhere into the southern Africa region by virtue of its central location. The company is also currently finalizing the identifying of a development partner for its Mmamantswe coal project located near South African Boarder.
“This project is designated for future power supply into South Africa as part of the Independent power procurement plan recently initiated by the Govt of South Africa,” observed African Energy management in their recent progress report released late last year. The company also shared that Sese JV Project continues to receive strong support from the Government of Botswana via the approval of a 25-year mining license for the project, plus the granting of a Manufacturing Development Approval Order which provides for a 5-year tax holiday from commercial completion followed by a 15% corporate tax rate for the power project.
African Energy says it remains well funded and carries no debt and has low corporate overheads. “Coupled with a strong development partner at the Sese JV Project, and a high-quality portfolio, the Company is well placed to develop major power projects for the region” read the statements from the company reiterating that the best out Botswana exploration will still be leveraged despite the delisting.
African Energy also has other projects apart from the Sese JV undertaking. This includes the 2.4 billion tonne Mmamabula West project which contains some of the best quality coal in Botswana in two 4-6m thick seams which are at 100-150m depth. A prefeasibility study has determined that low-cost underground mining presents an opportunity to produce affordable power station fuel from a conventional underground coal mine.
African Energy continues to develop this project and has as of now completed a detailed fuel specification for both coal seams for use in power generation. The company has also applied for Land Rights over the area to be developed which has been submitted together with the Environmental and Social Impact Assessment for the project to the Department of Environmental Affairs in Botswana. The project includes a 600MW power station and a 4.5 Mtpa underground coal mine.
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.
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.
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”