The resource curse, also known as the paradox of plenty, refers to the paradox that countries with an abundance of natural resources – like minerals, tend to have less economic growth, less democracy, and worse development outcomes than countries with fewer natural resources.
Well, Botswana had actually turned this theory upside down over the years, but lately, things have turned a bit on the economic growth aspect. Low and unstable commodity prices are definitely shaking the country’s well managed economy, and the call for diversification is becoming more louder.
From the latest Statistics Botswana Indices of the Physical Volume of Mining Production, First Quarter 2017 Stats Brief, the Index of Mining Production stood at 77.1 in the first quarter of 2017 showing a year-on-year decline of 14.4 percent from 90.1 during 2016 first quarter. The quarter-on-quarter analysis gives a decline of 6.4 percent from 82.4 during 2016 fourth quarter, observes a report compiled by Statistician, Mothati Goweditswe Madande.
It concludes that the closure of the three copper-nickel mines as well as unstable world commodity prices for all minerals are the major factors that contributed negatively to the growth of mining production during the first quarter of 2017. “The main contributors to the decline in the year-on-year percentage change in the physical volume of mining production during the first quarter of 2017 were copper-nickel-cobalt matte contributing negative 11.3 percentage points followed by diamonds and Soda Ash with 2.4 percentage points and 0.5 of a percentage point respectively.”
Even though coal production had a positive year-on-year percentage change, this was not able to make a positive contribution (% points) to the overall year-on-year percentage change in the volume of mining production due to its insignificant weight in the index.
Low prices influenced mineral production cut
The technical causation also arise for production at various mines in Botswana. Comparisons between production during the first quarter of 2017 and the same quarter of 2016 paint a picture of decrease all round except for coal. According to the Statistics Botswana report, diamond production recorded a decrease of 2.7 percent during the first quarter of 2017 as compared to the first quarter of 2016. The decline was largely due to the mining of lower grades diamonds in Jwaneng mine as well as maintaining business strategy to align production to trading conditions.
The quarter-on-quarter analysis shows that diamond production decreased by 5.0 percent during the first quarter of 2017 when compared with production during the last quarter of 2016. Meanwhile gold production declined by 26.0 percent in the first quarter of 2017 when compared to the same quarter of 2016. This decline was as a result of unstable commodity prices. The quarter-on-quarter production comparison shows a decrease of 37.2 percent for production during the quarter under review when compared to 2016 fourth quarter production.
The same applies to Soda Ash as a decrease of 39.0 percent in production was registered during the first quarter of 2017 when compared to the same quarter of 2016. “The quarter-on-quarter comparisons reflects a decrease of 52.4 percent during the period under review as compared to last quarter of 2016. Salt production recorded a decrease of 31.7 percent in the first quarter of 2017 when compared to the first quarter of 2016.” The quarter-on-quarter comparison shows a decrease of 52.1 percent in production during the first quarter of 2017 as compared to production during the last quarter of 2016.
The report from Statistics Botswana notes: “The decline for both soda ash and salt is attributed to low commodity demand as well as the unstable commodity prices in the international markets.” But there is one performer from the first quarter analysis, Coal is the only commodity that recorded positive growth in production, increasing by 14.7 percent in the first quarter of 2017 as compared to the corresponding quarter of 2016. However, the comparison of the first quarter of 2017 and fourth quarter of 2016 shows a decline of 9.6 percent.
“It is important to note that though Morupule power plant demand for coal resulted in the year-on-year increased demand for the commodity, the closure of the BCL mine in the last quarter of 2016 (one of the local markets for the commodity) negatively affected the coal production leading to low coal production in the first quarter of 2017,” reads the report. Copper-Nickel-Cobalt Matte, Silver and Copper in Concentrates recorded zero production during the period under review. The instability and uncertainty of commodity prices had negatively affected the mines, leading to the provisional liquidation of the concerned companies.
Strategic partnership offers inherent benefits of global knowledge, African insights, and local expertise and commitment
Minet Group and Africa Lighthouse Capital today announced that they have received regulatory approval and fulfilled all requirements to acquire Aon’s shareholding in Aon Botswana, and consequently will begin the process to rebrand to Minet Botswana.
Minet Group is a well-known and trusted pan-African risk advisory firm and Aon’s largest Global Network Correspondent and has been rapidly expanding its African footprint since 2017 through the acquisition of operations from global professional services firm Aon in Kenya, Lesotho, Malawi, Mozambique, Namibia, Tanzania, Uganda, and Zambia. Minet has been delivering world class products and services across Africa for over 70 years.
Africa Lighthouse Capital (ALC) is a leading Botswana citizen-owned private equity firm focused on investing in Botswana companies and propelling them into regional champions, with over BWP 500 million in funds under management.
The new entity will be rebranded to Minet and will inherit deeply rooted respect by its clients for their innovative and locally relevant solutions, responsiveness, and efficient processes. Furthermore, it shall have the benefit of consistency in leadership and staffing, with Barnabas Mavuma, previously Managing Director of Aon Botswana, continuing to lead the business as the MD supported by the local management team.
“The addition of Minet Botswana to our growing African network affirms our belief in the great opportunities for growth that Africa offers, driven by rising consumer demand, huge investment in infrastructure and quick adoption of new technology,” says Joe Onsando, CEO at Minet Group.
“This transaction significantly adds to the diversity and skills base of our team and will have a positive impact on the range of products and services we provide. Our Correspondent agreement with Aon gives us access to global expertise and data driven insights and uniquely positions us to deliver risk advisory solutions that reduce volatility, thus driving improved performance for our clients. This is a very exciting time to be Minet in Africa.”
“The significantly increased Botswana citizen shareholding effected by this transaction gives rise to an exciting era of local market focus and growth for Minet Botswana,” says Bame Pule, Founder and CEO of Africa Lighthouse Capital. “We intend to work with Minet Botswana’s local management team to further localise the business in terms of product development, while at the same time investing in local skills development and business development. We look forward to this exciting journey, which will result in a significantly enhanced service offering for Minet Botswana’s clients.”
Consequently, and similar to the other members of the Minet Group, Minet Botswana becomes an Aon Global Network Correspondent, retaining its access to Aon’s resources, technology, and best practises, combined with the benefit of independent, local agility. This transaction furthermore significantly increases local shareholding, enabling operations to become even nimbler and better positioned to unlock new and existing growth opportunities.
Clients of Minet Botswana will experience continuity of product and service delivery standards in the short term. In the near future, they can expect an enhanced offering that combines agility with technology and product innovation, tailormade for their specific needs.
Together, Minet and ALC bring a sound understanding of local market conditions, strong governance, and an established track record in the region. These qualities, combined with Aon’s global capabilities and expertise, will bring clear benefits for clients.
This transaction vastly increases citizen ownership with shareholders who are going to be active in the business. The transfer of equity interests in Botswana to investors with local and regional expertise, presence and commitment will allow the businesses to move quickly in line with market movements, and to introduce products that are tailored to the local market.
“Minet’s commitment and drive to incessantly adapt to changing market conditions, and to innovate to meet the unique insurance demands of the African continent, while maintaining the high standards customers have come to expect – Onsando concludes – will continue to grow and give Minet a powerful competitive edge within the African market”.
French President Emmanuel Macron received 21 Heads of state and government officials from Africa during the recent summit on the Financing of African Economies that focused on Africa to take full advantage of the tectonic shifts in the global economy and the call for a joint effort for financial and vaccination support for the continent.
President Emmanuel Macron stressed that “Most regions of the world are now launching massive post-pandemic recovery plans, using their huge monetary and fiscal instruments. But most African economies suffer the lack of adequate capacities and such instruments to do the same. We cannot afford leaving the African economies behind.
We, the Leaders participating to the Summit, in the presence of international organizations, share the responsibility to act together and fight the great divergence that is happening between countries and within countries.
This requires collective action to build a very substantial financial package, to provide a much-needed economic stimulus as well as the means to invest for a better future. Our ambition is to address immediate financing needs, to strengthen the capacity of African governments to support a strong and sustainable economic recovery and to reinforce the vibrant African private sector, as a long-term growth driver for Africa.”
For her part, International Monetary Fund (IMF) Managing Director Kristalina Georgieva highlighted that “there is urgency to focus on financing Africa. Last year, the pandemic-caused recession shrank the GDP of the Continent by 1.9 percent – the worst performance on record. This year, we project global growth at 6 percent, but only half that 3.2 percent for Africa.” Adding that Africa needs to grow faster than the world at 7 to 10 percent to meet the aspirations of its youthful populations, and become more prosperous and more secure.
Georgieva revealed that the price tag on the shot is estimated to be “$285 billion through 2025. Of this $135 billion is for low-income countries. This is the bare minimum. To do more – to get African nations back on their previous path of catching up with wealthy countries – will cost roughly twice as much. These are large numbers. They may seem out of reach. But to quote Nelson Mandela: impossible until it is done.”
The main areas of interest to achieve this include; first, end the pandemic everywhere, 40 percent of the population of all countries is targeted to get vaccinated by the end of 2021, and at least 60 percent by mid-2022.
Second, bilateral and multilateral developmentfinancing grants and concessional loans ought to go up. Over the last year, the IMF have swiftly ramped their financing for the Continent, including providing 13 timestheir average annual lending to sub-Saharan Africa. And are working to do much more. The IMF has also received support to increase access limits so they can scale up their zero-interest lending capacity through the Poverty Reduction and Growth Trust.
The IMF has also devised exceptional measures. Their membership backs an unprecedented new allocation of Special Drawing Rights (SDR) of $650 billion, by far the largest in their history.Once approved, which is intended to be achieved by the end of August, it will directly and immediately make about $33 billionavailable to African members. It will boost their reserves and liquidity, without adding to their debt burden.
Over the course of the last year, the IMF has built experience in facilitating the on lending of SDRs – thus managing to triple their concessional lending capacity as a result.
The Third being, actions at home. According to Georgieva “a crisis is an opportunity for transformational domestic reforms that increase domestic revenue, improve public services, and strengthen governance. For instance, digitalization can improve tax administration and revenue collection, and the quality of public spending. And with radical transparency, Africa can tap into new sources of finance – such as carbon offsets.
There is ample scope for countries to encourage private investment, including in social and physical infrastructure. New IMF research, published today, highlights that domestic and international investors could provide at least 3 percent of GDP per yearof additional financing by the end of this decade.”
Reforms of international taxation can also support Africa’s growth. For a long time, the IMF has been in favor of minimum corporate tax rates to reduce the race to the bottom and tax avoidance. And they strongly support an international agreement on digital tax, something France has been a leading voice for. It is important to secure fair distribution of tax revenues, so they can contribute to closing Africa’s financial gap.
Georgieva called on to each and every one to step up. Reminding the attendees that from history they are all familiar with what a shock of this magnitude can do if not countered forcefully and effectively.
De Beers’ Group, the world’s number one diamond producer by value, this week attributed the downfall of its sales for the fourth cycle week to the second wave of the Covid-19 variant (B.1.617.2) which was first discovered in India.
Diamond trading conditions have been hit by the Covid-19 crisis in India which is a major cutting and polishing centre for the world’s diamond trade.
The outbreak of the new variant has led to a humanitarian crisis with 280, 284 fatalities of the disease reported.
The London headquartered company said the sales in its fourth cycle fell to $380m (about P4.1 billion) down from $450m (about P4.8 billion) in the third cycle though it was higher than the fifth cycles of last year when the group shifted only $56m (P600 million).
De Beers emphasized that they continued to implement a more flexible approach to rough diamond sales during the fourth sales cycle of 2021, with the Sight event extended beyond its normal week-long duration.
The De Beers group Chief Executive Officer (CEO), Bruce Cleaver said the company continues to see robust demand for diamond jewellery in the key US and China consumer markets.
“However, the scale of the second wave of Covid-19 in India, where the majority of the world’s diamonds are cut and polished, has led to reduced midstream capacity and subsequently lower rough diamond demand, during what is already a seasonally slower time of year for midstream purchases,” said Cleaver.
Meanwhile Botswana health officials have confirmed the new Covid-19 variant in Botswana. The Ministry of Health and Wellness -through a press statement- informed members of the public that the variant (B.1.617), was confirmed in Botswana on 13th May 2021.
According to Christopher Nyanga, spokesperson at the Ministry, this followed a case investigation within Greater Gaborone, involving people of Indian origin who arrived in the country on the 24th April 2021.
Moreover the World Health Organization (WHO) recently announced that the Indian Covid-19 variant was a global concern, with some data suggesting that the variant has “increased transmissibility” compared with other strains.
The India variant (B.1.617.2) – is one of four mutated versions of the coronavirus which has been designated as being “of concern” by transitional public health bodies, with others first being identified in Kent, South Africa and Brazil.
Nevertheless when speaking at Bank of America Global Metals and Mining conference, Anglo American Chief Executive Officer, Mark Cutifani said the company portfolio is increasingly tilted towards future enabling products and those that need to decarbonise energy and transport in order to meet consumers’ needs – from home appliances, electronics and infrastructure, to food and luxury goods.
“We see material opportunity for Anglo American to continue to set itself apart in terms of the performance of our diversified business, further enhanced through sector-leading 25% volume growth over the next four years, led by copper and the platinum group metals,” said Cutifani.
“Most importantly, as the supplier of such critical materials, it is the duty of our industry to ensure that in everything we do, we act responsibly and deliver enduring value for our full breadth of stakeholders, including our planet.”