Stan Chart CEO in shock resignation
Business
The Chief Executive Officer of Standard Chartered Bank Botswana, Mr. Moatlhodi Lekaukau, on Wednesday resigned from the troubled bank, leaving more questions than answer.
The resignation of Mr. Lekaukau comes amid allegations of improper behaviour by the bank in handling one of their client’s accounts, possible investigation by the regulator and falling profits. However the board chairman, Prof. Bojosi Botlhogile, and Mr. Lekaukau have denied insinuations that the CEO was pushed out in the face of the emerging scandal. Instead they offered that Mr. Lekaukau, a chartered accountant and former partner at PriceWater House Coopers, will be pursuing other interests.
Mr. Lekaukau’s departure marks five years since he walked through the banking corridors in early 2012 at the time when the economy was recovering following a slump in diamond production caused by subdued global demand. The bank that year recorded a 0.9% decline in profit despite strong set of results that showed slight increase in net interest income and a reduction in bad debt impairment charge. Also contained in the 2012 final year results is a small clue that offers a rare view in what has come to haunt the bank, its obsession with strengthening the balance sheet and its affinity for the risky yet lucrative mining sector.
Standard Chartered Bank Botswana under Mr. Moatlhodi continued with its plans and risky appetite to be the choice financier for the mining industry. It seemed to have been working out for them as the bank’s corporate segment recorded an impressive growth of about 21%. Furthermore, during that period the bank opened two branches (Gaborone and Francistown) and also introduced the first of its kind in the local banking industry, a 24-hour full service call centre. Despite the 0.9% decline in profit that year, the bank paid P200 million in dividends.
The year 2013 was definitely a good one for the Bank and its CEO. In that period, for the first time ever, the bank exceeded the P1 billion revenue mark. And not only that, the bank was hitting good numbers: profit before tax increased by 28%, total impairment decreased by 57%, and of course the bank emphasised that the balance sheet continues to strengthen with loans to customers increasing by 26% and deposits from non-bank customers increasing by 8%. For that period, the bank paid P192.9 million in dividends.
The momentum slowed in 2014 when Standard Chartered Botswana recorded profit after tax of P319.184, a decline of o.74% from the previous period. However the bank was satisfied with growth in total income that was 7% above that of 2013, with the balance sheet growing by 28% on the back of advances to customers that grew by 29%. The bank also managed to reduce impairment by 94%. The bank was once more generous with the dividend payout that amounted to P213 million.
Now this is where things started going downhill for the bank. In 2015 delivered its worst set of results in terms of bottom line. The bank’s profit after tax declined from P319.1 million to P47.3 million. The group’s performance in 2015 was impacted by the challenging trading environment characterised by subdued macroeconomic conditions, low interest rates and significant decline in market liquidity. Operating income was down by 18% from 2014 reflecting the challenging market conditions.
In 2014, Bank of Botswana had imposed a two year moratorium on banking fees and charges, effectively starving off banks from increasing their revenues through hiking charges and fees. In what shocked shareholders and investors, the oldest bank in the country announced that the shocking decline in profit should not be much of concern. In fact, the bank said part of the reason operating income went down was because they took a strategic management decisions to strengthen the balance sheet at the expense of short term performance. And for all those efforts the balance sheet only grew by 3%.
While the shocking drop in profit was downplayed, the pressure in the bank was becoming more palpable. Other banks were posting declining profits but not as steep as Standard Chartered Bank Botswana. Then details started to emerge, painting a picture of a bank caught off guard by the commodity slump in 2015. The commodity slump in 2015 was a result of waning global demand that resulted in lower productions and lower prices.
The bank which has set out to be a financier of choice in the mining industry found itself in a vulnerable position. The bank was later to admit that part of the fall in profit was a result of one of their top corporate client that was having a difficult time financing its loan following the slump in diamond production and sales. As a sign of pressure mounted for the bank, they announced that to maintain capital resilience of the bank and to manage growth expectations in the near future, the Board will consider a dividend declaration in 2016.
In the last know financial performance, the bank’s interim profit for the half year ended June 2016 dropped by 5% from the corresponding period, sparking fresh fears that the bank’s 2016 year end results might be as dismal as the previous year if not worse. The results were once more impacted by a 42% surge on net impairments losses that resulted in the bank posting profit before tax of P80.1 million, while the profit after tax fell to P63 million.
Despite the fall in profit, the bank remained bullish: they had grown the balance sheet by 3% and they were bolstered by a significant earnings recovery in the first half of the year culminating in first half earnings exceeding total earnings for 2015. However, the optimism was now tampered with caution. The bank announced that it has further strengthened its capital position, tightened risk tolerance and established more robust controls as it continues to focus on driving initiatives to realise long term sustainable gains. During the period, P90 million dividends were declared and paid.
With recovery in sight, the bank had the rug pulled under their feet when the government announced that BCL Group will be put under provisional liquidation. The announcement created a flurry of chatter and confusion, with no doubt that this liquidation is going to have a serious impact on the economy. As it is normally the case, the financial services industry soon found itself affected by the contagion.
When the noise settled and calm returned, Standard Charted Bank Botswana dropped a bombshell: they had significant exposure to the BCL group and it was likely to impact their financial performance for 2016. With the hopes of a quick recovery up in smoke, the company’s stock took a drubbing at the Botswana Stock Exchange (BSE).
The shareholders who were used to large and consistent payouts were rattled and they acted. When 2015 came to an end, Standard Chartered Bank Botswana’s stock plunged by 11%. The selloff extended to 2016 as the stock became one of the worst performers, plummeting by as much as 30%. The stock is now trading at P7.60 after losing 1.92% in the past two months.
Mr. Lekaukau’s exit could not have come at a worse time, prompting analyst to ask questions if he was pushed out over dismal results or the man is simply pursuing greener pastures. Those who contend he is pushed out point to the bank’s past performances and the falling stock price while those who are convinced he is jumping shipping are saying he actually took longer than expected given the frustrations of the job. Industry insiders and those familiar with the matter say the banking industry in Botswana is controlled from outside by parent companies (Botswana has no indigenous commercial bank).
While banking heavyweights like First National Bank Botswana and Barclays Bank Botswana also answer to superiors outside the country, Mr. Lekaukau was in different circumstances altogether. FNBB and Barclays Botswana are owned by parent companies that are based in South Africa hence understand the African business dynamics and can respond quickly to opportunities and threats.
As for Standard Chartered Bank Botswana, despite being the oldest bank in Botswana, the shots came from Kenya to Dubai, Singapore and London. Standard Chartered Bank Plc, the global banking group, has most of the time treated its Botswana operations as an extension of the Kenya operations. This has made it difficult for the Botswana operations to be innovative and responsive.
But for now, Mr. Lekaukau’s resignation will be the least of the bank’s worries after the bank found itself embroiled in a scandal that is expected to unveil the shadowy operations of the banking sector. The bank is being accused by Mr. Majakathata Pheko of Oseg Group for playing fast and loose with his businesses accounts. Mr. Pheko has made damning allegations that the bank was negligent and gave unauthorised overdrafts.
Furthermore, the businessman says the bank’s handling of the issue bordered on clear violations of the bank’s own internal controls and runs afoul of the regulations set by the regulatory body. Still on that, Mr. Pheko has written to the central bank to intervene while in the meantime he has lodged a lawsuit against the bank.
Business
New Khoemacau owners commit to mine’s multibillion Pula expansion
The future of Botswana’s largest copper and silver operation, Khoemacau Copper Mining, looks promising as the new owners, MMG Group, commit to the mine’s expansion plans. MMG, an Australian headquartered company owned by China, has expressed its dedication to doubling Khoemacau’s production and transforming it into one of the most significant high-grade copper operations in Africa.
Nan Wang, the Executive General Manager for Australia and Africa at MMG, stated that while the immediate focus is on maintaining a consistent production level of 60ktpa, there are solid plans to increase Khoemacau’s production capacity. The company aims to double its production from 3.65Mtpa to 8.15Mtpa, resulting in an increase in payable copper from approximately 60ktpa to around 130ktpa.
To achieve this expansion, Khoemacau has completed a pre-feasibility study on the project and a solar power initiative. The next step is to conduct a feasibility study, which will pave the way for increased production capacity. Additionally, Khoemacau has identified extensive exploration opportunities across its license area, positioning the company for an exciting new phase of development.
The current Khoemacau operation reached full production and nameplate capacity in December 2022, following over a decade of investment totaling over P10 billion. This significant investment allowed for an intense exploration program, resulting in the development of the most automated underground mining operation in Botswana. The first concentrate was produced in June 2021, and the product entered the export market in July of the same year. Throughout 2022, the company has been working on the pre-feasibility study for the expansion project, with the feasibility study scheduled for the following year.
The expansion plans will involve the construction of a new world-class process plant in Zone 5, where the current mining of ore takes place. This new plant will be larger than the existing one in Boseto, which currently receives ore from Zone 5. The expansion will also involve the development of new underground mines, including Mango, Zone 5 North, and Zeta North East. These additional mines will bring the total number of underground shafts at Khoemacau to six. The ramp-up of production from the expansion is expected to occur in 2026.
Khoemacau, which acquired assets in the Kalahari Copper Belt after the liquidation of Discovery Metals in 2015, currently employs over 1500 people, with the majority being Batswana. The Khoemacau Mine is located in north-west Botswana, in the emerging Kalahari Copperbelt. It boasts the 10th largest African Copper Mineral Resource by total contained copper metal and is one of the largest copper sedimentary systems in the world outside of the Central African Copperbelt.
The mine utilizes underground long hole stoping as its mining method and conventional sulphide flotation for processing. Resource drilling results have shown the existing resources to have continuity at depth, and there are several exploration targets within the tenement package that have the potential to extend the mine’s life or increase productivity.
The Zone 5 mine has already ramped up production, and further expansion in the next five years will be supported by the deposits in the Zone 5 Group. The estimated mine life is a minimum of 20 years, with the potential to extend beyond 30 years by tapping into other deposits within the tenement package.
In conclusion, the commitment of MMG Group to Khoemacau’s expansion plans signifies a bright future for Botswana’s largest copper and silver operation. With the completion of pre-feasibility and feasibility studies, as well as significant investments, Khoemacau is poised to become one of Africa’s most important high-grade copper operations. The expansion project will not only increase production capacity but also create new job opportunities and contribute to the economic growth of Botswana.
Business
Khoemacau Copper Mining to be acquired by MMG Limited
Khoemacau Copper Mining, a leading copper mining company, has recently announced its acquisition by MMG Limited, a global resources company based in Australia. This acquisition marks a significant milestone for both companies and demonstrates their commitment to continued investment, growth, and sustainability in the mining industry.
MMG Limited is a renowned mining company that operates copper and other base metals projects across four continents. With its headquarters in Melbourne, Australia, MMG has a strong track record in mining and exploration. The company currently operates several successful mines, including the Dugald River zinc mine and the Rosebery polymetallic mine in Australia, the Kinsevere copper mine in the Democratic Republic of Congo, and the Las Bambas Mine in Peru. MMG’s extensive experience and expertise in mining operations make it an ideal partner for Khoemacau.
MMG’s commitment to sustainability aligns perfectly with Khoemacau’s values and priorities. Khoemacau has always placed a strong emphasis on safety, health, community, and the environment. MMG shares this commitment and applies the principles of good corporate governance as set out in the Corporate Governance Code of the Hong Kong Listing Rules. As a member of the International Council on Mining and Metals (ICMM), MMG adheres to sustainable mining principles, ensuring responsible and ethical practices in all its operations.
Over the past 12 years, Khoemacau’s current shareholders have made significant investments in the development of the company. With approximately US$1 billion deployed in the project, Khoemacau has successfully transformed from an exploration and discovery phase to a fully-fledged operating copper mine. The completion of the ramp-up of the Zone 5/Boseto operations has set the stage for the next phase of expansion.
With the acquisition by MMG, Khoemacau is poised for an exciting new chapter in its development. The completion of a pre-feasibility study on the Khoemacau expansion and a solar power project has paved the way for increased production capacity. The feasibility study will be the next step in doubling the production capacity from 3.65 million tonnes per annum (Mtpa) to 8.15 Mtpa, resulting in a significant increase in payable copper from approximately 60,000 tonnes per annum (ktpa) to 130,000 ktpa. Additionally, Khoemacau has extensive exploration opportunities across its license area, further enhancing its growth potential.
The CEO of Khoemacau, Johan Ferreira, expressed his gratitude to the current owners for their stewardship of the company and their successful transformation of Khoemacau into a fully operational copper mine. He also highlighted the company’s focus on the expansion study and its vision for the future with MMG. Ferreira emphasized that the partnership with MMG will ensure Khoemacau’s long-term success, delivering employment, community benefits, and economic development in Botswana.
MMG Chairman, Jiqing Xu, echoed Ferreira’s sentiments, stating that the acquisition of Khoemacau aligns with MMG’s growth strategy and vision. Xu emphasized MMG’s commitment to creating opportunities for all stakeholders, including shareholders, employees, and communities. He expressed confidence in Khoemacau’s expansion potential and the company’s ability to realize its full potential with the support of MMG.
The sale of Khoemacau to MMG is subject to certain conditions precedent and approvals, with the expected closing date in the first half of 2024. This acquisition represents a significant step forward for both companies and reinforces their commitment to sustainable mining practices, responsible resource development, and long-term growth in the mining industry.
In conclusion, the acquisition of Khoemacau Copper Mining by MMG Limited signifies a new era of investment, growth, and sustainability in the mining industry. With MMG’s extensive experience and commitment to responsible mining practices, Khoemacau is well-positioned for future success. The partnership between the two companies will not only drive economic development but also ensure the safety and well-being of employees, benefit local communities, and contribute to the overall growth of Botswana’s mining sector.
Business
BPC Signs PPA with Sekaname Energy
The Botswana Power Corporation (BPC) has taken a significant step towards diversifying its energy mix by signing a power purchase agreement with Sekaname Energy for the production of power from coal bed methane in Mmashoro village. This agreement marks a major milestone for the energy sector in Botswana as the country transitions from a coal-fired power generation system to a new energy mix comprising coal, gas, solar, and wind.
The CEO of BPC, David Kgoboko, explained that the Power Purchase Agreement is for a 6MW coal bed methane proof of concept project to be developed around Mmashoro village. This project aligns with BPC’s strategic initiatives to increase the proportion of low-carbon power generation sources and renewable energy in the energy mix. The use of coal bed methane for power generation is an exciting development as it provides a hybrid solution with non-dispatchable sources of generation like solar PV. Without flexible base-load generation, the deployment of non-dispatchable solar PV generation would be limited.
Kgoboko emphasized that BPC is committed to enabling the development of a gas supply industry in Botswana. Sekaname Energy, along with other players in the coal bed methane exploration business, is a key and strategic partner for BPC. The successful development of a gas supply industry will enable the realization of a secure and sustainable energy mix for the country.
The Minister of Minerals & Energy, Lefoko Moagi, expressed his support for the initiative by the private sector to develop a gas industry in Botswana. The country has abundant coal reserves, and the government fully supports the commercial extraction of coal bed methane gas for power generation. The government guarantees that BPC will purchase the generated electricity at reasonable tariffs, providing cash flow to the developers and enabling them to raise equity and debt funding for gas extraction development.
Moagi highlighted the benefits of developing a gas supply industry, including diversified primary energy sources, economic diversification, import substitution, and employment creation. He commended Sekaname Energy for undertaking a pilot project to prove the commercial viability of extracting coal bed methane for power generation. If successful, this initiative would unlock the potential of a gas production industry in Botswana.
Sekaname Energy CEO, Peter Mmusi, emphasized the multiple uses of natural gas and its potential to uplift Botswana’s economy. In addition to power generation, natural gas can be used for gas-to-liquids, compressed natural gas, and fertilizer production. Mmusi revealed that Sekaname has already invested $57 million in exploration and infrastructure throughout its resource area. The company plans to spend another $10-15 million for the initial 6MW project and aims to invest over $500 million in the future for a 90MW power plant. Sekaname’s goal is to assist BPC in becoming a net exporter of power within the region and to contribute to Botswana’s transition to cleaner energy production.
In conclusion, the power purchase agreement between BPC and Sekaname Energy for the production of power from coal bed methane in Mmashoro village is a significant step towards diversifying Botswana’s energy mix. This project aligns with BPC’s strategic initiatives to increase the proportion of low-carbon power generation sources and renewable energy. The government’s support for the development of a gas supply industry and the commercial extraction of coal bed methane will bring numerous benefits to the country, including economic diversification, import substitution, and employment creation. With the potential to become a net exporter of power and a cleaner energy producer, Botswana is poised to make significant strides in its energy sector.