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Two titans drag down the BSE

Sechaba Brewery Holdings limited stock price has plunged the most since the beginning of this year. The fall in Sechaba share price, is an occurrence repeated across the wholesaling and retail sector in the Botswana Stock Exchange, marked by falling share prices amid tough operating conditions.


 The wholesaling and retail sector has dragged the BSE’s domestic company index (DCI) down by 3.61% since the beginning of the year. The sector’s drag spills over from last year when the DCI declined by 11.3% after the wholesaling and retail sector lost 7.1% to become the worst performing sector in the local stock market. This was a reversal of fortunes from 2015 when the DCI finished the year 11.6% up with the wholesale and retail sector being the second best performing sector at 4.2%.


The performance of the sector this year reflects a broader trend that started earlier last year when African states battled with the fall in commodity prices due to waning demand across major markets. Furthermore wholesaling and retail stocks were under pressure from the El Nino phenomenon that affected many farmers, particularly in Southern Africa. By nature of their business, wholesaling and retail companies’ revenue is directly affected by the spending power of consumers and any negative shocks to the economy that affects government and consumer spending power rattles investors.


Sechaba’s shock share price drop was rapid but not totally unexpected. The group has so far lost 22% of its share value amid a challenging environment that investors have no appetite for. The woes of Sechaba dates back to the introduction of the alcohol levy in 2008. The levy has had an impact on the volumes shipped thus reducing the bottom line margins. However, the brewery giant was able to remain resistant, delivering profits and investors cheering them on the stock market.

 

A spanner was once more thrown in the works when the government introduced the traditional beer regulation that affected some of the group’s operations. The combination of the levies and regulations are now weighing heavily on Sechaba’s operations. To compound the matter further, investors are weary now considering the future of the group under new owners: in 2015, Anheuser-Busch InBev finally offered SABMiller PLC £68 billion in a  takeover bid, creating a brewing giant making about a third of the world’s beer.


In Botswana, SABMiller Plc has a stake in Sechaba Brewery Holdings which trades in the domestic exchange market. According to Botswana Stock Exchange, Sechaba Brewery Holdings limited is an investment holding company with interest in Kgalagadi Breweries (Pty) Limited (KBL).Sechaba holds 60% of the shares of KBL while SABMiller Botswana B.V. holds 40%. SABMiller Plc has management control in the operating company. Their involvement brings management, technical and brand building expertise of the three largest brewing companies in the world to KBL.


The question in the minds of Sechaba’s existing shareholders  is will the new owners put up with the government’s hard stance  on alcohol and if they do what measures will be put on place to system against the swelling pressure. On the other hand some investors have made their minds to exist their positions sooner than wait to find out what’s in store from the new owners.

 

Moreover, the drop in share price follows the shocking financial performance from Kgalagadi Breweries Limited (KBL), the sole associate of Sechaba, in the interim results ended September 2016. Sechaba’s share of results from KBL fell by 39.6%, operating profit went down by 40.1%, profit after tax decreased by 40.7% while basic and diluted earnings per share declined by 40.8%.


Sechaba said the decline in the financial performance of the company is mainly attributable to the current regulatory challenging environment in which the company operates. The other losing stock in the past month is Sefalana Holding Company, also a key player in the wholesaling and retail sector. Sefalana’s stock price took a huge hit in the last three weeks of January.  Shares of Sefalana have plummeted by 15.46% to trade at P10.99.

 

The precipitous drop in the group’s stock price makes it the second worst performing stock under the local counter on the BSE. Combined with 5.8% losses in the previous year, the stock is under pressure from investors who are used to the stock’s good returns last seen in 2015 when it grew by almost 50%.


Through the four decades of operating, Sefalana Group has grown into a large and diverse business, operating in a number of sectors including 67 stores in the Fast Moving Consumer Goods (FMCG) sector within Botswana and Namibia. Whilst its core business is in the FMCG sector, the Group remains well diversified with a solid property portfolio in Botswana, Zambia and Namibia, 3 motor dealerships (MAN, TATA and Honda), agencies for the sale of industrial and agricultural equipment, a well-established grain mill in Serowe, providing nutritious meals for the country’s population and a UHT milk plant, which commenced operations this year. Group remains the only listed company without a controlling shareholder. The single largest shareholder is Botswana Public Officers Pension Fund at 42.85%. Citizens hold a total of 91.87% of all issued shares.


Late last year, Sefalana undertook a Rights Issue program when the board issued an additional 27,858,523 new shares thus increasing stated capital comprising of ordinary shares from 222,868,186 shares to 250,726,709 shares. The additional shares were offered to existing shareholders in a ratio of 1 Offer Share for every 8 shares held by shareholders at a price of P12.60 per offer share, representing a 10% discount to the Sefalana share price at the time.

 

The rights issue was able to raise P351 million. The trailblazing group said the capital will be used to finance the acquisition of the Lesotho Business (TFS), to make an investment in a South Africa Consortium, to assist with future acquisition opportunities, to fund property acquisitions relating to these Transactions, and for other working capital requirements of the Sefalana Group.


In the latest interim financial results released a week ago, Chandra Chauhan, the group Managing Director, says in the face of continued strain on the economic climate in Botswana, following the closure of a number of institutions that has led to an increase in unemployment across the country, Sefalana has had to remain competitive and weather the storm of lower consumer spending.


“Some of our business units in Botswana have generated a lower level of profitability than in the previous year as a result of increased pressure on margins as we attempt to provide our customers with the best possible price in these difficult times. Government spending in some areas has also declined and this has adversely impacted those businesses that are reliant on recurring tenders.” He added that fortunately for the group as a whole, the Namibian business has grown sufficiently to offset the decline experienced locally.


The Group’s overall profit before tax for the 6 months ended 31 October 2016 of P81.1 million was marginally up on the comparative period ended 31 October 2015 at P80.4 million. The group managed to reach the P2 billion threshold in terms of turnover for the current six month period – a long standing target for the group. The overall total comprehensive income for the period is significantly up on the comparative period at P60.1 million compared to P18.5 million at October 2015.

 

Other financial highlights for the 6 months to 31 October 2016, show that the group’s revenue was P2.0 billion – up 9% on prior period; Gross profit was P152 million – up 4% on prior period; Earnings before interest, tax and amortization (EBITA) was P82.2 million, up 4% on prior period; and Profit before tax was P81.1m – marginally up on the prior period.

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The  Bulb World CEO selected for Africa’s prestigious award

22nd July 2021

The Bulb World Chief Executive Officer (CEO) and entrepreneur, Ketshephaone Jacob has been selected as a 2021 Top 50 Africa’s Business Hero.

Jacob was chosen from a pool of 12,000 applicants – many of whom are highly-skilled and accomplished entrepreneurs.

Africa’s Business Hero, sponsored by technology entrepreneur, Jack Ma, aims to identify, support and inspire the next generation of African entrepreneurs who are making a difference in their local communities, working to solve the most pressing problems, and building a more sustainable and inclusive economy for the future.

The initiative is as inclusive as possible and applications were open in English and French to entrepreneurs from all African countries, all sectors, and all ages who operate businesses formally registered and headquartered in an African country, and that have a 3 year-track record.

Every year, finalists are selected to compete in the ABH finale pitch competition and participate in a TV Show that will be broadcast online and across the continent.

The finalists will compete for a share of US $1.5 million in grant money.

The Bulb World, is home grown LED light manufacturing company, which was partly funded by Citizen Entrepreneurial Development Agency (CEDA) at the tune of P4 million, to manufacture LED lighting bulbs for both commercial and residential use in 2017.

The Bulb World operate from the Special Economic Zone of Selibe Phikwe. Early this year, The BulB World announced its expansion to South Africa, setting in motion its ambitious Africa expansion plan.

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Business

Mining production down 12 % IN Q1 2021

14th July 2021

During the first quarter of 2021, production in Botswana’s economic nucleus- the mining sector contracted by 12 percent. This is according to Mining Production Index released by Statistics Botswana this week.

The country’s central data body revealed that Index of Mining production stood at 74.4 during the first quarter of 2021, showing a negative year on-year growth of 12.0 percent, from 84.6 registered during the first quarter of 2020.

The main contributor to the decline in mining production came from the Diamonds sector, which contributed negative 11.7 percentage points. Soda Ash was the only positive contributor in the mining production, contributing 0.1 of a percentage point. However Soda Ash’s contribution was insignificant to offset the negative contribution made by Diamonds.

The quarter-on-quarter analysis by Statistics Botswana experts shows an increase of 16.3 percent from the index of 64.0 during the fourth quarter of 2020 to 74.4 observed during the period under review.

Diamond production decreased by 12.1 percent during the first quarter of 2021 compared to the same quarter of the previous year. The decrease was as a result of planned strategy to align production with weaker trading conditions mostly linked to Covid-19 protocols restrictions.

Botswana’s diamond sector is underpinned by Debswana, the country’s flagship rough producer- a 50-50 joint venture between government and global mining giant De Beers Group. The other producer is Canadian based Lucara Diamond Corp through its wholly owned Karowe Mine which is a relatively small but significant production that has made a name for itself worldwide with rare diamond recoveries of unprecedented carat size.

On the other hand, quarter-on quarter analysis shows that production has improved, registering a positive growth of 17.5 percent during the first quarter of 2021 compared to the preceding quarter – 2020 Q4.

Though production was significantly lower in the first quarter, the two producers ended Q2 with rare diamond recoveries. Debswana early last month found the world’s third largest gem diamond – weighing 1098 carat at Jwaneng Mine, its flagship gem quality diamonds producer, also regarded the world’s richest diamond mine.

A week later Lucara  announced its second biggest recovery, the 1174 carat clivage near-gem dug from its Karowe Mine. The diamond is the world third in carat size after the plus-3000 carat Cullinan found in South Africa back in 1905 and the 1758 carat Sewelo unearthed at its Karowe mine in 2019. Debswana and Lucara are investing billions of pulas in underground mining projects to extend the life of its mines, Jwaneng & Karowe respectively.

In terms of Gold which is produced at Mupani mine near Botswana’s second city of Francistown output decreased by 17.9 percent during the first quarter of 2021 compared to the same quarter of the previous year.

Similarly, quarter-on-quarter analysis reflects that production decreased by 21.4 percent during the first quarter of 2021, compared to the preceding quarter. The decrease was as a result of the deteriorating lifespan of the mine as well as the impact of COVID-19 which slowed down the mining activities.

Soda Ash production increased by 11.1 percent during the first quarter of 2021 compared to the same quarter of the previous year. In terms of quarter-on-quarter Soda Ash production also showed an increase, picking up by 2.1 percent during the period under review. The increase in production is attributable to the effectiveness of the plant following refurbishment which occurred in the third quarter of 2020.

Salt production decreased by 34.0 percent during the first quarter of 2021, compared to the same quarter of the previous year. Similarly, the quarter-on-quarter analysis shows that salt production registered a decrease of 32.9 percent during the period under review. Both salt and Sodash are produced by partly government owned Botswana Ash (BotsAsh) operating from Sowa town near Makgadikgadi pans.

Coal production decreased by 11.2 percent during the first quarter of 2021, compared to the corresponding quarter of the previous year. The decrease was attributed to the reduced demand from Morupule B Power Station following the remedial works being undertaken, as one boiler was in operation during the period under review.

Although production fell, Statistics Botswana says there was no shortfall in supply of coal due to stockpiling. On the other hand, the quarter-on-quarter comparison shows that coal production increased by 20.4 percent compared to the preceding quarter.

Botswana’s flagship coal producer is Morupule Coal Mine; a wholly state owned mining company located in Palapye producing primarily for Botswana Power Corporation (BPC)’s power generation plants Morupule A & B.

The other coal producer is Botswana Stock Exchange listed Minergy which operates a 390 MT Coal Resource mine in Masama near Media in the southwestern edge of the Mmamabula Coalfields.

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Gov’t awards mining licence for Gantsi Copper Mine

14th July 2021
Moagi

Department of Mines in the Ministry of Mineral Resources, Green Technology & Energy Security has awarded mining licence to Tshukudu Metals-a subsidiary of Aussie firm Sandfire Resources ,giving the company a green light to start piecing the ground at its Motheo Copper Project near Gantsi.

Lefoko Moagi, minister in charge of mineral resources in Botswana confirmed to weekendpost on Tuesday. Minister Moagi revealed that “the licence has been approved , but Sandfire Resources as a listed company will report to its shareholders and investors then make an official public statement” he said.

Based on a forecast copper price of US$3.16/lb (reflecting current long-term consensus pricing) the Base Case 3.2Mtpa – Ghantsi copper project is forecast to generate US$664 million (over P7 billion) in pre-tax free cash-flow and US$987 million (over P10 billion) in EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation), at a forecast all-in sustaining cost of US$1.76/lb over its first 10 years of operations.

In December 2020, the Board of Sandfire Resources approved the commercial development of the Motheo Copper Mine located in the Kalahari Copper Belt in Botswana, marking a key step in its transformation into a global, diversified, and sustainable mining company.

Tshukudu Metals Botswana (Pty) Limited (Tshukudu) a 100% owned subsidiary will be the owner and operator of the Motheo Copper Mine which is scheduled to produce up to 30,000 tonnes per annum of copper in concentrate over a 12 year mine life.TMB is targeting development of its Motheo Copper Mine in 2021 and 2022, with its first production in 2023.

GOVERNMENT NOT TAKING UP 15 % STAKE ON OFFER

Beginning of this year presentations were made to the Department of Mines as part of the Mining Licence approval process and to the Ghanzi Regional Council, additional information was requested by Department of Mines in April and was duly supplied by the company.

As part of the Mining Licence approval process, the Government of Botswana has a right to acquire up to a 15% fully contributing interest in all mining projects locally. Quizzed on whether government through Mineral Development Corporation Botswana (MDCB) would be taking up stake in the project Minister Moagi said, “No consideration is being made on that regard”.

“Government is not considering taking up a stake in the Ghantsi Copper Mine project, every opportunity is assessed on all risks, but Government makes money all the while from leases, taxes and royalties, remember if you take stake you are liable for liabilities of the project as well,” Moagi said.

MINING CONTRACT

Last month Sandfire announced that it has awarded over P5 billion worth mining contract to African Mining Services (AMS), a subsidiary of Perenti, to deliver the open cast operation.

The contract, which has an estimated value of US$496 million (over 5 billion), is the largest single operational contract for the new Motheo Project covering a period of 7 years and 3 months, with provision for a one-year extension.

The contract according to Sandfire Resources was awarded following a competitive 3-stage tender process which saw a number of key factors taken into consideration when selecting the preferred contractor.

These included Citizen Economic Empowerment, safety culture, equipment suitability and availability, commercial terms and identified improvement opportunities. Under the terms of the contract, AMS has agreed to form a 70:30 Joint Venture with a suitable local Botswana partner or partners.

The JV is expected to be finalized ahead of commencement of mining in early 2022. African Mining Services has been operating in Africa for over 30 years. AMS’ parent company, ASX listed diversified mining services group Perenti, already has a presence in Botswana through Barminco, their underground mining division, at the large-scale Khoemacau Copper Mine located 200km north-east of Motheo.

Last month Sandfire executives said the award of the open pit mining contract represents another key milestone in advancing the Motheo Project towards production, with all components of the contract in line with the key parameters outlined in the December 2020 Definitive Feasibility Study (DFS).

The company said full-scale construction of the US$279 million (over P 3 billion ) mine development is expected to commence immediately upon receipt of the Mining Licence, with mining scheduled to commence in early 2022 ahead of first production in early 2023. This week Sandfire Resources advertised over 10 positions in calling on applications from geologists, mining engineers and geotechnical engineers.

The Motheo mine has an initial mine life of 12.5 years based on production from the T3 pit. The initial development is expected to generate approximately 1,000 jobs during the construction phase and 600 direct full-time jobs during operations, with at least 95% of the total mine workforce expected to be made of up of Botswana citizens.

Later in the week Sandfire Resources announced in the company website that it has received the licence. Sandfire’s Managing Director and CEO, Mr Karl Simich, said the award of the Mining Licence represented a major milestone that would see a significant increase in construction and development activities on site.

“We are absolutely delighted to now be in a position to move to full-scale construction at Motheo, with our construction crews expected to mobilise to site over the next few days. I would like to thank the Government of Botswana for their support throughout the approvals process, which will see Motheo come on-stream in 2023 as one of very few new copper mines commencing production globally.”

Simich said the project is expected to generate approximately 1,000 jobs during construction and 600 full-time jobs during operations, and represents the foundation for Sandfire’s long-term growth plans in Botswana.

“Our vision is that Motheo will form the centre of a new, long-life copper production hub in in the central portion of the world-class Kalahari Copper Belt, where we hold an extensive ground-holding spanning Botswana and Namibia,” he said.

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