EU: Conflict Minerals agreement reached as exemptions added
Business
The European Union (EU) this week took a positive, but half-hearted, step towards cleaning up Europe’s trade in minerals.
EU legislators concluded their negotiations on a new law on so-called ‘conflict minerals’—a Regulation which is meant to ensure that minerals entering the EU do not finance conflict or human rights violations. Certain EU companies will, for the first time, be legally required to take responsibility for their mineral supply chains and to take steps to prevent their trade being linked to conflict or human rights abuses. However, a string of concessions and last-minute loopholes could undermine the Regulation’s impact, as they exempt a large number of companies from the law.
Civil society organisations, including Amnesty International and Global Witness, are today calling on the EU and its Member States to show that they are serious about making sure these exemptions do not undermine the Regulation’s stated aims. “This Regulation is a welcome step forward,” said Michael Gibb of Global Witness. “But while the EU has sent a strong signal to a small group of companies, it has ultimately trusted that many more will continue to regulate themselves.
It is now up to these companies to show that this trust is well-placed and well-earned; and we expect our lawmakers to act if it is not.” The EU is a major destination for minerals, both as a market for raw materials and the everyday products that contain them, from laptops and mobile phones to engines and jewellery. The Regulation will cover EU imports of minerals tin, tungsten, tantalum and gold from all countries in the world, and is the first mandatory law of this kind to be truly global in its scope.
But while global standards on the minerals trade require all companies to check their supply chains for conflict financing or human rights violations, the EU’s mandatory provisions will cover only a small part of the supply chain. In defiance of the European Parliament’s more ambitious proposal in May 2015, only companies that import minerals in their raw forms—as ores and metals—will be covered. Companies that bring the very same minerals into the EU inside components or finished products are let off the hook.
Late in negotiations EU Member States also successfully pushed for the inclusion of a series of import thresholds that will further reduce the number of companies required to comply. “These volume thresholds, that exempt companies from complying with legislation, are dangerous loopholes,” said Nele Meyer at Amnesty International. “They could let minerals worth millions of Euros enter the EU free of any scrutiny—often those with the highest risk of being linked to conflict. This new law can only be the very first step forward.
Additional measures will be needed to ensure that all companies will and can adequately check their supply chains.” Even companies required to comply with the Regulation have been offered shortcuts. The European Commission has agreed to accredit private industry bodies to which companies have increasingly sought to outsource their obligations to check their supply chains. Members of accredited industry bodies will benefit from limited oversight.
In addition, companies will be encouraged to source from a list of “responsible” smelters and refiners, despite few mechanisms being put in place to actually assess the behaviour of all smelters and refiners on the list. The Regulation will not come into force immediately, with legislators opting instead to insert a lengthy phase-in period. “Talk of a phase-in is a red herring. The Regulation reflects responsibilities companies have had for many years, and they have all the tools and information they need to comply.
Enough time has been wasted looking for ways to help companies shirk their responsibilities. Now the focus must be on making sure they meet them as soon as possible,” said Michael Reckordt of PowerShift. By itself, this trade Regulation cannot bring peace and prosperity to communities blighted by the resource curse. Civil society has therefore welcomed the EU’s integrated approach intending to complement the new Regulation with diplomatic and development measures. “Concluding these negotiations is an important step, despite the limited scope of the new law.
But this is only the beginning of the process, not the end. Now is the time for companies to show that they are serious about meeting their responsibilities; for EU member states to show that they are committed to enforcing the standards which have now been established; and for the EU to make use of all its resources to promote a more sustainable and responsible sourcing of minerals worldwide.” said Frederic Triest of EurAc. POLITICAL UNDERSTANDING The EU reached a “political understanding” in June 2016, which set the broad political contours for the Regulation.
Technical discussions were then held to develop the final text of the Regulation. This “trilogue” process concluded today, with the European Commission, European Parliament, and Council reaching agreement on a final text. This text will now be voted on in the Council and Parliament. The Regulation applies to companies whose imports of ores or metals of tin, tantalum, tungsten, or gold into the EU exceed certain specified annual thresholds.
The law will require companies to conduct “due diligence” on their supply chains broadly in line with the requirements of the Organisation for Economic Cooperation and Development’s (OECD) “Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas.” Unlike the EU’s Regulation, this OECD Guidance applies to all mineral resources and to the entire supply chain, including companies that buy or trade products containing those minerals.
Due diligence on mineral supply chains does not aim to discourage sourcing from fragile and high-risk areas. Rather, they seek to encourage and facilitate a more responsible and transparent trade with these regions.
Business
Grit divests from Letlole La Rona
Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.
The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.
Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.
This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.
In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.
Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.
The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.
“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said
In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.
The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.
Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.
Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.
Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.
Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.
“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.
LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.
The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.
An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.
Business
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices. Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.
Business
Food import bill slightly declines
The latest figures released by Statistics Botswana this week shows that food import bill for Botswana slightly declined from around P1.1 billion in November 2022 to around P981 million in December during the same year.
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