BCL only alive because of the 5000 jobs
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Government looks set to keep operations alive at BCL mine following a tumultuous time at the Selibe Phikwe open shaft with copper nickel prices hitting rock bottom and the smelter operations failing regularly.
Vice President Mokgweetsi Masisi pronounced while in Kigali at the African Union summit that Botswana will maintain 1.4 billion pula of annual spending on state-owned BCL Ltd. even as it wants to move away from mining, because the copper and nickel producer employs as many as 5,000 people.
“Only for the reason of wanting to save jobs, and the hope and promise that prices might go up, the government kept on putting in more money,” Mokgweetsi Masisi stressed in an interview Sunday in Rwanda’s capital, Kigali. “There will come a point where a decision is made. We have got about 15 more years to go. It’s hot, deep, poor-quality ore — it’s like flagging an old woman and asking her to run in the Olympics.”
The Government position on the BCL could be deducted from a narrative piece in support of BCL by the secretary general of the ruling Botswana Democratic Party (BDP), Botsalo Ntuane some two months back when he vowed that his government will do anything possible to protect or save the 5000 jobs at the BCL mine.
From Vice President Masisi’s interview Government wants to protect the 5000 jobs and is hopeful that prices will improve over time. “There is no way that the BCL mine will be shut down because that will bring down an entire eastern region,” said an analyst who works for the University of Botswana.
Apart from the jobs, BCL has so many other businesses and companies relying on it, some of which employ hundreds of people. This publication has established that companies such as Botsogo medical aid scheme get almost 60 percent of their business from BCL. A number of banks in the eastern region are also reliant on BCL for business. This is in addition to the fact that thousands of BCL employees have accessed financial services with these banks.
MALFUNCTIONING SMELTER
Another problem for the troubled mine has been the smelter. It has not been functioning continuously as expected hence bleeding the mine millions of Pula in lost revenue from smelting ore from other mines; as well as the high cost of maintaining it. At some point recently, this publication understands that the smelter was not working for over a month and an expert, who used to work for BCL, had to be called in from Zambia to come and help fix it. The smelter is expected to help the mine pick up its revenue but this has been difficult to achieve because of the fault associated with it. Just as an example, the smelter rakes in P30 million for the BCL monthly for work it does on the ore from Nkomati mine.
Responding to inquiries on the BCL Smelter, Public Relations Manager, Mr James Molosankwe said the smelter experiences normal spate of breakdowns attendant to any plant which are being addressed through normal preventive and maintenance protocols. He said the BCL has a capable maintenance team that does the plant preventative maintenance. However, when the need arise to get experts’ advice it is sought from time to time. Asked if it is true that the smelter needs another shutdown of about a month so as to fully repair it, Molosankwe said: “Not true. However, the Waste Heat Boiler (WHB) requires a statutory inspection every two years, the one having being done in 2015.”
GOVERNMENT POURING IN MILLIONS
In May this year Government had said it plans to sell its stake in the BCL as soon as it returns to profitability. The price of copper, used to make cables, has increased 3 percent in 2016 after plunging for three straight years while nickel has rallied 17 percent following the biggest annual decline since 2008 last year.
Masisi revealed that his Government is pouring in about P110 million, P120 million every month. “It’s unprofitable, unsustainable and expensive,” he was quoted saying.
Government underwrote a $100 million loan from Barclays Bank to the mine in April and BCL plans to raise $250 million in a bond sale and use some of the proceeds to repay the debt and also fund its purchase of a 50 percent stake in South Africa’s Nkomati mine from OAO GMK Norilsk Nickel.
BCL, board chairman, Akolang Tombale who threw in the towel earlier this year, agreed in 2014 to buy 50 percent of Nkomati and 85 percent of Botswana’s Tati Nickel Mining Co. from Norilsk, the world’s biggest producer of the metal, for $337 million. BCL continues to negotiate down how much it has to pay after commodity prices declined and after the transfer of mineral rights in South Africa was delayed. This has yet to be finalised.
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FaR property assets value clock P1.47 billion
FaR Property Company (FPC) Limited, a property investment company listed on the Botswana Stock Exchange, has recently announced its exceptional financial results for the year 2023. The company’s property asset value has risen to P1.47 billion, up from P1.42 billion in the previous year.
FPC has a diverse portfolio of properties, including retail, commercial, industrial, and residential properties in Botswana, South Africa, and Zambia. The company owns a total of 186 properties, generating rental revenues from various sectors. In 2023, the company recorded rental revenues of P11 million from residential properties, P62 million from industrial properties, and P89 million from commercial properties. Overall, the company’s total revenues increased by 9% to P153 million, while profit before tax increased by 22% to P136 million, and operating profit increased by 11% to P139 million.
One notable achievement for FPC is the low vacancy rate across its properties, which stands at only 6%. This is particularly impressive considering the challenging trading environment. The company attributes this success to effective lease management and the leasing of previously vacant properties in South Africa. FPC’s management expressed satisfaction with the results, highlighting the resilience of the company in the face of ongoing macroeconomic challenges.
The increase in profit before tax can be attributed to both an increase in income and effective control of operating expenses. FPC managed to achieve these results with fewer employees, demonstrating the company’s efficiency. The headline earnings per linked unit also saw an improvement, reaching 26.92 thebe, higher than the previous year.
Looking ahead, FPC remains confident in its competitiveness and growth prospects. The company possesses a substantial land bank, which it plans to develop strategically as opportunities arise. FPC aims for managed growth, focusing on consumer-driven developments and ensuring the presence of supportive tenants. By maintaining this approach, the company believes it can sustainably grow its property portfolio and remain competitive in the market.
In terms of the macroeconomic environment, FPC noted that inflation rates are decreasing towards the 3% to 6% range approved by the Bank of Botswana. This is positive news for the company, as it hopes for further decreases in interest rates. However, the fluctuating fuel prices, influenced by global events such as the war in Ukraine and oil output reductions by Russia and other Middle Eastern countries, continue to impact businesses, including some of FPC’s tenants.
FPC’s property portfolio includes notable assets such as a shopping mall in Francistown with Choppies Hyper as the anchor tenant, Borogo Mall located on the A33 main road near the Kazungula ferry crossing, and various industrial and commercial properties in Gaborone leased to Choppies, Senn Foods, and Clover Botswana. The company also owns a shopping mall in Mafikeng and Rustenburg in South Africa.
The majority of FPC’s properties, 85%, are located in Botswana, followed by 12% in South Africa and 3% in Zambia. With its strong financial performance, competitive position, and strategic land bank, FPC is well-positioned for continued growth and success in the property market.
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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.
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UDC deadlock: Boko, Ndaba, Reatile meet
It is not clear as to when, but before taking a festive break in few weeks’ time UDC leaders would have convened to address the ongoing deadlock surrounding constituency allocation in the negotiations for the 2024 elections. The leaders, Duma Boko of the UDC, Mephato Reggie Reatile of the BPF, and Ndaba Gaolathe of the AP, are expected to meet and discuss critical matters and engage in dialogue regarding the contested constituencies.
The negotiations hit a stalemate when it came to allocating constituencies, prompting the need for the leaders to intervene. Representatives from the UDC, AP, and BPF were tasked with negotiating the allocation, with Dr. Patrick Molotsi and Dr. Philip Bulawa representing the UDC, and Dr. Phenyo Butale and Wynter Mmolotsi representing the AP.
The leaders’ meeting is crucial in resolving the contentious issue of constituency allocation, which has caused tension among UDC members and potential candidates for the 2024 elections. After reaching an agreement, the leaders will engage with the members of each constituency to gauge their opinions and ensure that the decisions made are favored by the rank and file. This approach aims to avoid unnecessary costs and conflicts during the general elections.
One of the main points of contention is the allocation of Molepolole South, which the BNF is adamant about obtaining. In the 2019 elections, the UDC was the runner-up in Molepolole South, securing the second position in seven out of eight wards. Other contested constituencies include Metsimotlhabe, Kgatleng East and West, Mmadinare, Francistown East, Shashe West, Boteti East, and Lerala Maunatlala.
The criteria used for constituency allocation have also become a point of dispute among the UDC member parties. The issue of incumbency is particularly contentious, as the criterion for constituency allocation suggests that current holders of UDC’s council and parliamentary seats should be given priority for re-election without undergoing primary elections. Disadvantaged parties argue that this approach limits democratic competition and hinders the emergence of potentially more capable candidates.
Another disputed criterion is the allocation based on the strength and popularity of a party in specific areas. Parties argue that this is a subjective criterion that leads to disputes and favoritism, as clear metrics for strength and visibility cannot be defined. The BNF, in particular, questions the demands of the new entrants, the BPF and AP, as they lack a traceable track record to support their high expectations.
The unity and cohesion of the UDC are at stake, with the BPF and AP expressing dissatisfaction and considering withdrawing from the negotiations. Therefore, it is crucial for the leaders to expedite their meeting and find a resolution to these disputes.
In the midst of these negotiations, the BNF has already secured 15 constituencies within the UDC coalition. While the negotiations are still ongoing, BNF Chairman Dr. Molotsi revealed that they have traditionally held these constituencies and are expecting to add more to their tally. The constituencies include Gantsi North, Gantsi South, Kgalagadi North, Kgalagadi South, Good Hope – Mmathethe, Kanye North, Kanye South, Lobatse, Molepolole North, Gaborone South, Gaborone North, Gaborone Bonnignton North, Takatokwane, Letlhakeng, and Tlokweng.
The resolution of the contested constituencies will test the ability of the UDC to present a united front in the 2024 National Elections will depend on the decisions made by the three leaders. It is essential for them to demonstrate maturity and astuteness in resolving the constituency allocation deadlock and ensuring the cohesion of the UDC.