Financial partnership to provide access to credit for Botswanaís cutting and polishing industry
Loan will anchor supply chain in country catalysing local economic growth
The Overseas Private Investment Corporation (OPIC), the U.S. Government’s development finance institution, today signed a $125 million loan guaranty which will help Botswana develop its diamond industry in a sustainable manner that will promote local job creation and diversified economic growth. Historically, diamonds mined in Botswana and elsewhere would be sorted, marketed and manufactured in other countries. Bringing these value-adding functions into Botswana has been a priority of the country’s Government, and the guaranty will help provide the finical underpinnings for this economic development strategy to succeed. The $125 million represents the first tranche of a broader $250 million OPIC loan guaranty program for these purposes.
OPIC signed the $125 million loan guaranty with Barclays Bank of Botswana, a subsidiary of Barclays Africa Group Limited, together with Lazare Kaplan International (LKI) acting through its subsidiary Botswana Finance LLC. The agreement will establish a revolving framework facility in which OPIC will share the credit risk.
“This project will provide critical support to an industry that is central to Botswana’s economy and a key source of job creation,” said James Polan, OPIC Vice President of Small and Medium-sized Enterprise Finance. “Bringing the larger supply chain into Botswana will have a huge impact in local communities across the country.”
This project aims to facilitate further lending to diamond manufacturing and polishing companies with operations in the Republic of Botswana. This will support economic diversification by providing cutting and polishing companies in Botswana with access to long-term financing, as well as develop the country’s financial sector. Given the critical importance of the diamond industry to their economies, Botswana and other southern African countries have implemented local beneficiation policies that require additional economic benefits to be derived from their diamond resources.
Access to finance is an essential component of the development of the diamond manufacturing sector.
Barclays Bank of Botswana is the first lender under the broader $250 million loan guaranty program, and additional lenders may join the program in the future. This tripartite partnership reflects Barclays Bank of Botswana’s commitment to the local diamond industry alongside OPIC’s commitment to economic development and LKI’s longstanding record of investment in Botswana. This OPIC-supported loan will make it easier and more efficient for the local cutting and polishing facilities to borrow money locally, and add value to the supply chain in Botswana by creating employment opportunities and growth to this sector.
Reinette Van Der Merwe, Managing Director of Barclays Bank of Botswana, says it was imperative that Barclays finds a sustainable way to grow lending to the sector. “Diamonds have transformed Botswana’s economy from the poorest country in the world before independence to one of the fastest growing economies.”
Leon Tempelsman, President of LKI stated, “We are honoured to be associated in this undertaking with partners as strong as Barclays and OPIC, who not only hold the highest standing in capital markets but share our vision of the diamond industry: one which supports constructive economic growth in the countries and communities where it operates, and adheres to the utmost standards of accountability and integrity.
We commend both OPIC and Barclays for this substantial commitment to the next stage of development and diversification of the economy of Botswana, a nation which has been a beacon of good governance and responsible stewardship of minerals resources, and which we have been proud to be associated with as an investor and friend, for some four decades.”
About OPIC: OPIC is the U.S. Government’s development finance institution. It mobilizes private capital to help address critical development challenges and in doing so, advances U.S. foreign policy and national security priorities. Because OPIC works with the U.S. private sector, it helps U.S. businesses gain footholds in emerging markets, catalysing revenues, jobs and growth opportunities both at home and abroad. OPIC achieves its mission by providing investors with financing, political risk insurance, and support for private equity investment funds, when commercial funding cannot be obtained elsewhere. Established as an agency of the U.S. Government in 1971, OPIC operates on a self-sustaining basis at no net cost to American taxpayers.
All OPIC projects adhere to high environmental and social standards and respect human rights, including worker's rights. By mandating high standards, OPIC aims to raise the industry and regional standards of the countries where it funds projects. OPIC services are available for new and expanding business enterprises in more than 160 countries worldwide.
Botswana Finance LLC is a subsidiary of (Lazare Kaplan International) LKI, the project sponsor and investor. LKI is a New York-based global company with over 100 years of participation, and a long record of innovation, in the diamond industry, including leadership in promoting transparency and accountability within the trade. It was involved in the design of the Kimberley Process, the industry’s first attempt to establish verifiable chains of custody for diamonds internationally; was the first company specialized in diamond trading to raise funding in public capital markets; and the first also to become a participant in the UN Global Compact, the world’s largest social corporate responsibility initiative.
Barclays Bank is a leading commercial bank in Botswana. The company employs 1,200 people with 41 branches and 115 ATMs throughout the country. The bank opened its doors in Botswana in 1950 and continues to grow 60 years later. We are a publicly listed blue chip entity on the Botswana Stock Exchange, with a strong citizen shareholding. Euromoney and EMEA Finance have voted us the Best Bank in Botswana for more than 3 years in a row and we have been recognised for significant contribution in the implementation of vision 2016 goals.
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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 (‚ÄėGrit‚Äô) 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‚Äôs 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‚Äôs share price.
The statement explained that Grit‚Äôs 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.
‚ÄúGrit 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‚ÄĚ 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‚Äôs 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.
‚ÄúWe 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,‚ÄĚ 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. ‚ÄúWe continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,‚ÄĚ 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.
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.
‚ÄúIn 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,‚ÄĚ 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.
‚ÄúCommunity 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,‚ÄĚ 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.
‚ÄúAs 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‚Äôs 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,‚ÄĚ said the Minister of Minerals and Energy.
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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