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Doha talks collapse: the implications…

Collapse of talks in Doha, Qatar by world’s biggest oil producers last Sunday sent oil prices tumbling to around $40 per barrel. The talks were initiated to nail a deal to freeze oil output to prop up prices in a market that has seen uncertainties over the past few months. So desperate was the situation that in an unusual fashion, OPEC members and non-members met for the deal.

Iran, which sanctions were lifted in January as part of the nuclear deal it signed with world powers, stayed away from the meeting. It insisted that it would not accept proposals to cap its production until it recovered a similar market share to that which it held before the sanctions were imposed. However, according to diplomats and officials at the talks, Saudi Arabia insisted on Iran signing up to any agreement.

Prices jumped back marginally to around $45 per barrel on Thursday as the market focused on supply outages: an oil-worker strike in Kuwait which removed 1.3 million barrels a day from the market, pipeline problems in Nigeria removed another 440,000 barrels, 150,000 barrels a day of Iraqi crude has come off the market because of a pipeline dispute between the central government and Kurdish regional authorities, and the North Sea production maintenance is expected to remove another 160,000 barrels.

The $45 per barrel price marks a significant drop from the $110 per barrel price seen in mid-2014. Analysts have attributed the dramatic fall in prices to a deliberate move by Saudi Arabia for an oil price crush in response to threats posed by new forms of renewable energy — windmills, tidal power, and solar power. The Saudis also wanted to keep in check fracking in the United States which threatened to displace their production.

One analyst, Philip Verleger, an economist and consultant who has watched the oil market for more than 40 years, has argued; “Saudis now want cheaper oil, in part to slow down the fracking revolution in the U.S. — and to signal to the developing world: Don't worry — you don't need to invest in alternative energy. You can buy cheap oil from us.”

Botswana, as a price taker, has benefitted from low global oil prices leading to a reduction in fuel pump prices in December 2014 and a bulging National Petroleum Fund (NPF).

With the oil output freeze intended to prop up prices not realized, will we enjoy an extended period of cheap fuel and is there is a possibility we will see another fuel pump price decrease. Batsumi Rankokwane, Principal Energy Officer in the Ministry of Minerals, Energy and Water Resources responded that government reviews prices on a monthly basis and adjusts pump prices, if necessary,  in order to align with international trends.

Further, he mentioned other factors that are taken into consideration to adjust local retail prices such as the position of the National Petroleum Fund (NPF) balance and unit rates movement. “Any decision by the government to adjust fuel pump prices shall always be communicated as has been the norm in the past after satisfying all necessary procedures and processes,” he said.

On the question of the health of the NPF, Rankokwane assured that the NPF has enough funds to continue cushioning the effects of fluctuating oil prices. He also acknowledged that the fund balance has been increasing as a result of over recoveries recorded in the previous months.

AN INTERNATIONAL PERSPECTIVE

Yes negotiations for the Doha round of trade liberalisation have been suspended indefinitely. In the words of Brazilian foreign minister Celso Amorim, ‘The Doha round is as near to a catastrophe as one can imagine’.

Andrew Charlton is a research economist in CEP’s globalisation programme, and co-author with Nobel laureate Joseph Stiglitz of Fair Trade for All: How Trade can Promote Development (Oxford University Press,2006) is of the view that the Doha failure may undermine WTO credibility and ferment distrust in developing countries

He points out that this outcome was not a foregone conclusion. For the last six months, a deal had been close, at least in the sense that its parameters had been fairly well-defined and each party knew the likely compromises that would be required to reach an agreement.

“The United States knew that its compromise lay in offering more farm subsidy cuts; the European Union knew it would be required to cut agricultural tariffs; and the larger emerging countries knew they would have to offer deeper industrial and agricultural tariff cuts. Yet after more than five years of preparations, when the deal was there for the taking, none of the key players stepped up to make it happen.”

Charlton says at this stage, the critical question is whether the collapse of the Doha round is a catastrophe for the world. As it stands, the answer is no. he writes that the World Bank’s estimates of likely gains from a successful Doha round are $100 billion, most of which would accrue to the rich countries. Much of the remainder (the Bank is at pains to say) would probably be eroded by concessions on ‘special products’ and other loopholes.

Further, Charlton says had the negotiators been more ambitious, perhaps there would be larger potential gains from a successful agreement. But with the minimalist agenda that evolved, it is hard to identify any serious grouping of countries for which a successful deal is of critical significance.

He view is that the Cairns group of agricultural exporters – a diverse coalition that includes Argentina, Australia, Brazil, Canada, Indonesia, New Zealand and South Africa – is a possible exception.

“But in the longer run, the collapse of the Doha round may be more significant. There is a long-term economic cost that is difficult to quantify, and there is an obvious symbolic failure. This may undermine the credibility of the World Trade Organisation and ferment distrust in the developing countries whose promised ‘development round’ has conspicuously failed to materialise.”

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Matsheka seeks raise bond program ceiling to P30 billion

14th September 2020
Dr Matsheka

This week Minister of Finance & Economic Development, Dr Thapelo Matsheka approached parliament seeking lawmakers approval of Government’s intention to increase bond program ceiling from the current P15 Billion to P30 billion.

“I stand to request this honorable house to authorize increase in bond issuance program from the current P15 billion to P30 billion,” Dr Matsheka said. He explained that due to the halt in economic growth occasioned by COVID-19 pandemic government had to revisit options for funding the national budget, particularly for the second half of the National Development Plan (NDP) 11.

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Lucara sits clutching onto its gigantic stones with bear claws in a dark pit

14th September 2020
Lesedi La Rona

Botswana Stock Exchange (BSE) has this week revealed a gloomy picture of diamond mining newcomer, Lucara, with its stock devaluated and its entire business affected by the COVID-19 pandemic.

A BSE survey for a period between 1st January to 31st August 2020 — recording the second half of the year, the third quarter of the year and five months of coronavirus in Botswana — shows that the Domestic Company Index (DCI) depreciated by 5.9 percent.

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Botswana Diamonds issues 50 000 000 shares to raise capital

14th September 2020
Diamonds

Botswana Diamond PLC, a diamond exploration company trading on both London Stock Exchange Alternative Investment Market (AIM) and Botswana Stock Exchange (BSE) on Monday unlocked value from its shares to raise capital for its ongoing exploration works in Botswana and South Africa.

A statement from the company this week reveals that the placing was with existing and new investors to raise £300,000 via the issue of 50,000,000 new ordinary shares at a placing price of 0.6p per Placing Share.

Each Placing Share, according to Botswana Diamond Executives has one warrant attached with the right to subscribe for one new ordinary share at 0.6p per new ordinary share for a period of two years from, 7th September 2020, being the date of the Placing Warrants issue.

In a statement Chairman of Botswana Diamonds, John Teeling explained that the funds raised will be used to fund ongoing exploration activities during the current year in Botswana and South Africa, and to provide additional working capital for the Company.

The company is currently drilling kimberlite M8 on the Marsfontein licence in South Africa and has generated further kimberlite targets which will be drilled on the adjacent Thorny River concession.

In Botswana, the funds will be focused on commercializing the KX36 project following the recent acquisition of Sekaka Diamonds from Petra Diamonds. This will include finalizing a work programme to upgrade the grades and diamond value of the kimberlite pipe as well as investigating innovative mining options.

Drilling is planned for the adjacent Sunland Minerals property and following further assessment of the comprehensive Sekaka database more drilling targets are likely. “This is a very active and exciting time for Botswana Diamonds. We are drilling the very promising M8 kimberlite at Marsfontein and further drilling is likely on targets identified on the adjacent Thorny River ground,” he said.

The company Board Chair further noted, “We have a number of active projects. The recently acquired KX36 diamond resource in the Kalahari offers great potential. While awaiting final approvals from the Botswana authorities some of the funds raised will be used to detail the works we will do to refine grade, size distribution and value per carat.”

In addition BOD said the Placing Shares will rank pari passu with the Company’s existing ordinary shares. Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that such admission will become effective on or around 23 September 2020.

Last month Botswana Diamond announced that it has entered into agreement with global miner Petra Diamonds to acquire the latter’s exploration assets in Botswana. Key to these assets, housed under Sekaka Diamonds, 100 % subsidiary of Petra is the KX36 Diamond discovery, a high grade ore Kimberlite pipe located in the CKGR, considered Botswana’s next diamond glory after the magnificent Orapa and prolific Jwaneng Mines.

The acquisition entailed two adjacent Prospecting Licences and a diamond processing plant. Sekaka has been Petra’s exploration vehicle in Botswana for year and holds three Prospecting Licenses in the Central Kalahari Game Reserve (Kalahari) PL169/2019, PL058/2007 and PL224/2007, which includes the high grade KX36 kimberlite pipe.

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