Debswana Pension Fund bolster property portfolio
Debswana Pension Fund has notified the Competition Authority of its intention to bolster its property portfolio through an increase of its stake in Healthcare Holdings (Pty) Ltd (HCH) and DBN Development Partnership (DBN). The move offers a glimpse into DPF’s investment strategy together with that of Botswana Development Corporation (BDC), with the latter being the seller. DPF has proposed to acquire additional 29.08% shareholding in HCH while the second proposed acquisition is for an additional 33.33% interest in DBN, from NPC Investments which is wholly owned by BDC.
The Debswana Pension Fund (DPF) is the largest private pension fund in Botswana and a major player in the retirement services industry with assets valued at over P6 billion and a total membership of 11 589 inclusive of active, deferred and pensioner members. The DPF is a pension fund secretariat to the Debswana & De Beers family of companies namely; Debswana Diamond Company (Debswana), Diamond Trading Company Botswana (DTCB), De Beers Holding Botswana (DBHB), Morupule Coal Mine (MCM), De Beers Global Sightholder Sales (DBGSS), Anglo Coal Botswana and the DPF itself.
Other than its interest in HCH, DPF’s property portfolio in Botswana boasts of Tala Court, Plot 8842 (Former Barclays House), Carlton House, Debswana House Sitatunga Lodge, both properties in Gaborone. Other properties include Plot 105 in Maun; and Plot 5415 (Teemane Mall) in Jwaneng. Furthermore, DPF has 25% shareholding in Lot 1196 (Engen Maun); 20% in Lot 68 in Palapye; 75% in lot 21928/9 at Francistown; and 33.33% in lot 4933(DBN Partnership) in Gaborone.
In the first transaction, HCH, the target firm, is a property holding company which has healthcare property assets in its portfolio. It owns the property buildings currently occupied by Gaborone Private Hospital as well as the residential property in Gaborone Private Hospital. HCH is directly controlled by Botswana Development Corporation (29.08%), Botswana Insurance Fund Management (29.08%), Debswana Pension Fund (29.08%) and Clinical Developments Botswana (12.77%). In the transaction under consideration, DPF seeks to increase its shareholding by buying out one of the shareholders, Botswana Development Corporation. This will result in DPF having a 58.16% controlling interest in HCH.
The second transaction, DBN, the target entity, is a property development partnership between DPF, Botswana Investment Fund Management (“BIFM”) and NPC. NPC, in turn, is a wholly owned subsidiary of Botswana Development Corporation (“BDC”). BIFM is an asset management company wholly owned by Botswana Insurance Holdings Limited (“BIHL”); whereas NPC is a special purpose vehicle set up by BDC particularly for the purposes of investing in DBN. BDC is a development finance Institution founded to promote and facilitate the development of industrial, commercial, and agricultural enterprises within the framework of the Government of Botswana's plan for economic development.
In 2014, DPF revised its investment strategy to increase domestic property investment exposure to 12.5% of assets over the next 3 years while also developing a strategy to take advantage of local and African investment opportunities. The DPF in its quest to fulfil its investment strategy has found a willing seller in BDC which has also implemented its 5 year strategy that has seen the corporation scaling back on certain investments to focus on high value investments. The Bashi Gaetsaloe led BDC has been disinvesting from businesses that do not fit in with its new strategy, in the process freeing up cash to be used in large scale projects. The proposed acquisitions will likely not face any stiff resistance as none of the parties have a firm control on the property market in Botswana.
According to the latest publicly available DPF’s annual report, for the year ending 2014, the Debswana Pension Fund grew by 10.84% to a total Fund size of P 5,541 billion. Still in the same period, the Fund had 58% of its assets invested offshore with 42% invested locally, with the local assets split between local balanced funds (36%), local property (5%) and private equity (1%). In 2014, the DPF property portfolio returned 20.57% against an IPF Botswana Property index benchmark return of 21.40%. The slight underperformance was driven by the Fund’s high exposure to residential and commercial properties relative to the IPD index. “The Fund also has no exposure to industrial property which is a sector that is yielding high returns.
The income and capital appreciation of the portfolio have remained strong despite challenges with general oversupply in the Gaborone Office sector,” read part of the annual report. While the 2015 annual report is yet to be made public, the latest proposed acquisitions by DPF could signal that 2015 was a good year for them and it reaffirms their continued appetite for local assets, particularly in the lucrative property market.
Business
LLR transforms from Company to Group reporting
Botswana Stock Exchange listed diversified real estate company, Letlole La Rona Limited (“LLR” or “the Company” or “the Group”), posted its first set of group financial statements which comprise the Company and Group consolidated accounts, which show strong financial performance for the six months ended 31 December 2023, with improvements across all key metrics.
The Company commenced the financial year with the appointment of a Deputy Chairperson, Mr Mooketsi Maphane, in order to bolster its governance and enhance leadership continuity through the development of a Board and Executive Management Succession Plan.
At operational level, LLR increased its shareholding in Railpark Mall from 32.79% to 57.79% and proudly took over the management of this prime asset.
The CEO of LLR, Ms Kamogelo Mowaneng commented “During the period under review, our portfolio continued to perform strongly, with improvements across all key metrics as a result of our ongoing focus on portfolio growth and optimisation.
“We are pleased to report a successful first half of the 2024 financial year, where we managed to not only grow the portfolio through strategic acquisitions and value accretive refurbishments but also recycled capital through the disposal of Moedi House as well as the ongoing sale of section titles at Red Square Apartments. The acquisition of an additional 25% stake in JTTM Properties significantly uplifted the value of our investment portfolio to P2.0 billion at a Group level. Our investment portfolio was further differentiated by the quality of our tenant base, as demonstrated by above market occupancy levels of 99.15% and strong collections of above 100% for the period”.
The growth in contractual revenue of 9% from the prior year’s P48.0 million to the current year P52.2 million, increased income from Railpark Mall, coupled with high collection rates, has enabled the company to declare a distribution of 9.11 thebe per linked unit, which is in line with the prior year.
In line with its strategic pillars of ‘Streamlined and Expanded Botswana Portfolio’ as well as ‘Quality African Assets’, the Group continuously monitors the performance of its investments to ensure that they meet the targeted returns.
“The Group continues to explore yield accretive opportunities for balance sheet growth and funding options that can be deployed to finance that growth” further commented the CEO of LLR Ms Kamogelo Mowaneng.
Ms Mowaneng further thanked the Group’s stakeholders for their continued support and stated that they look forward to unlocking further value in the Group.
Business
Botswana’s Electricity Generation Dips 26.4%
The Botswana Power Corporation (BPC) has reported a significant decrease in electricity generation for the fourth quarter of 2023, with output plummeting by 26.4%. This decline is primarily attributed to operational difficulties at the Morupule B power plant, as per the latest Botswana Index of Electricity Generation (IEG) released recently.
Local electricity production saw a drastic reduction, falling from 889,535 MWH in the third quarter of 2023 to 654,312 MWH in the period under review. This substantial decrease is largely due to the operational challenges at the Morupule B power plant. Consequently, the need for imported electricity surged by 35.6% (136,243 MWH) from 382,426 MWH in the third quarter to 518,669 MWH in the fourth quarter. This increase was necessitated by the need to compensate for the shortfall in locally generated electricity.
Zambia Electricity Supply Corporation Limited (ZESCO) was the principal supplier of imported electricity, accounting for 43.1% of total electricity imports during the fourth quarter of 2023. Eskom followed with 21.8%, while the remaining 12.1, 10.3, 8.6, and 4.2% were sourced from Electricidade de Mozambique (EDM), Southern African Power Pool (SAPP), Nampower, and Cross-border electricity markets, respectively. Cross-border electricity markets involve the supply of electricity to towns and villages along the border from neighboring countries such as Namibia and Zambia.
Distributed electricity exhibited a decrease of 7.8% (98,980 MWH), dropping from 1,271,961 MWH in the third quarter of 2023 to 1,172,981 MWH in the review quarter.
Electricity generated locally contributed 55.8% to the electricity distributed during the fourth quarter of 2023, a decrease from the 74.5% contribution in the same quarter of the previous year. This signifies a decrease of 18.7 percentage points. The quarter-on-quarter comparison shows that the contribution of locally generated electricity to the distributed electricity fell by 14.2 percentage points, from 69.9% in the third quarter of 2023 to 55.8% in the fourth quarter. The Morupule A and B power stations accounted for 90.4% of the electricity generated during the fourth quarter of 2023, while Matshelagabedi and Orapa emergency power plants contributed the remaining 5.9 and 3.7% respectively.
The year-on-year analysis reveals some improvement in local electricity generation. The year-on-year perspective shows that the amount of distributed electricity increased by 8.2% (88,781 MWH), from 1,084,200 MWH in the fourth quarter of 2022 to 1,172,981 MWH in the current quarter. The trend of the Index of Electricity Generation from the first quarter of 2013 to the fourth quarter of 2023 indicates an improvement in local electricity generation, despite fluctuations.
The year-on-year analysis also reveals a downward trend in the physical volume of imported electricity. The trend in the physical volume of imported electricity from the first quarter of 2013 to the fourth quarter of 2023 shows a downward trend, indicating the country’s continued effort to generate adequate electricity to meet domestic demand, has led to the decreased reliance on electricity imports.
In response to the need to increase local generation and reduce power imports, the government has initiated a new National Energy Policy. This policy is aimed at guiding the management and development of Botswana’s energy sector and encouraging investment in new and renewable energy. In the policy document, Minister of Mineral Resources, Green Technology and Energy Security Lefoko Moagi stated that the policy aims to transform Botswana from being a net energy importer to a self-sufficient nation with surplus energy for export into the region. Moagi expressed confidence that Botswana has the potential to achieve self-sufficiency in electric power supply, given the country’s readily available energy resources such as coal and renewable sources.
Business
MMG acquires Khoemacau in a transaction valued at P23Bn
MMG Limited, the Hong Kong-based mining company specializing in base metals, has successfully concluded the acquisition of Khoemacau Copper Mine, a state-of-the-art, world-class copper asset nestled in the northwest of Botswana.
On Monday, MMG announced that the acquisition of Khoemacau Mine in Botswana was finalized on 22nd March 2024. “This acquisition enriches the company’s portfolio with a top-tier, transformative growth project and signifies a monumental milestone in the Company’s journey,” MMG communicated in an official statement published on the Hong Kong Stock Exchange.
Upon completion of the acquisition, MMG remitted to the Sellers an Aggregate Consideration of approximately US$1,734,657,000 (over P23 billion), a sum subject to potential adjustments post-Completion.
In addition to the Aggregate Consideration, MMG, in accordance with the Agreement, advanced an aggregate amount of approximately US$348,580,000 (over P4.5 billion) as the Aggregate Debt Settlement Amount, to settle certain debt balances of the Target Group (Cuprous Capital/Khoemacau).
On November 21, 2023, Khoemacau announced that the shareholders of its parent company [Cuprous Capital] had agreed to sell 100% of their interests to MMG Limited.
MMG is a global resources company that mines, explores, and develops copper and other base metals projects on four continents. The company is headquartered in Melbourne, Australia, and has a significant shareholder, China Minmetals Corporation, which is China’s largest metals and minerals group owned by the Government of the People’s Republic of China.
On December 22, 2023, Khoemacau Copper Mining (Pty) Ltd received the approval from the Minister of Minerals and Energy of Botswana regarding the transfer of a controlling interest in the Project Licenses and Prospecting Licenses associated with the Khoemacau Copper Mine, a result of the Acquisition.
The Botswana Competition & Consumer Authority (CCA) on January 29, 2024, notified the market that it had given its approval for the takeover of Khoemacau Copper Mining by MMG Limited.
On January 29, 2024, the CCA issued a merger decision to the market, stating that after conducting all necessary assessments, it was ready to proceed.
The Competition Authority affirmed that the structure of the relevant market would not significantly change upon implementation of the proposed merger as the proposed transaction is not likely to result in a substantial lessening of competition, nor endanger the continuity of service in the market of mining of copper and silver ores and the production, and sale or supply of copper concentrate in Botswana.
Furthermore, the CCA stated that the proposed merger would not have any negative impact on public interest matters in Botswana as per the provisions of section 52(2) of the Competition Act 2018.
Earlier this month, Minister of Minerals & Energy, Lefoko Maxwell Moagi, informed parliament that his Ministry was endorsing the Khoemacau acquisition by MMG Limited. He noted that not only was the company acquiring the existing operation but also committing to an expansion program that would cost over $700 million to double production, create more jobs for Batswana, and increase taxes and royalties paid to the Government.