De Beers in UDC conundrum
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De Beers, Nicky Oppenheimer
De Beers Group could be unsettled by the unfolding political landscape in Botswana, the close to five decades long mining partnership with the ruling Botswana Democratic Party (BDP) party is threatened by the possibility of opposition taking power in 2019.
This publication has been informed by an impeccable source that De Beers has been following the unfolding political events in Botswana with keen interest and it is ‘nervous’ about possible outcomes.
It is not for the first time that De Beers finds itself in this conundrum, back in 1994 following a disastrous performance by the ruling party in general elections; BDP was faced with the possibility of losing power in the next general elections for the first time since independence.
The only opposition party in parliament at that time, Botswana National Front (BNF) had surged from inconsequential three seats to win 13 seats in a 40 seat legislature, the result which meant BNF needed eight more seats in the 1999 general election to dethrone BDP from power.
De Beers, worried by the events, commissioned and financed a consultancy by reputed Cape Town based professor, Lawrence Schlemmer which recommended that BDP bring someone with popular appeal and not dented by party factionalism.
Consequent to the report, Festus Mogae, who succeeded Quett Masire as president in 1998 went on to appoint the popular Bangwato Chief and then Botswana Defence Force (BDF) commander Lt Gen Ian Khama as Vice President and with constitutional assurance that he will be next in succession of presidency.
Almost 20 years since Khama was brought into politics, the BDP faces another scenario of post 1994 general elections. At the end of March 2018, two years from now, Khama will be bidding the nation fare well as the country’s fourth president.
In his trail, will be an unenviable situation in the party’s prospects to stay in power amid Umbrella for Democratic Change (UDC)’s upsurge. Khama will leave behind BDP enjoying a meagre 46.7 percent in popular vote, the lowest in its history.
This uncertainty has not been helped by the announcement of the leader of opposition in parliament Duma Boko that UDC once in power will vigorously consider other technical partners for the management of Botswana’s diamond mines other than the current De Beers arrangement.
“We believe that it is necessary to pursue a fair-minded approach that does not unduly defer to De Beers even where there is a possibility that there are partners that could assist Botswana generate better revenues and profits from our diamond mines,” he told parliament last week.
“This posture is informed by our view that there have been companies, including one in Russia that has been able to perform admirably despite the global economic slowdown and storm against diamonds.”
Ndaba Gaolathe, Boko’s deputy, also reiterated the words of his colleague in an interview with this publication this week as he noted that the decision will be taken in the interest of the nation of Botswana.
“If we are going to do things the same as the previous regime why should people vote us? “, he asked rhetorically.
“We will be doing that for the freedom of our people and we should be resistant to the pressure.”
Gaolathe said UDC will open up opportunity for other technical partners to come on board but was quick to note that De Beers has helped Botswana in the past.
Gaolathe however highlighted that they will dialogue with De Beers over what their government will envisage.
“I hear they are nervous about UDC, but they should view us as fairly minded citizens who want to do things which are good for the people,” he said.
The late Baledzi Gaolathe, Ndaba’s father has served as Managing Director of Debswana, a joint venture mining company owned by De Beers and government of Botswana.
BDP bank bencher and MP for Tati West Bigge Butale was even more vehement. He wants Debswana to be an entity wholly owned by the government without any technical partner.
“I was surprised by the Leader of Opposition yesterday talking about inviting the Russians to come and colonise us just like De Beers colonised us,“ he said. “Why should we always be hankering for people to come from outside and exploit us?”
In 1994 negotiations, De Beers had troublesome relationship with then sturdy minister of Minerals, Energy and Water Resources David Magang. Magang made it clear to De Beers that if they were counting on getting another lease of life with respect to Orapa mine, they had to undertake to boost the productive capacity of the mine by at least 75 percent, failure to which tenders would be floated to other high-profile players in the diamond mining industry globally.
Magang’s stance on De Beers will put him at odds with his party, and when Mogae assumed the the presidency, the former was moved to the Ministry of Works and Transport.
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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.