Infrastructure projects can be among the best investments a country can make, given the strong link between construction and gross domestic product (GDP).
At the recent job summit held in Gaborone on the 19-20th October, Batho Mohwasa, Senior Advisor, Programme advisory and Public Private Partnerships at Mott Macdonald advocated for public private partnerships (PPPs) in carrying out infrastructural developments as means to job creation best practices.
“Construction offers clear links to a country’s economic growth, the multiplier effect is 1 to 3,” Mohwasa explained at the first annual job summit. A multiplier effect of 1 to 3 will mean for every 1 pula spent on construction, the GDP will rise by extra 3 pula. He stressed that construction offers many benefits, chiefly amongst them is the ability to create jobs for the lowly educated. “Construction is not consumed, but an investment.”
He added that there is need to unlock private sector funding. The money used by the private sector to buy bonds could be used to construct schools, hospitals, roads and other infrastructures. “Public Private Partnerships create value for money, it is the best way of investing.”
The principle behind public private partnerships is simple. Government enters in a social contract with citizens guaranteeing certain services but the private sector provides them. In this form of partnership, the citizens get what they want, but more efficiently and also cheaper. The model allows for economies of scale, the greater the quantity of goods or service offered, the lower the fixed costs because these costs are shared over a larger number of goods or services.
Basically, if the government outsources certain services to companies that specialize in that domain, they will save costs due to the expertise of that company’s ability and understanding of that particular industry.
In his address, Mohwasa noted that PPPs can be used to transfer risk. The essence of PPPs is that risk sits with people who are better placed to manage the risk. He explained that PPPs have proven to be a source of funding around the world, citing the United Kingdom and the United States of America as examples of successful implementation of PPPs.
On the regulation and implementation of PPPs, Mohwasa offered that a good legislation is needed for PPPs to protect both the private sector and the government. On the part of implementation, he stated that developing countries like Botswana can make tremendous progress by playing catch up. “There are good lessons to be learned around the world hence we can get it right.”
Mohwasa challenged the government to come up with a robust framework in the mould of perhaps “the Botswana Infrastructure plan,” as he calls it. The plan, according to him, should be able to show the short term and long term benefits of infrastructural developments. In that way the government will invest in well researched projects that can demonstrate they been thought of, he argued.
Mohwasa concluded that although construction is key to job creation, it is also heavily reliant on government spending. He advised that there is need to forge new partnerships to stem against financial constraints, and that means diversifying revenue streams to avoid the dependency syndrome that plagues the construction industry.
Franck Behilbo, Head of Corporate Development, Quantum Global Alternative Investments, when giving a presentation on the benefits of regional infrastructure development, said to create jobs we need sustainable growth. “We need infrastructure,” he said, before explaining that in infrastructural developments, you are going to make money but you will have to spend money first.
Behilbo told the participants at the job summit that infrastructure deficiencies affect growth. These deficiencies include power shortages, water crisis, bad roads and unreliable communication systems. “These deficiencies invariably cause the cost of goods and services to increase by 30%-40%. We should deal with infrastructural deficiencies by being practical and pragmatic.”
He implored African countries to reduce their reliance on China. Economies of Africa are geared towards china due to the extractive industry, as China is the biggest consumer of raw materials. Behilbo warns that the implications on Sub-Saharan countries will be dire should commodity prices continue to plummet. “You can’t have sustainable growth if it’s geared to one country,” he advised.
In his key recommendations, Behilbo suggested that economies that are dependent on the extractive industry should diversify by mobilising resources and investing in agriculture. He said that infrastructure projects spur economic growth and job creation. He concluded by saying that a country with a good infrastructure will see money inflows instead of money outflows.
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.
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.
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.