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Investors eye stake in Trans Kalahari rail project


The Australian consultant engaged by Botswana Government to determine the feasibility of the Trans Kalahari railway line, last week handed over the final assessment report, the Trans Kalahari Railway Development Plan.


Coal Development Unit coordinator, Obakeng Moumakwa, told BusinessPost that “We met with the consultants the other week and they gave us their final report, which basically set out the financials and the realigned routes of the railway line.”
“The project is continuing,” declared Moumakwa, contrary to recent reports that the project has been shelved.


“Now we need to create a legislator framework for both safety and economic regulation and this will see some laws will having to be changed in Botswana and Namibia, to allow for the setting and operation of the railway,” said Moumakwa.
“The project, owned by both countries, could have been opened as early as January 2015 but will open any time and the countries will deal with staffing issues,” he said.


Moumakwa said that the railway line is an investment opportunity for anybody with money and he also revealed that potential investors call all the time with enquiries and they are awaiting Government to complete its initial processes.


Government is in the process of informing itself of the modalities of the project, something Moumakwa admits is “taking a bit long” to complete. “We are still to do a bankable feasibility study,” Moumakwa asserted.


However, Moumakwa said that as things stand none of the coal mining companies have expressed a wish to own the TKR, in part or the whole project.


The railway line, which comes with a P136 billion price tag, is expected to unlock the monetisation of Botswana’s coal resources, which are seen as a way to augment the depleting diamond resources that have been the mainstay of the country’s economy.
Aurecon has given the resultant capital expenditure costs at a total of USD14.2 billion, comprising USD8.6 billion for electrified rail, and USD1.9 billion for above rail, and USD3.6 billion for the port.



The “Pre-Feasibility Study of the TKR Report” prepared by Canadian firm, CPCS in 2011, contained capital and operating costs estimates for the rail and port but the new assessment by Aurecon is said to be 90 percent different due to several considerations such as, a high level review of these costs having been undertaken as a result of a number of issues; changes to the construction market since 2011; changes in operating philosophy of the rail, and proposed enhancements to the project.


Since the signing of the Memorandum of Understanding between Botswana and Namibia in early 2014, the Bilateral Agreement coal prices have fallen significantly.


The Bilateral Agreement envisaged a Public Private Partnership procurement method using the DBOOT model with the private sector financing the project and taking on demand risk. Until prices return to greater than $85/t a demand risk PPP will not be bankable.


However, Government has been presented with the option to fund up-front, over time or provide a state backed guarantee to the project company though “this is likely to be unaffordable to government”.


According to consultants Aurecon, future considerations regarding the structuring of the project will ultimately depend on the composition of the mining players at the time and this may also influence the regulatory regime.


As recommendations for the way forward, Government has been asked to simply acknowledge that the project is conditional upon the coal price. The report also states that, at the current coal price the project is not viable although long term outlook may be positive.


Government has also been urged to show commitment to the project by announcing an undertaking to resolve those project risks that the government can control. The foremost factors that will form the foundation for the project include, alignment (optimising and purchasing); Wildlife and stock management along alignment; Cross border regulations and the Electric vs diesel traction.


Key risks to the whole project include Coal Price; Cross Border Project; Land Acquisition; Alignment of participants and the presence of migratory animals in the likely path of the rail line along the three main wildlife corridors identified, linking the Kgalagadi Transfrontier Park and the Central Kalahari Game Reserve.


The master planning as set in the development plan by the consultants, has identified clusters of potential coal mines and developed connections to the Trans Kalahari Railway line, 11 clusters in total – some more likely to develop than others.


The main line of the rail way will start at the Mmamabula Coal Fields and pass through some clusters owned by Walkabout Resources. The north eastern extension of the rail line will reach clusters owned by among others, Anglo Coal (Pty) Ltd, Weldon Asenjo, African Energy Botswana (Pty) Ltd.


Mineral resources along the TKR corridor in Namibia may further improve the viability of the TKR, though this factor has not been assessed. Other potential contributors to the TKR identified include Copper deposits from North West Botswana and Manganese in southern Botswana.


Giving comment on the progress of the TKR, the Managing Director of Botswana Shumba Coal, and Mashale Phumaphi said, “I believe that the railway line is of strategic national importance to Botswana. The progress of the development is not as fast as one would want, however given the current constraints of lack of funding for the project and low coal prices it is understandable.”


When asked about confidence on the project, Phumaphi said, “The commodity markets tend to be cyclical, therefore the falling prices are not a worry to me, given that the developing countries have a huge appetite for gravel, lumber, steel, coal for energy and other materials needed to build roads and public works. This building spree is being prompted by population growth and increasing urbanization and thus I believe that over the medium to long term, coal prices will recover and continue to increase.”


He however revealed that Shumba would not invest on the project yet. “We do not have that intention at the moment but this may change in future,” he asserted.


“If the coal sector is developed in tandem with the power sector and thus making Botswana a regional power hub, I am of the belief that the revenues and jobs created would easily compete with the diamond sector,” Phumaphi posited.


South African mining Consultancy Analytika Holdings Director, Alan Golding was previously quoted in the media as saying the coal industry in Botswana was “moribund” due to little or no coal mining exploration underway in the country.
Golding also said that a more facilitative approach should be considered to develop the country’s coal resources and mitigate any challenges.


“If several smaller mines, with a one-million to two-million yearly production capacity, could be brought to production, it would be easier for the existing infrastructure and rail to cope with international exports and the required capacity,” Golding was quoted in South African media reports.


According to Golding, the mines could develop the required human resources and increase the local skills pool, as well as supply the local power generation market, which would allow for expansion in the coal mining industry and for the export of power to neighbouring countries that have shortages.


 “In the long term, Botswana could supply the international or African markets if the price is right,” Golding said.


He however also said that there should be no rush to invest in the coal sector since a no profit is currently expected to be gained from its mining. He further noted that current  coal prices, which averaged $66 per tonne to $67 per tonne for December 2014, and January 2015 shipments were negatively affecting the coal export market, as well as the ability of exploration companies to bring operations into production.

“Investors are not prepared to invest in exploration if they cannot, in the long term, see a deposit brought in to production,” Golding said, emphasizing that if the product cannot be taken to market, it remains only a resource and not a reserve.

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Pan-African risk advisor Minet Group and Botswana’s Africa Lighthouse Capital acquire Aon Botswana

21st May 2021
Pan-African-risk-advisor-Minet-Group-

Strategic partnership offers inherent benefits of global knowledge, African insights, and local expertise and commitment

Minet Group and Africa Lighthouse Capital today announced that they have received regulatory approval and fulfilled all requirements to acquire Aon’s shareholding in Aon Botswana, and consequently will begin the process to rebrand to Minet Botswana.

Minet Group is a well-known and trusted pan-African risk advisory firm and Aon’s largest Global Network Correspondent and has been rapidly expanding its African footprint since 2017 through the acquisition of operations from global professional services firm Aon in Kenya, Lesotho, Malawi, Mozambique, Namibia, Tanzania, Uganda, and Zambia.   Minet has been delivering world class products and services across Africa for over 70 years.

Africa Lighthouse Capital (ALC) is a leading Botswana citizen-owned private equity firm focused on investing in Botswana companies and propelling them into regional champions, with over BWP 500 million in funds under management.

The new entity will be rebranded to Minet and will inherit deeply rooted respect by its clients for their innovative and locally relevant solutions, responsiveness, and efficient processes. Furthermore, it shall have the benefit of consistency in leadership and staffing, with Barnabas Mavuma, previously Managing Director of Aon Botswana, continuing to lead the business as the MD supported by the local management team.

 “The addition of Minet Botswana to our growing African network affirms our belief in the great opportunities for growth that Africa offers, driven by rising consumer demand, huge investment in infrastructure and quick adoption of new technology,” says Joe Onsando, CEO at Minet Group.

“This transaction significantly adds to the diversity and skills base of our team and will have a positive impact on the range of products and services we provide. Our Correspondent agreement with Aon gives us access to global expertise and data driven insights and uniquely positions us to deliver risk advisory solutions that reduce volatility, thus driving improved performance for our clients. This is a very exciting time to be Minet in Africa.”

“The significantly increased Botswana citizen shareholding effected by this transaction gives rise to an exciting era of local market focus and growth for Minet Botswana,” says Bame Pule, Founder and CEO of Africa Lighthouse Capital.  “We intend to work with Minet Botswana’s local management team to further localise the business in terms of product development, while at the same time investing in local skills development and business development.  We look forward to this exciting journey, which will result in a significantly enhanced service offering for Minet Botswana’s clients.”

Consequently, and similar to the other members of the Minet Group, Minet Botswana becomes an Aon Global Network Correspondent, retaining its access to Aon’s resources, technology, and best practises, combined with the benefit of independent, local agility. This transaction furthermore significantly increases local shareholding, enabling operations to become even nimbler and better positioned to unlock new and existing growth opportunities.

Clients of Minet Botswana will experience continuity of product and service delivery standards in the short term. In the near future, they can expect an enhanced offering that combines agility with technology and product innovation, tailormade for their specific needs.

Together, Minet and ALC bring a sound understanding of local market conditions, strong governance, and an established track record in the region. These qualities, combined with Aon’s global capabilities and expertise, will bring clear benefits for clients.

This transaction vastly increases citizen ownership with shareholders who are going to be active in the business. The transfer of equity interests in Botswana to investors with local and regional expertise, presence and commitment will allow the businesses to move quickly in line with market movements, and to introduce products that are tailored to the local market.

“Minet’s commitment and drive to incessantly adapt to changing market conditions, and to innovate to meet the unique insurance demands of the African continent, while maintaining the high standards customers have come to expect – Onsando concludes – will continue to grow and give Minet a powerful competitive edge within the African market”.

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Africa scores $285 Billion IMF deal

21st May 2021
IMF-Managing-Director-Kristalina-Georgieva

French President Emmanuel Macron received 21 Heads of state and government officials from Africa during the recent summit on the Financing of African Economies that focused on Africa to take full advantage of the tectonic shifts in the global economy and the call for a joint effort for financial and vaccination support for the continent.

President Emmanuel Macron stressed that “Most regions of the world are now launching massive post-pandemic recovery plans, using their huge monetary and fiscal instruments. But most African economies suffer the lack of adequate capacities and such instruments to do the same. We cannot afford leaving the African economies behind.

We, the Leaders participating to the Summit, in the presence of international organizations, share the responsibility to act together and fight the great divergence that is happening between countries and within countries.

This requires collective action to build a very substantial financial package, to provide a much-needed economic stimulus as well as the means to invest for a better future. Our ambition is to address immediate financing needs, to strengthen the capacity of African governments to support a strong and sustainable economic recovery and to reinforce the vibrant African private sector, as a long-term growth driver for Africa.”

For her part, International Monetary Fund (IMF) Managing Director Kristalina Georgieva highlighted that “there is urgency to focus on financing Africa. Last year, the pandemic-caused recession shrank the GDP of the Continent by 1.9 percent – the worst performance on record. This year, we project global growth at 6 percent, but only half that 3.2 percent for Africa.” Adding that Africa needs to grow faster than the world at 7 to 10 percent to meet the aspirations of its youthful populations, and become more prosperous and more secure.

Georgieva revealed that the price tag on the shot is estimated to be “$285 billion through 2025. Of this $135 billion is for low-income countries. This is the bare minimum. To do more – to get African nations back on their previous path of catching up with wealthy countries – will cost roughly twice as much. These are large numbers. They may seem out of reach. But to quote Nelson Mandela: impossible until it is done.”

The main areas of interest to achieve this include; first, end the pandemic everywhere, 40 percent of the population of all countries is targeted to get vaccinated by the end of 2021, and at least 60 percent by mid-2022.

Second, bilateral and multilateral development financing grants and concessional loans ought to go up. Over the last year, the IMF have swiftly ramped their financing for the Continent, including providing 13 times their average annual lending to sub-Saharan Africa. And are working to do much more. The IMF has also received support to increase access limits so they can scale up their zero-interest lending capacity through the Poverty Reduction and Growth Trust.

The IMF has also devised exceptional measures. Their membership backs an unprecedented new allocation of Special Drawing Rights (SDR) of $650 billion, by far the largest in their history. Once approved, which is intended to be achieved by the end of August, it will directly and immediately make about $33 billion available to African members. It will boost their reserves and liquidity, without adding to their debt burden.

Over the course of the last year, the IMF has built experience in facilitating the on lending of SDRs – thus managing to triple their concessional lending capacity as a result.

The Third being, actions at home. According to Georgieva “a crisis is an opportunity for transformational domestic reforms that increase domestic revenue, improve public services, and strengthen governance. For instance, digitalization can improve tax administration and revenue collection, and the quality of public spending. And with radical transparency, Africa can tap into new sources of finance – such as carbon offsets.

There is ample scope for countries to encourage private investment, including in social and physical infrastructure. New IMF research, published today, highlights that domestic and international investors could provide at least 3 percent of GDP per year of additional financing by the end of this decade.”

Reforms of international taxation can also support Africa’s growth. For a long time, the IMF has been in favor of minimum corporate tax rates to reduce the race to the bottom and tax avoidance. And they strongly support an international agreement on digital tax, something France has been a leading voice for. It is important to secure fair distribution of tax revenues, so they can contribute to closing Africa’s financial gap.

Georgieva called on to each and every one to step up. Reminding the attendees that from history they are all familiar with what a shock of this magnitude can do if not countered forcefully and effectively.

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Indian COVID-19 variant hits Botswana diamond sales

20th May 2021
Indian-Covid--19-variant-hit-rough-diamonds-sales---De-Beers-

De Beers’ Group, the world’s number one diamond producer by value, this week attributed the downfall of its sales for the fourth cycle week to the second wave of the Covid-19 variant (B.1.617.2) which was first discovered in India.

Diamond trading conditions have been hit by the Covid-19 crisis in India which is a major cutting and polishing centre for the world’s diamond trade.

The outbreak of the new variant has led to a humanitarian crisis with 280, 284 fatalities of the disease reported.

The London headquartered company said the sales in its fourth cycle fell to $380m (about P4.1 billion) down from $450m (about P4.8 billion) in the third cycle though it was higher than the fifth cycles of last year when the group shifted only $56m (P600 million).

De Beers emphasized that they continued to implement a more flexible approach to rough diamond sales during the fourth sales cycle of 2021, with the Sight event extended beyond its normal week-long duration.

The De Beers group Chief Executive Officer (CEO), Bruce Cleaver said the company continues to see robust demand for diamond jewellery in the key US and China consumer markets.

“However, the scale of the second wave of Covid-19 in India, where the majority of the world’s diamonds are cut and polished, has led to reduced midstream capacity and subsequently lower rough diamond demand, during what is already a seasonally slower time of year for midstream purchases,” said Cleaver.

Meanwhile Botswana health officials have confirmed the new Covid-19 variant in Botswana. The Ministry of Health and Wellness -through a press statement- informed members of the public that the variant (B.1.617), was confirmed in Botswana on 13th May 2021.

According to Christopher Nyanga, spokesperson at the Ministry, this followed a case investigation within Greater Gaborone, involving people of Indian origin who arrived in the country on the 24th April 2021.

Moreover the World Health Organization (WHO) recently announced that the Indian Covid-19 variant was a global concern, with some data suggesting that the variant has “increased transmissibility” compared with other strains.

The India variant (B.1.617.2) – is one of four mutated versions of the coronavirus which has been designated as being “of concern” by transitional public health bodies, with others first being identified in Kent, South Africa and Brazil.

Nevertheless when speaking at Bank of America Global Metals and Mining conference, Anglo American Chief Executive Officer, Mark Cutifani said the company portfolio is increasingly tilted towards future enabling products and those that need to decarbonise energy and transport in order to meet consumers’ needs – from home appliances, electronics and infrastructure, to food and luxury goods.

“We see material opportunity for Anglo American to continue to set itself apart in terms of the performance of our diversified business, further enhanced through sector-leading 25% volume growth over the next four years, led by copper and the platinum group metals,” said Cutifani.

“Most importantly, as the supplier of such critical materials, it is the duty of our industry to ensure that in everything we do, we act responsibly and deliver enduring value for our full breadth of stakeholders, including our planet.”

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