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.â€¨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.â€¨â€¨
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.
A squeaky and glittering metaphoric smile was the look reflected from the Pula against the greenback this week and money market researchers lean this on optimism following Monday’s announcement of another Covid-19 vaccine which is said to have boosted emerging market economies.
With other emerging market currencies, the Pula too reacted to optimism and fanfare on the new Covid-19 vaccine against the weakening US dollar which has been losing its shine since the uncertainty laden US elections.
After bouncing back into the Johannesburg Stock Exchange (JSE) last week Friday, following a year of being in the freezer, the Choppies stock started this week with much fluidity.
Choppies was suspended in both the Botswana Stock Exchange and its secondary listing at the JSE for failure to publish financial results. Choppies suspension on Botswana Stock Exchange was lifted on 27 July 2020. On Friday last week, when suspension was being lifted, Choppies explained that this came into fruition “following extensive engagement with the JSE.”
Choppies stock, prior to suspension, hit a mammoth decline in value of more than 60 percent, especially in September 2018. Waking from a 24 month freezer, last week the Choppies share price was at R0.64 and the stock did not make any movement.
However, Monday was the day when Choppies stock moved vibrantly, albeit volatile. Choppies’ value was on a high volatile mood on Monday, reaching highs of 200 percent. At noon, the same Monday, the Choppies share had reached R1.05. Before taking an uphill movement, Choppies stock slightly slipped by 2 cents. But the Choppies share rode up high and by lunch time the stock had reached the day’s summit of R2.00 and that was at 13:30 when investors were buying the stock for lunch.
The same eventful Monday saw gloom on the faces of Choppies rivals, when Choppies gained by 220.31 percent around lunch time its rivals in the JSE Food & Drug Retailers sector were licking wounds. Spar lost 2.94 percent, Pick Pay fell by 2.43 percent, Shoprite 7.52 percent and Dis-Chem 1.98 percent. The only gainer was Clicks by a paltry 0.51 percent.
In an interview with BusinessPost, Choppies sponsors at the JSE PSG Capital Managing Director Johan Holtzhausen explained that the retailer’s stock was in high demand after a long suspension. He said when a company list or a suspension is lifted the market needs to find itself on the pricing of the share.
“Initially when the suspension was lifted there were more buyers than sellers. As far as we could see this created a shortage of shares so to speak and resulted in the price at which the shares traded going to R1.20 and eventually R2.05 before finding its level around R0.80 sent from a JSE perspective.
This is marked dynamics and reflect that there are investors that are positive about the stock in the long run. This is a snapshot over a short period and one requires a longer period to draw further conclusions,” said Holtzhausen in an interview talking about the Choppies stock.
On Monday this week where the Choppies value grew by 200 percent, the stock took a turn looking down, closing the day at R0.87 from a high of R2.00. According to local stockbroker Motswedi Securities on Monday while there was no movement by Choppies in the local stock exchange as the retailer appeared on the board as 141,000 shares traded at P0.60 each.
However in Choppies’ secondary listing the stock price rallied to over 200 percent during intraday trading on Monday before losing steam and declining to around R0.87 share.
Before press yesterday Choppies opened the market with the stock starting the day at R0.80 then went flat for few hours before taking a slide downward, dropping 5 cents in 30 minutes. Choppies then went flat at R0.75 for 50 minutes yesterday before going up at 10:20 am where it nearly recovered the open day price of 80 cents, but was shy of 1 cent. From 79 cents the price went flat until noon.
Competition and Consumer Authority (CCA) has revealed that in its assessment of the Jet take over by Foschini, there were considerations on possible market rivalry and a clash in targeted classes.
According to a merger decision notice seen by this publication this week, high considerations were made to ensure that Foschini’s takeover of Jet is not anyhow an elimination of rivalry or competition or if the two entities; the targeted and the acquiring enterprise serves the same class of customers or offer the same products, to elude the anti-trust issues or a stretch of monopoly.
The two entities are South African retailers whose services stretched to Botswana shores. Last month local anti-trust body, CCA, received an acquisition proposal from South African clothing retailer, Foschini, stating their intentions to take-over Jet.
South African government’s Business Rescue Practitioners earlier this year after finding out that Jet’s mother company, Edcon, is falling apart, made a decision that Foschini can buy Jet for R480 million. This means that Foschini will add Jet to its portfolio of 30 retail brands that trade in clothing, footwear, jewellery, sportswear, homeware, cell phones, and technology products from value to upper market segments throughout more than 4085 outlets in 32 countries on five continents.
However the main headache for the CCA decision which was released this week, is distinguishing the targeted and the acquiring entity businesses and services.
When doing a ‘Competitive Analysis and Public Interest’ assessment, CCA is said to have discovered that Foschini is classified as a “standard retailer” which targets middle-to-upper income consumers and it competes with stores such as; Truworths and Woolworths. The targeted entity, Jet, is on the lower league when compared to its acquirer, it serves customers of lower classes and is regarded as a discount/value retailer targeting lower income consumers or a mass market. This makes Jet to be in direct competition with Ackermans, Pepkor, Cash Bazaar and Mr Price.
“Therefore, a narrower view of the market is that Foschini through its stores trading in Botswana is not a close competitor to Jet. Additionally, there exist other major rivals who will continue to exercise competitive constraints on the merged enterprise post-merger,” concluded CCA this month.
The anti-trust body continued to explain that in terms of the Acquisition of a Dominant Position, the analysis shows that the acquisition of the target business by Foschini Botswana will result in an insignificant combined market share in the relevant market.
This made CCA reach to a conclusion that there is no case of an acquisition of a dominant position in the market under consideration or any other market on the account of the proposed transaction.
What supports the merger according to CCA is that it is in compliance with regards to ‘Public Interest Considerations’ because the findings of the assessment revealed that the transaction is as a result of the need for a Business Rescue by the target enterprise. This is so because in the event that the proposed transaction fails, it will translate into the loss of the employment positions at the target business.
“On that note the Authority (CCA) found it necessary to ensure that the proposed merger does not result in any retrenchments or redundancies. In light of this, the assessment revealed the critical need to protect the employees of the merged entity from possible merger specific retrenchments/ redundancies,” said CCA.
Before making a determination that the recently proposed transaction is not likely to result in the prevention or substantial lessening of competition or endanger the continuity of the services offered in the relevant market, CCA said it then moved into a concern for public interest which is a protection enshrined in the Competition Act of 2018.
CCA’s concern was mostly loss of livelihood or employment by 126 Batswana workers at Jet stores, stating that possible retrenchments or redundancies may arise as a result of implementation of the proposed merger.
Much to the desire of trade union or labour movements in Botswana and across Southern Africa where the Jet stores are stemmed-who also raised concerns about the retail’s workers job security- CCA subjects Foschini to keep the target entity 126 workers.
“There shall be no merger specific retrenchments or redundancies that may affect the employees of the merged enterprises. For clarity, merger specific retrenchments or redundancies do not include (the list is not exhaustive): i. voluntary retrenchment and/or voluntary separation arrangements; ii. Voluntary early retirement packages; iii. Unreasonable refusals to be redeployed; iv. Resignations or retirements in the ordinary course of business; v. retrenchments lawfully effected for operational requirements unrelated to the Merger; and vi. Terminations in the ordinary course of business, including but not limited to, dismissals as a result of misconduct or poor performance,” said CCA.
CCA also orders that Foschini informs it about all the details of 126 Jet employees within thirty (30) days of the merger approval date. CCA should also know information of when Foschini is implementing the merger, within 30 days of the approval date.
Other conditions include Foschini sharing a copy of the conditions of approval to all employees of the Jet or their respective representatives within ten (10) days of the approval date.
“Should vacancies arise in the target, the merged enterprise shall consider previous employment at one of the non-transferring Jet stores to be a positive factor to be taken into account in the consideration of offering potential employment,” said CCA.
According to CCA, in cases of any job losses, for the Authority to assess whether the retrenchments or redundancies are merger specific, at least three months before (to the extent that this deadline can be practically achieved and in terms of the prevailing and legally required employment practices) any retrenchments or redundancies are to take place, inform the Authority of: i. The intended retrenchments; ii. The reasons for the retrenchments; iii. The number and categories of employees affected; iv. The expected date of the retrenchments.