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Budget Review: P50 billion at stake


GARRY JUMA AND TLOTLO RAMALEPA
MOTSWEDI SECURITIES ANALYSTS


The Minister of Finance and Development Planning, Kenneth Matambo presented a fairly ‘neutral’ Budget for the 2015/16 financial year. Total Revenues and grants are forecasted at P55.38bn, a 10% increase from the revised FY14: P50.18bn. Mineral revenue is forecast to contribute 34.4% of the total revenue, Customs & Excise, 29.5%; Non Mineral 17.5%.


Mineral revenue continues to be the main contributor towards total revenue and this is a cause of concern as any negative developments on the global economic landscape may impact negatively on our mineral exports and hence reduce revenue. This brings to the fore the need to speed up the diversification of the country’s economy. Total expenditure and net lending is projected at P54.1bn, a 6% increase from the revised FY14: P51.26bn.

Accordingly, a budget surplus of P1.23bn (0.8% of GDP) is projected, an increase from the revised FY14: P280mn. The recurrent budget was allocated P36.7bn (68% of total expenditure), with the education ministry taking the biggest share of 33% (5% increase from 2014).


The education ministry has been enjoying the largest share of the recurrent budget in recent years but we are of the view that more emphasis should be placed on improving the quality of the education system. The government should also prioritise the alignment of the education system especially at tertiary level so as to meet the changing and dynamic needs of the private sector.


The development budget stood at P12.93bn. (23% of total expenditure), with the Ministry of Minerals, Energy & Water taking the biggest share of 28% in line with our expectations. Major projects that will be funded includes; the North-South Water Carrier ii (P500mn) and Morupule A refurbishment (P100mn).

The North-South Water Carrier project will go a long way in the provision of adequate water supplies especially towards the southern parts of the country following the almost drying up of Gaborone dame. Water is one of the key resources needed by the business sector and its availability will go a long way in creating a conducive and enabling environment for the business sector. The allocation towards the refurbishment of Morupule A is also vital as it will ensure the provision of adequate energy supplies which is vital for the business sector and the growth of the economy.


One of the major highlight that came out of the budget is the extent to which some of the major projects are not properly implemented. Between 2011/12 – 2013/14, around 17.3% of the development budget was under spent. This is an area of concern as it compromises the growth of the economy.

In some cases, the government has had to allocate more funds towards the refurbishment of some projects which becomes too costly to the economy, whereas the funds could have been used for other key projects. Going forward it is our view that more attention should be given toward the implementation of the projects to ensure that the funds are utilised more effectively and efficiently. We are still to see how the newly established implementation unit will be effective in ensuring that projects are implemented and completed on time.


The Minister also announced the setting up of the Cluster and Value chain in selected sectors ie; Diamonds, Tourism, Cattle, and Mining comprising of coal and other minerals except diamonds. The idea is to encourage private sector participation in the growth of the economy while at the same time diversifying the economy.

In China this concept has a long history and has been a huge success, with significant contribution towards its growth and economic transformation. It is estimated that these Clusters in China (including all types of industrial parks and zones) accounted for about 22% of national GDP, about 46% of FDI, and about 60% of exports and generated in excess of 30 million jobs in 2007.

It is vital to note that the success of these Clusters is based in among others; availability of economies of scale, funding, supplies of inputs, ready market for finished products, good infrastructure, productivity advantages, presence of anchor firms etc.

It is our firm believe that the ‘Cluster’ and Value Chain approach will go a long way in supporting the private sector contribution to the country’s economy as well as create employment provided the concept is adequately financed and conducive. However, we note that the budget was silent on the budget allocation for this noble project.


Going forward, we are of the view that more focus should be channelled towards the agriculture sector given its importance in the economic diversification and the development of the rural economy and ultimately poverty eradication. Adequate resources are needed to mechanise the sector and provide adequate farmer training to increase productivity and hence food security. We can take a leaf from Israel, which is predominantly a desert country with more than half of the land area a desert while the climate and lack of water do not favour farming.


Its agriculture sector is mechanised, highly developed and produce 95% of its own food requirements, while contributing 3.5% towards total exports. The agricultural sector is based almost entirely on Research & Development, while diversification and growth in types of plant crops and livestock breeding has increased over time. Methods of cultivation have also improved, and Israel continues to develop more efficient forms of irrigation, greenhouses, and mechanical equipment for processing and harvesting crops.

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Matsheka seeks raise bond program ceiling to P30 billion

14th September 2020
Dr Matsheka

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.

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Lucara sits clutching onto its gigantic stones with bear claws in a dark pit

14th September 2020
Lesedi La Rona

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.

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Botswana Diamonds issues 50 000 000 shares to raise capital

14th September 2020
Diamonds

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.

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