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Thursday, 18 April 2024

What Matambo left out: tax issues, job creation

Business

Minister of Finance and Development Planning Kenneth Matambo

The Minister of Finance and Development Planning Kenneth Matambo pitched an recurrent budget package  this week that focused on economic diversification, promoting economic growth, physical structure development and human capital development, however economic  experts are of the view that the 2015/16 budget had its  ‘hits and misses’.


The budget offered a modest budget surplus of P1.23billion or 0.8 per cent of GDP which will contribute towards rebuilding of the country's net financial assets and provide a cushion to global shocks. The education was the biggest benefactor with a 33% share while the agriculture sector took the smallest share of 3%.


Key issues that the experts anticipated to hear were left out and these included tax issues, employment creation, attracting FDI, issuance of permits to name but just a few.


In an interview with Vijay Kalyanaraman a Partner and Advisory services with Grant Thornton he said the government initiatives as expressed in the budget are excellent the challenge remains as to how to relate the excellent intentions to implementation.


“A roadmap for implementing government’s intentions is critical, what we want to know is what initiatives are there in place to drive implementation” said Kalyanaraman.


He said there is a great deal of challenge on the implementation of the development projects. In his speech Matambo said During NDP 10, the development budget has been underspent by an average of 17.3 percent for the years 2011/2012 through 2013/2014, due to delayed project implementation.


Kalyanaraman added that he would have expected to hear the minister talk about administrative issues regarding approval of licenses. “We expect the one-stop shop in place to work seamlessly and improve on the issuance of permits because it’s really disturbing for an investor to go through a lot of hustles,” he said.


A total of P12.93 billion was proposed for the development budget with the largest share allocated to the Ministry of Minerals, Energy and Water Resources (MMEWR) at P3.32 billion or 25.7 percent of the budget.


Tax Director with Deiloitte & Touche Botswana Terry Brick said the budget allocation was equally good considering the largest allocation went to education. “It does not stop there must be jobs for school leavers to go to,” said Brick. The current unemployment rate of 19.8 percent therefore represents underutilization of one of the country’s important resource, namely our human capital.


Brick said an unemployment rate of 19% is very worrying. “I would have expected the Minister to have addressed job creation in greater detail,” he said. In a bid to spur growth and employment, Matambo said that this year’s development budget would mainly be spent on infrastructure projects such as construction of new schools, new power transmission lines and water pipelines.


Investment analyst with a local brokerage Motswedi Securities Garry Juma said the budget missed key issues like the Value Added Tax (VAT) contribution to the total revenue. “Matambo was silent on this matter of which everybody expected to know how much is the VAT contributing to the total revenue,” said Juma.


He added that it was his expectation that he talk about the modalities in place to implement the clusters as well as the budget allocation. Juma said though not much change has been seen in the budget there is need for government to look into the slow implementation of projects as these constraints the growth process. He said the implementation process requires more focus to ensure that resources allocated are utilized efficiently.


The investment analyst said more focus should be channeled towards the agriculture sector given its importance in the economic diversification.


Research Manager with First National Bank (FNB) Moathlodi Sebabole said the budget puts Botswana in a twin surplus of: current account surplus and fiscal budget surplus. “This is a good as an insurance policy for the country and will ensure we continue to have financial stability,” he said.


However, he said Matambo did not address how government intends to maximize on tax revenues or improving efficiencies on custom collections.


In addition Sebabole highlighted that Matambo failed to reveal the exact role that private sector will play in economic diversification and employment creation be it through private-public-partnership (PPP) or contracting.


Sebabole said though Matambo acknowledged as shortfalls poverty levels, income inequalities and unemployment rates he did not do the expected that is to zoom in terms of how we will reduce these adversities and the rates that we will be comfortable to operate with at country level.


“Minister mentioned the government bond BW003 which is maturing this year, but did not indicate whether, given the surplus, they will be re-issuing or activities they will undertake to stimulate the capital markets further,” said Sebabole.


Furthermore, a local tax expert said he was surprised that the minister did not mention any proposed Tax changes against what the tax practitioners expected.


“We were expecting to hear an update on the proposed exemption on first time home owners which the minister announced in the last year’s budget. The proposal was to provide an exemption to citizens when they purchase their homes for the first time,” he said.


Currently citizens do not enjoy the 100% Transfer duty exemption but only enjoy an exemption on the first 200 000 with the rest being chargeable to transfer duty at 5%.


He added that contrary to expectations the minister never mentioned anything regarding the Income tax bill.  An IMF paper recommended that governments must do away with IFSC preferential tax rates of 15% it doesn’t really attract investment. Put in place thin capitalization rules for all tax payers not just mining entities and take away 15% tax rate from manufacturing.


“These are possible changes we expect to through the Income Tax Bill yet to be published,” he added.


Matambo said the economy will slow down in 2015 as compared to previous years though the domestic outlook remains positive.

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Business

LLR transforms from Company to Group reporting

9th April 2024

Botswana Stock Exchange listed diversified real estate company, Letlole La Rona Limited (“LLR” or “the Company” or “the Group”), posted its first set of group financial statements which comprise the Company and Group consolidated accounts, which show strong financial performance for the six months ended 31 December 2023, with improvements across all key metrics.

The Company commenced the financial year with the appointment of a Deputy Chairperson, Mr Mooketsi Maphane, in order to bolster its governance and enhance leadership continuity through the development of a Board and Executive Management Succession Plan.

At operational level, LLR increased its shareholding in Railpark Mall from 32.79% to 57.79% and proudly took over the management of this prime asset.

The CEO of LLR, Ms Kamogelo Mowaneng commented “During the period under review, our portfolio continued to perform strongly, with improvements across all key metrics as a result of our ongoing focus on portfolio growth and optimisation.

“We are pleased to report a successful first half of the 2024 financial year, where we managed to not only grow the portfolio through strategic acquisitions and value accretive refurbishments but also recycled capital through the disposal of Moedi House as well as the ongoing sale of section titles at Red Square Apartments. The acquisition of an additional 25% stake in JTTM Properties significantly uplifted the value of our investment portfolio to P2.0 billion at a Group level. Our investment portfolio was further differentiated by the quality of our tenant base, as demonstrated by above market occupancy levels of 99.15% and strong collections of above 100% for the period”.

The growth in contractual revenue of 9% from the prior year’s P48.0 million to the current year P52.2 million, increased income from Railpark Mall, coupled with high collection rates, has enabled the company to declare a distribution of 9.11 thebe per linked unit, which is in line with the prior year.

 

In line with its strategic pillars of ‘Streamlined and Expanded Botswana Portfolio’ as well as ‘Quality African Assets’, the Group continuously monitors the performance of its investments to ensure that they meet the targeted returns.

“The Group continues to explore yield accretive opportunities for balance sheet growth and funding options that can be deployed to finance that growth” further commented the CEO of LLR Ms Kamogelo Mowaneng.

Ms Mowaneng further thanked the Group’s stakeholders for their continued support and stated that they look forward to unlocking further value in the Group.

 

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Business

Botswana’s Electricity Generation Dips 26.4%

9th April 2024

The Botswana Power Corporation (BPC) has reported a significant decrease in electricity generation for the fourth quarter of 2023, with output plummeting by 26.4%. This decline is primarily attributed to operational difficulties at the Morupule B power plant, as per the latest Botswana Index of Electricity Generation (IEG) released recently.

Local electricity production saw a drastic reduction, falling from 889,535 MWH in the third quarter of 2023 to 654,312 MWH in the period under review. This substantial decrease is largely due to the operational challenges at the Morupule B power plant. Consequently, the need for imported electricity surged by 35.6% (136,243 MWH) from 382,426 MWH in the third quarter to 518,669 MWH in the fourth quarter. This increase was necessitated by the need to compensate for the shortfall in locally generated electricity.

Zambia Electricity Supply Corporation Limited (ZESCO) was the principal supplier of imported electricity, accounting for 43.1% of total electricity imports during the fourth quarter of 2023. Eskom followed with 21.8%, while the remaining 12.1, 10.3, 8.6, and 4.2% were sourced from Electricidade de Mozambique (EDM), Southern African Power Pool (SAPP), Nampower, and Cross-border electricity markets, respectively. Cross-border electricity markets involve the supply of electricity to towns and villages along the border from neighboring countries such as Namibia and Zambia.

Distributed electricity exhibited a decrease of 7.8% (98,980 MWH), dropping from 1,271,961 MWH in the third quarter of 2023 to 1,172,981 MWH in the review quarter.

Electricity generated locally contributed 55.8% to the electricity distributed during the fourth quarter of 2023, a decrease from the 74.5% contribution in the same quarter of the previous year. This signifies a decrease of 18.7 percentage points. The quarter-on-quarter comparison shows that the contribution of locally generated electricity to the distributed electricity fell by 14.2 percentage points, from 69.9% in the third quarter of 2023 to 55.8% in the fourth quarter. The Morupule A and B power stations accounted for 90.4% of the electricity generated during the fourth quarter of 2023, while Matshelagabedi and Orapa emergency power plants contributed the remaining 5.9 and 3.7% respectively.

The year-on-year analysis reveals some improvement in local electricity generation. The year-on-year perspective shows that the amount of distributed electricity increased by 8.2% (88,781 MWH), from 1,084,200 MWH in the fourth quarter of 2022 to 1,172,981 MWH in the current quarter. The trend of the Index of Electricity Generation from the first quarter of 2013 to the fourth quarter of 2023 indicates an improvement in local electricity generation, despite fluctuations.

The year-on-year analysis also reveals a downward trend in the physical volume of imported electricity. The trend in the physical volume of imported electricity from the first quarter of 2013 to the fourth quarter of 2023 shows a downward trend, indicating the country’s continued effort to generate adequate electricity to meet domestic demand, has led to the decreased reliance on electricity imports.

In response to the need to increase local generation and reduce power imports, the government has initiated a new National Energy Policy. This policy is aimed at guiding the management and development of Botswana’s energy sector and encouraging investment in new and renewable energy. In the policy document, Minister of Mineral Resources, Green Technology and Energy Security Lefoko Moagi stated that the policy aims to transform Botswana from being a net energy importer to a self-sufficient nation with surplus energy for export into the region. Moagi expressed confidence that Botswana has the potential to achieve self-sufficiency in electric power supply, given the country’s readily available energy resources such as coal and renewable sources.

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Business

MMG acquires Khoemacau in a transaction valued at P23Bn

9th April 2024

MMG Limited, the Hong Kong-based mining company specializing in base metals, has successfully concluded the acquisition of Khoemacau Copper Mine, a state-of-the-art, world-class copper asset nestled in the northwest of Botswana.

On Monday, MMG announced that the acquisition of Khoemacau Mine in Botswana was finalized on 22nd March 2024. “This acquisition enriches the company’s portfolio with a top-tier, transformative growth project and signifies a monumental milestone in the Company’s journey,” MMG communicated in an official statement published on the Hong Kong Stock Exchange.

Upon completion of the acquisition, MMG remitted to the Sellers an Aggregate Consideration of approximately US$1,734,657,000 (over P23 billion), a sum subject to potential adjustments post-Completion.

In addition to the Aggregate Consideration, MMG, in accordance with the Agreement, advanced an aggregate amount of approximately US$348,580,000 (over P4.5 billion) as the Aggregate Debt Settlement Amount, to settle certain debt balances of the Target Group (Cuprous Capital/Khoemacau).

On November 21, 2023, Khoemacau announced that the shareholders of its parent company [Cuprous Capital] had agreed to sell 100% of their interests to MMG Limited.

MMG is a global resources company that mines, explores, and develops copper and other base metals projects on four continents. The company is headquartered in Melbourne, Australia, and has a significant shareholder, China Minmetals Corporation, which is China’s largest metals and minerals group owned by the Government of the People’s Republic of China.

On December 22, 2023, Khoemacau Copper Mining (Pty) Ltd received the approval from the Minister of Minerals and Energy of Botswana regarding the transfer of a controlling interest in the Project Licenses and Prospecting Licenses associated with the Khoemacau Copper Mine, a result of the Acquisition.

 

The Botswana Competition & Consumer Authority (CCA) on January 29, 2024, notified the market that it had given its approval for the takeover of Khoemacau Copper Mining by MMG Limited.

On January 29, 2024, the CCA issued a merger decision to the market, stating that after conducting all necessary assessments, it was ready to proceed.

The Competition Authority affirmed that the structure of the relevant market would not significantly change upon implementation of the proposed merger as the proposed transaction is not likely to result in a substantial lessening of competition, nor endanger the continuity of service in the market of mining of copper and silver ores and the production, and sale or supply of copper concentrate in Botswana.

Furthermore, the CCA stated that the proposed merger would not have any negative impact on public interest matters in Botswana as per the provisions of section 52(2) of the Competition Act 2018.

Earlier this month, Minister of Minerals & Energy, Lefoko Maxwell Moagi, informed parliament that his Ministry was endorsing the Khoemacau acquisition by MMG Limited. He noted that not only was the company acquiring the existing operation but also committing to an expansion program that would cost over $700 million to double production, create more jobs for Batswana, and increase taxes and royalties paid to the Government.

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