‘Buyers fly in, out without leaving anything here’
According to several local dealers, the relocation of locally-mined diamond sales, from London to Botswana is yet to produce the envisaged benefits to the local economy.
The US$5 billion dollar injection to the economy through the rough and polished diamond sales, is seen by observers as having the potential for a ,multiplier effect of two and a half times itself; P130 billion into the local economy annually, if harnessed to its full potential.
In an interview with BusinessPost, Mmetla Masire of the Diamond Hub said that after the relocation of the De Beers Sales to Gaborone, Government is now looking at developing a jewellery industry. Government, through the Diamond Hub, has instituted an internal study that will inform the development of jewelry manufacturing industry.
“We are lucky to have Shrenuj Botswana, the sole jewellery manufacturer in the country, and they can provide a test model for how best we can develop manufacturing.”
However, local diamond dealers are crying foul at the lack of legislation that compels diamond buyers to transact through them.
One local dealer who preferred anonymity told BusinessPost that: “These diamond buyers pay brokers fees everywhere, except here,” saying the law in other world centres, empowers the local dealers to reap substantially from billion dollar industry.
“So basically what has happened is that sales from moved from overseas and there are no other benefits for us.”
The dealer cites larger brokers such as Rothschilds and Henning as having their own clients and thus setting up in the country to facilitate their trade.
“But of the 200 buyers that come to ODC every month, if I had just 10 of them, I would have hired close to 12 people,” said the dealer.
“We actually had a manager at ODC, (name withheld) who told one of our clients that they did not need us, that they can buy direct; needless to say the client was gone the following month.”
“Imagine you had ten licensed brokers all employing about 10 to 15 people minimum,” said the dealer.
“We organise some business for ourselves and then when they realise they don’t need, us they bail”
But Masire insists that the issue of dealers’ contribution to the trade should be put in the proper context. “Botswana’s diamond trade processes are much smaller and uncomplicated; in India, you will have 800 diamond cutting factories and it makes sense to have locals there who know the terrain better; same as in Antwerp,” said Masire.
Masire says that the conundrum is caused by the need for buyers to view their purchases, and this necessitates their visits to Botswana, where they find out that they don’t need to deal through the brokers and dealers.
He concedes that in Botswana, there is no law that compels diamond buyers to go through dealers when transacting for diamonds. He adds that some diamond producing countries in the region, such as South Africa and Namibia, have suffered from over regulation and this has to be avoided.
“Dealers and brokers have complaints but they must lobby Government and make Government understand their point of view; they must group themselves or form associations because a one by one approach cannot be as effective.”
DIAMOND SECTOR OPPORTUNITIES
Masire tells this publication that the opportunities in the diamond sector are infinite and the thinking that the sector is risky, is old thinking. He says that, perhaps Government has helped to perpetuate the perception that diamond business is low; on the contrary, the business is growing but not at pre recession levels.
“The industry changed post the recession and we have seen what used to be families now turning into companies that run the trade; banks have also become strict on the diamond trade, insisting that traders put up some of their own money when transacting, to share the risks involved,” said Masire.
Masire reveals that there are opportunities for training in the diamond sector, with only two institutions holding the fort, namely Afrimond Diamond Institute who teach broadly on issues surrounding the industry, and the GIA (Gemological Institute of America) who teach mostly about valuations.
He says the security sector also could hinge on the diamond industry, with Brinks and Malca-Amit, being the only significant players.
While only as much as 150 new jobs have been created with the relocation from London, the intention was to bring the diamantaire traffic to Botswana for multilier business and for Der Beers clients to access diamonds from other sellers; besides De Beers, other diamond companies are also holding their auctions in Botswana, with Lucara having held its first auction in November of 2014 and one to follow in two weeks.
ANTWERP VS BOTSWANA
Botswana still has some way to go in emulating or even surpassing Belgium as a diamond centre, but the stage is set for this development to possibly take place in future. Botswana has since asserted itself as one of the global diamond centres of repute, after the relocation of Der Beers Global Sight Sales, a move meant to facilitate the arrival of diamantaires.
The world’s largest diamond trading hub with 80 percent of the world’s rough diamonds and 50 percent of polished diamonds traded through Antwerp Yearly turnover with a turnover of over €42 billion in 2011.
1st Belgian export product outside the EU. The leading component of Belgian trade with India, China and Russia Diamonds Account for 5 percent of Belgian Exports. Leader in global diamond compliance and Corporate Social Responsibility and 1,850 registered diamond businesses in Antwerp.
Diamonds create an added value of €1500 million for Belgium with more than 34,000 jobs in Flanders, contributing to 70 percent of Belgian trade surplus with High-end niche manufacturing. The fiscal and parafiscal contribution of the diamond sector is €300-€800 million year. Antwerp has in its Presence of the world’s largest diamond mining companies; BHP-Billiton, Rio Tinto, Alrosa and De Beers. Diamonds are an iconic facet of Antwerp’
Though Antwerp is currently the largest hub in the world, it is not sitting on its laurels, considering the threat from Botswana and other centres.
Cathy Berx, Governor, Province of Antwerp, Belgium, in a foreword of the Antwerp diamond Masterplan document released in 2012, mentions that: “I was first approached by some key players of the diamond industry who expressed their concern about the future of their sector in Antwerp. Citing aggressive competition and an ‘uneven playing field’, they feared that without a clear vision and strategy, the sector’s prospects of survival were slim.
Despite its problems, I felt there was tremendous potential; with strong leadership, unity and vision combined with a sense of innovation, professionalism and openness, the sector was capable of creating a new and brighter future for diamonds and for Antwerp.”
“My office was happy to facilitate a repositioning exercise that the sector would own and take responsibility for.”
“In addition to the many ideas and initiatives put forward, problems were identified, solutions discussed and new business areas targeted to keep Antwerp as world-leader in diamonds. I am particularly glad to see the exercise has been honest in tackling important issues such as transparency, compliance, individual responsibility, CSR and innovation driven by new technology. There was also a strong plea for a competitive fiscal operating template, as without this, successfully competing with India, Dubai or Botswana in the future, will always remain an uphill struggle,” said Cathy Berx.
Business
LLR transforms from Company to Group reporting
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.
Business
Botswana’s Electricity Generation Dips 26.4%
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.
Business
MMG acquires Khoemacau in a transaction valued at P23Bn
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.