De Beers Chairman plots Botswana’s growth prospects
The Chief Executive Officer (CEO) of Anglo American, who is also Chairman of De Beers Group, Mark Cutifani used the recent Botswana Confederation of Commerce Industry and Manpower (BOCCIM) 13th National Business Conference held in Maun, to share insights into Botswana’s economic projections.
Cutifani was invited in his capacity of business leadership position to share his insights about Botswana.
His remarks focused on answering the question of how Botswana should best leverage its enviable strengths to continue the growth trajectory established in the half century since independence.
The De Beers Chairman said he understands that Botswana has long had the desire to diversify its economy away from diamonds. He explained that despite the growth achieved, the country arguably remains vulnerable to shifts in the global diamond market.
Diversification beyond extractives in general and diamonds in particular is crucial as proven resources will eventually deplete, he explained. “It is understandable that the leadership would like to make more progress towards having a more vibrant manufacturing, services and export economy,” he observed.
Cutifani said Botswana’s development strategy should be based on clear objectives that foster long term infrastructure development, the generation of intellectual capital, enhanced access to markets, inbound investments competition and improved relationships for all stakeholders.
According to Cutifani, Botswana needs three key ingredients to drive the depth and breadth of its primary growth path.
BOTSWANA HAS TO BUILD OFF HER NATURAL RESOURCES
According to Cutifani there are very few economies that have not begun their growth path outside of the mining and agricultural sectors. He indicated that Botswana is in a fortunate position to not only have the mineral endowment but, contrary to some other developing nations, to have used it well.
“Mineral resources are like any other natural resources; you can either use them well or squander your endowment through short sighted and inadequate policy frameworks and approaches.”
Cutifani said Anglo American stands ready to partner with Botswana government in evaluating the economic viability of natural resource projects, across a range of commodities.
The De Beers chairman said beyond mining, tourism will continue to play a key role in promoting Botswana to the rest of the world. But he warned that tourism centers must be supported with complementary attractions and superior service that will be competitive with the country’s target customer base’s choices for high quality vacation experiences.
STRONG INSTITUTIONS, SOUND POLICIES CRITICAL
Modern public governance best practice indicates that progressive, consistent, transparent and business friendly policy environments are needed for business and economics to flourish. Cutifani explained that it should be any different in Botswana. He said the country must continue to strengthen its public institutions to develop standards and norms compatible with the most successful democracies in the world.
He advised that success in this area requires a hard and honest look at the country itself and readiness to make changes where necessary to the country’s way of life norms and customs. Cutifani shared that Botswana should realize that it is competing for capital against Singapore, Brazil, Tanzania, Italy and South Africa, among other countries.
“Botswana should make it easier for foreign businesses to operate in Botswana,” and in relation to attracting Foreign Direct Investment (FDI) and ensuring the country’s global competitiveness, Cutifani advised “today living in the interconnected world, business has no boundaries because prices are global not local. States should not try and impose prices onto a producer or to cross subsidize inefficient industries by distorting prices, this compromises natural competitive advantages and opportunities and embeds inefficiently through ought an economy and society. All prices eventually come back to a global value.”
DEVELOP AND INCLUDE SOCIETY IN THE GROWTH PLAN
Fortunately for Botswana, the world’s greatest and most destructive sources of social divisions and strife (ethnicity, religion, language and class) have had relatively minimum impact on Botswana’s fabric in the period since its independence. He expressed that it is certainly encouraging that democracy, development, dignity, discipline and delivery continue to be upheld as the country’s moral code through the 5D’s roadmap. He added that this is an essential ingredient to maintaining peace, the rule of law and stability in the country.
Cutifani explained that creating opportunities through investments in infrastructure is also critical. He explained that without infrastructure sustainable growth and truly diversified economy cannot be achieved. He stressed that it is important to facilitate and build infrastructures that supports other industry opportunities, in terms of access through roads and rail but also energy and information technology services.
He also advised on intellectual capital as the most important resource it could be for Botswana highlighting that young people is more valuable than the country’s diamonds.
“The quality of Botswana’s future will be determined by the quality of its leadership and the talents the country develops and retain to take its challenge. If Botswana does not find a way to make it attractive to the country’s brightest and most talented they will be lost to a world that owes Botswana a little.”
Cutifani advised that while attracting diamond grading expertise and research activities in Botswana will generate some economic activity in the short term, but the real long term value lies in retaining the intellectual property generated by attracting the world’s young high potential talent and skilled workforce to this country.
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.