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Anglo American plc’s unit Kumba annual earnings soars to P41.1 billion

South Africa’s Kumba Iron Ore Limited, a unit of Botswana Stock Exchange (BSE) listed British multinational mining Anglo American plc, revenue soared by 41 percent, from P33.5 billion to P47.1 billion.


According to the company’s audited financial results for 2019, the increased in returns is mainly attributed to result of stronger iron ore prices, higher market premiums and currency gains, which were partially offset by lower sales volumes due to the lower domestic offtake.


The mining company’s iron ore export price increased by 35 percent to US$97/tonne from US$72/tonne in 2018, while the average Rand/US$ exchange rate weakened by 9percent to R10.61/US$1 in 2018 to R9.72/US$1 in 2019.


On the Operating expenses, excluding mineral royalties and impairment, the South African mining company saw an increased to P24.22 billion as compared to P20.92 billion recorded in 2018 mainly due to P2.28 billion higher operational costs and a P1.03 billion increase in logistics costs.


“The rise in operational cost is primarily attributable to P1.10 billion from the utilisation of Work in Progress (WIP) stock at Sishen and P95 millions of higher maintenance costs, of which P480.80 million related to unscheduled maintenance activities caused by equipment and plant breakdowns,” reads the annual results.


“Selling and distribution costs increased by 5 percent to P4.77 billion largely due to higher demurrage costs caused by port constraints and above-inflation increases in Transnet tariffs.”


Kumba Iron Ore Chief Executive Officer (CEO), Themba Mkhwanazi said, the company’s strategy has helped deliver exceptional earnings growth, as we continue to increase the resilience of the business. Against challenging operational conditions, we marked another year of strong financial performance with EBITDA up by 62 percent to P24.52 billion.


According to the statement posted in BSE, Mkhwanazi said financial performance of the company reflects the benefits of higher iron ore prices also improved efficiencies and further cost savings ahead of their target.


“These results were also achieved through a persistent focus on safety as we maintained our accident free track record since May 2016 and our commitment to responsible production, focused on unlocking value from our world-class assets, has in turn allowed us to help build thriving communities and improve people’s lives,” said Mkhwanazi.


Mkhwanazi further stated that the company’s EBITDA margin has increased to 52 percent and cash flow from operations is up by 79 percent to P25.47 billion.


He said the strong performance and robust balance sheet was result of the Board decision after they declared a final cash dividend of R15.99 per share.


“Combined with the interim dividend of R30.79 per share, this represents a total payout ratio of 92 percent of headline earnings per share for 2019, in excess of our 50 percent to 75percent dividend payout policy. In total we have created value of P14.39 billion for shareholders this year,” he indicated.


Kumba CEO added that since the company embarked on margin enhancement strategy, Kumba’s return on capital employed has improved from 49 percent in 2018 to 83 percent in 2019, reflecting favourable markets.


He went on according to the statement said the South African’s company was focused on optimising the value of assets and generating strong cash flows in order to improve returns.






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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020

This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.

The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.

He was speaking in  Parliament on Tuesday delivering  Parliament’s Finance Committee report after assessing a  motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.

The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.

The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.

The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.

This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.

Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.

Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.

However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.

Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.

When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.

This  as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.

The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.

Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.

In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.

Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.

Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.

Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.

Acknowledging the need to draw down from GIA no more, current Minister of Finance   Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”

He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”

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