Batswana to buy food cheap amid oil price turmoil
Some observers have seen an even bigger picture for a local consumer in the current oil price warfare; when oil prices go down, transportation of any commodity from Botswana’s main exporter South Africa will ease hence the cost of food subsequently falling.
Opening this week on Monday, history was made as the global oil price for crude skidded to its lowest level since 1991, a barrel was under $32 as international regulator of oil prices and production OPEC led by Saudi Arabia are entangled in a price war with the world’s biggest oil player- Russia.
Now superpowers Saudi Arabia and Russia are fighting over how much should be produced and how far prices should go. After the increase in the intensity of coronavirus, OPEC decided to decrease production by one million barrels per day and wanted even non-OPEC members including their leader Russia, to follow suit. But Russian President Vladimir Putin has stated this week that the country would not cut production, Saudi Arabia responded by shedding prices of oil while the market is swamped by cheap produce.
Motswedi Securities on Monday explained that the decline in prices came as OPEC+ member, Russia, went against efforts made by de facto leader, Saudi Arabia, to cut production to curb the coronavirus effects on demand. Saudi Arabia retaliated by evoking a price war against Russia by cutting its prices from $14 to $8. When commenting on the oil price war on Forbes magazine this week Ellen Wald wrote that, “the oil collapse this week is the result of two powerful oil producers reacting in their own best interests during a global demand crisis.”
On Tuesday Motswedi Securities said the price slash by OPEC's de facto leader Saudi Arabia on Monday evoked a price war with non-OPEC member Russia. The commodity climbed by almost 10% in the day (Tuesday), coming back slightly from a year to date loss of just above -50% to about -43%. According to Motswedi it announced at the beginning of the week that it would be increasing its production levels, which would be its first increase in over ten years. Output in the country will increase from 12mn barrels per day to 13mn barrels per day, with the commodity's price trading around 3% lower at US$36.09/bbl, at the time of writing.
But some observers see the good in this, Batswana will to go to South Africa for a huge shopping spree. Botswana gets most of its oil imports from South Africa, the country accounts for 64.4 percent of this country’s total imports according to latest statistics. In 2018 Botswana’s import bill from South Africa was US$ 3. 87 billion while the mineral fuels, oils and distillation products accounted for $4763.48 in the same year. Furthermore statistics suggests Botswana imports from South Africa of Oils and Other Products of Distillation of High Temperature Coal Tar was US$208.98 according to recent statistics.
According to Statistics Botswana, Commodities that were imported mostly in December 2019 were Diamonds; Food, Beverages & Tobacco and Fuel with contributions of 25.7 percent, 17.0 percent and 16.6 percent respectively. Out of all that is being put on paper, Botswana will buy everything in South Africa cheaper as fuel prices are lowered for transportation of goods, commodities will be even lower.
A private player, 100 percent citizen-owned company in the energy industry Boswa Energy CEO, Tumelo Sealetsa told BusinessPost in an interview that he expects food prices to decrease responding to the current oil price crash. He said decrease in oil means Boswa Energy will benefit and highlighted that food prices will eventually go down as diesel prices, a commodity used in farming and many other agriculture activities, fell this week. Retailers will ease food prices hence consumers paying a lot lesser than what they took out of their pockets few months ago.
According to Statistics Botswana price statistics, the Food & Non-Alcoholic Beverages group index registered an increase of 0.7 percent, moving from 103.0 in December 2019 to 103.7 in January 2020. The statistics was attributed to the increase in major constituent section indices of Meat (1.6 percent), Fruits (0.9 percent) and Bread & Cereals (0.6 percent). Botswana imports most of these commodities from South Africa. Many experts expect the April inflation to have a huge fall in food prices for Botswana due to what transpired after the oil crash.
Batswana consumers may have to face mask their SA spree as COVID-19 awaits
Another big headline for the oil’s Blue Monday crash, the South African Rand was also not without its woes, plunging by 8 percent against the American dollar this Monday. The Rand fell on its knees, a very big knock since January 1980, as a result of this it is reported that investors are fleeing from riskier assets. Adding more salt to the Rand’s wound is the tumbling oil prices which further put weight on the coronavirus spread scare. On Monday morning, the same day of the oil crash, as the rand fell R16.75 to the US dollar. To the Pound Sterling the Rand reflected R21 on Monday.
Economist Othata Batsetswe said the bubble or excitement that Batswana should go shopping because coronavirus does not hold enough air, because the Rand fall and oil crash would not affect the local economy that much. South Africa has so far reached 13 numbers of coronavirus cases and the numbers seem to be growing with time.
“Because the oil crash and Rand fall is against a backdrop of another economic impediment, the coronavirus outbreak, which will also affect Batswana or the local economy. Whatever might seem to be advantageous to Batswana may be economically inconsequential. Even though the oil crash and the rand fall, Batswana will still stay home because of coronavirus. Also if South Africa goes into recession, expect it to pull economies that are dependent on it like Botswana to go down with it. So there will be business as usual,” said Batsetswe.
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.