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EU may shun giving Botswana money, but not after October

President Masisi

Shockingly, COVID-19 became a blessing in disguise for Botswana as the European Union (EU) in its fresh dirty-money blacklisting of notorious countries took into consideration that the pandemic may be a major impediment for these nations to comply with Europe’s conditions or standards.

According to the EU recently, COVID-19 has had disruptive global impact on many economies and national administrations around the world, and it would not be fair to put harsh conditions now on these blacklisted countries; like EU funding and doing financial transactions with these dirty money countries through financial systems or by any means.

“The very exceptional and unpredictable situation arising from the Coronavirus pandemic has a global impact and is leading to significant disruption for economies and national administrations around the world.

Therefore, the date of application of today’s (EU’s Delegated Regulation) Regulation listing third countries – and therefore applying new protective measures – only applies as of 1 October 2020. This is to ensure that all stakeholders have time to prepare appropriately.

The delisting of countries, however, is not affected by this and will enter into force 20 days after publication in the Official Journal,” said EU after releasing the blacklist.

According to EU’s Commission last week Thursday, Botswana and other 11 nations of the world are blacklisted and should notoriously be seen as culprits posing a money-laundering or dirty money threat to Europe’s law-abiding single market.

This country and its named and shamed counterparts, The Bahamas, Barbados, Cambodia, Ghana, Jamaica, Mauritius, Mongolia, Myanmar, Nicaragua, Panama and Zimbabwe are seen as prone to financial lawlessness and poses a “high risk” of injecting criminal or terrorist funds into the single market. According to the Commission, EU banks ought to do enhanced due diligence on transactions when thinking of these countries.

Last week EU executive vice-president Valdis Dombrovskis said in a communication that: “We need to put an end to dirty money infiltrating our financial system. Today we are further bolstering our defences to fight money laundering and terrorist financing, with a comprehensive and far-reaching Action Plan.

There should be no weak links in our rules and their implementation. We are committed to delivering on all these actions – swiftly and consistently – over the next 12 months. We are also strengthening the EU’s global role in terms of shaping international standards on fighting money laundering and terrorism financing.”

Addition of a country into the EU blacklist can only mean many bad things to follow and a tarnish to the country’s image, especially Botswana which has been touted for years as an incorruptible model and jewel for democracy. After last week’s listing no funds from Botswana in any form of transaction will be accepted by the Eu community.

European financial systems or banks are told to do further diligence when dealing with “dirty money Botswana,” and Europeans will be under too much scrutiny when they make investment into Botswana. As if that is enough, the EU may consider its funding of Botswana as it does not want to pollute its (EU) money by dealing with a financial rascal of a jurisdiction.

The listing of notorious countries according to EU comes at a time when the world is grappled by COVID-19. Botswana is currently on lockdown and going through a State of Emergency in response to the pandemic to deal with the EU standards and conditions. Botswana and EU are major trading partners and Europe buys most of these country beef.

Botswana and its counterparts which were added last week joins countries already on the list which are Afghanistan, Iraq, Vanuatu, Pakistan, Syria, Yemen, Uganda, Trinidad and Tobago, Iran and North Korea. It is reported that all states except North Korea have committed to changing their rules in order to better tackle money laundering and terrorism financing and hope to be removed from the blacklist.

“We welcome those commitments and invite those jurisdictions to implement them swiftly. Given the Coronavirus crisis, the date of application of today’s Regulation listing third countries – and therefore applying new protective measures – only applies as of 1 October 2020,” said EU.

The European Commission said it, “will immediately identify those countries that refuse to take commitments to address their strategic deficiencies (“non-cooperative jurisdictions”) or those third countries that have an overriding level of risk.”

According to EU, third countries taking commitments to address concerns, as part of the European Commission’s autonomous assessment, will benefit from a 12-month observation period. In case they do not implement those commitments within the agreed period, the Commission will proceed with a listing, said EU.

A question which has been put for the EU is: Will there be any technical assistance available for the countries identified as high-risk third countries? The block said promised to assist the blacklisted countries by, “providing technical assistance to the countries identified as high-risk third countries.”

EU has put itself in the spotlight as an infallible champion of financial morality and leading the war on money laundering and countering terrorist financing. “The Commission currently has a programme (€20 million) under the Global Facility (AML/CFT) to support countries in the world to monitor, disrupt and deny the financing of terrorism and money-laundering.

The Commission aims at supporting more partners to address AML/CFT issues. This process is demand-driven – i.e. countries will have to define their needs and request technical assistance to improve their AML/CFT regimes in the framework of the external aid policy of the Commission,” said the EU.

Business

Botswana current account pressed down by mining woes

26th May 2020
Mowana copper mine

There is a fast developing case of a depleting government current account which in the twilight of last year recorded a mammoth deficit of P6.6 billion compared to a revised deficit of P485 million during the corresponding period in 2018.

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Slow recovery of global diamond market extends ODC closure

25th May 2020
ODC Managing Director: Marcus ter Haar

The economic shock occasioned by COVID-19 on the global diamond market has delivered the heaviest blow to Botswana’s wholly state owned Okavango Diamond Company (ODC), the worst since its establishment in 2012.

While other diamond operations across the value chain gradually reopen, ODC will remain closed until diamond market conditions fully recover. This was revealed by Permanent Secretary in the Ministry of Mineral Resources, Green Technology & Energy Security, Mmetla Masire this week.

Following a slow year for the global diamond industry in 2019 owing to the US-China trade war, the industry realized a slight upswing in the first month of 2020, spilling over from recovery signs in late 2019.

However all that was reversed by COVID-19. The virus, which broke in late 2019 in the Wuhan province of China intensified in February, spreading across the world, curtailing movements and international travels.

With the diamond industry, global lockdowns and travel restrictions resulted in muted rough diamond trade, closure of cutting and polishing firms, jewelry outlets and other segments of trade across the value chain.

Mmetla Masire noted that key markets like India are still relatively closed with little demand for rough import for those in operation, as inventories are still swamped up with stock piles. “ODC will remain closed because demand of rough diamonds globally is still very low, so ODC management took a decision to remain closed until demand fully recovers,” he said.

Masire reiterated that major markets for Botswana diamonds such as United States are still on lockdown. He said, “ODC sells its diamonds through auctions; it is still very difficult to hold auctions as of now, so the company will remain closed, with management working from home.”

Okavango Diamond Corporation (ODC) is a wholly state owned diamond marketing and sales company established in 2012 to sell Botswana diamonds outside De Beers’s channels and price books.

ODC markets and sells 15 % of Debswana diamonds after being sorted and valued by Diamond Trading Company (DTCB), while 85 % is sold by De Beers Global Sightholder Sales (DBGSS). Debswana and DTCB are 50-50 ventures of De Beers Group and Botswana Government. DBGSS is wholly owned by De Beers Group.

Botswana Government has a direct 15 % stake in De Beers Group, the remaining 85 % of De Beers Group is owned by Anglo American. Over 60 % of De Beers global production comes from Botswana (Debswana). Meanwhile Debswana, Diamond Trading Company (DTCB), De Beers Global Sightholder Sales (DBGSS) have opened and resumed operations at 60- 70 % workforce.

Mmetla Masire further revealed that DBGSS has started shipping some diamonds to their sightholders in a bid to cultivate market and trading activity amid COVID-19 imposed new normal.

OKAVANGO BLUE YET TO SELL

Okavango Diamond Company has also deferred the sale of Okavango Blue, the magnificent oval shaped blue diamond weighing over 20 carats, unearthed at Debswana Orapa mine at over 40 carats rough weight in 2018.

The sparkling Type IIb ‘Fancy Deep Blue’ unveiled to the world in Gaborone as 20 carats polished last year is yet to sell as demand and prices are still very low to inspire purchase of such a magnificent gem.

The Gemological Institute of America (GIA), has graded the diamond as an Oval Brilliant Cut, VVS2 clarity making it one of the highest polished colour classifications attainable for any blue diamond and at 20.46 carats it sits in the very top bracket of all-time historical blue diamond finds.

Its unique and vibrant blue colour, is created by the molecular inclusion of the rare mineral boron which between 1-3 billion years ago was present in the rocks of ancient oceans during violent diamond forming volcanic activity. Okavango Blue will be showcased over the coming months to promote Botswana as a leading global producer of natural ethical diamonds with an anticipated sale toward the end of the year.

GLOBAL DIAMOND INDUSTRY CRISIS

A couple of months into serious measures to slow the spread of the virus, it has already squashed diamond miners’ dawning hopes of a recovery. Alrosa the world’s largest diamond producer by output, last week reported 95% decline in sales during April, when gauged against the same months last year. This resulted the Russian state-owned deciding to halt production at two of its mines, citing worsening market conditions.

De Beers, the world’s largest producer by value, cut 2020 production guidance by a fifth last month. It had earlier cancelled its April sales event. Canada’s Dominion Diamond Mines, the controlling owner of Ekati mine and a 40% partner to Rio Tinto in the Diavik mine, filed for insolvency protection in April.

Lucara Diamond another Canadian company, posted last week a net loss of $3.2 million, or $0.01 a share, for the first three months of the year. The figure was in sharp contrast with the $7.4 million in net income, or $0.02 in earning per share the miner reported in the same period last year.

South Africa’s Petra Diamonds has recently delayed interest payments to borrow $21 million in new debt, a crucial move to keep the company afloat. Investment banks are increasingly reluctant to extend credit to diamond producers, as inventory is not being sold and defaults are possible, analysts have warned.

“We are concerned about oversupply of rough diamonds following the reopening of economies, as a lot of inventory could potentially be flooded into the system and the market might not be able to absorb all of it, resulting in increased pricing pressure,” said leading European diamond industry think tank, Learnbonds in a statement early this month.

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COVID-19 defers Turnstar 2020 global expansion plans

25th May 2020

Botswana Stock Exchange (BSE) listed property group, Turnstar Holdings Limited will in the year 2020 focus on domestic growth plans as opposed to further global expansion aspirations which were initially planned for the year.

In their abridged audited Group financial results for the year ended January 2020, Turnstar Managing Director, G H Abdoola said COVID19 will affect lives and businesses in every form until it is brought under control.

“My mission for 2020 was to make Turnstar the largest and most profitable property company on the Botswana Stock Exchange. We have done a lot of work on our growth strategy in the countries we operate in, and identified new opportunities in other countries.”

Abdoola says Coronavirus has brought with it, lessons that will change the way of thinking permanently. He said, “The crisis must not make us panic and helpless. It must make us strong and focused. Each business needs to do the best it can in these circumstances, and rise to the challenge.”

He explained that Turnstar wil continue to strive to achieve its goal of being the largest listed Property Company, by the end of 2020.  “We had plans with regards to growth in Botswana, Tanzania, Dubai & Europe, specifically Portugal. At present, this year, we will focus on Botswana until the Corona Virus pandemic has been brought under control,” he said.

Abdoola added, “Only then can we make informed decisions on our future plans. I will keep updating the public and our partners about our plans.” According to the Turnstar Managing Director, unprecedented times such as these require Companies to plan to stay resilient and strong. He revealed that there are various approaches and instruments available to Turnstar management to cushion revenue drop in the business.

The first being “self-help” – what Companies are doing to “help themselves”. The second being restructuring of finances and loans with Banks to suit the revised cash flows. The third being accessing any Government stimulus relief that is being offered.

Abdoola shared that Turnstar is implementing all the self-help steps that are available to keep the Company liquid and strong. The company has paid interim dividend of 9t per linked unit, for the first half of the financial year 31 January 2020.

Turnstar will not pay a final dividend, as has been traditionally done since the inception of the Company. The Managing Director said, “We have prepared cash flow projections based on best case and worst case scenarios, and we are very comfortable that the Group has the financial strength to survive even the worst case scenario.”

He however added that the situation will require management to be prudent and retain cash within the Company, to tide over these difficult times, when trading conditions are almost impossible to forecast.

Abdoola explained that the Company is looking into all areas to try and save costs wherever possible noting that Management will waive their bonuses in the current financial year.

For the financial year ended January 2020, Turnstar has posted satisfactory results, according to company management. The Botswana rental revenues have increased by P 7.7m (5.5%) whilst operational expenses only increased by 3.3%.

The Group operational expenses have been contained. The vacancies in the Commercial Office space in Dar es Salaam, has affected the Group results. The refurbished conference center performed well during the year.

The retail mall is performing to its optimum capacity. The Dubai property continues to perform well. Turnstar is continuously seeking opportunities to expand its property portfolio. Due to the vacancies in the Commercial Office space, Mlimani Holdings has reported a Fair Value loss for the year.

“It should be noted that Fair Values are calculated on current rentals, projected into the future on a discounted cash flow basis. It does not reflect the actual cost of the buildings, and may change from year to year, depending on occupancy levels” explained Turnstar Boss.

The Botswana properties recorded Fair Value Gains. However, due to the Mlimani fair value loss, the Group recorded an overall fair value loss for the year.

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