Closed border trade conundrum; Masisi’s pragmatic headache
A graphical picture or statistical publication shows that since 2018, Botswana’s trade balance has been on the lows if not fluctuating on the negatives-a bad economic health. This was shown in the latest International Merchandise Trade Statistics (IMTS), statistics which is one of the major contributing indicators of the performance of Botswana’s economy and its competitiveness in the world market.
This trade balance graphical picture is figuratively akin to that of a Covid-19 patient on life support; struggling to breathe while lying down on a sickbed gasping to salvage the last oxygen left on offer.
Botswana’s affair in foreign trade statistics -which is all about an account of all transactions of merchandise between this country’s domestic residents and the rest of the world- is on feeble health or life support status. The account measures the value and quantity of goods which add or subtract from the stock of material resources of a country, by entering (imports) or leaving (exports) its economic territory.
[ihc-hide-content ihc_mb_type=”show” ihc_mb_who=”1,2,3″ ihc_mb_template=”1″ ]Botswana’s trade health is synonymous with high dependency on diamond exports while being reliant on importation of basic, or in the use of Covid-19 language, essential goods like foodstuff. In trade, Botswana is more of an importer economy rather than an exporter economy. This is because it makes less money in what it buys than what it can sell, according to trade statistics.
In January 2018, Botswana’s trade balance was around P1.8 million before it slipped to –P1.9 million in February the same year. It rose from the negatives in May 2018 to be over P2 million. However, in August the trade balance went down in to the negatives before it rose again to close to P2.2 million by the end of 2018. From 2018 trade balance has been fluctuating albeit holding on to a deficit which was metaphorically compared to a sick state.
The greatest fall in this trend is showing Botswana on an economic sickbed happened in July 2019. The IMTS statistical graph reads lowly; the biggest fall of trade balance held a trade deficit of July 2019, the same period this year, was -P3.2 billion.
Statistics Botswana explained that the greatest trade shortfall by a decrease of exports by 53.1 percent (P3 billion) compared to the revised June 2019 value of P5.7 billion. The statistics body said the decrease is associated with a fall of 56.2 percent (P2.9 billion) in diamond exports during July 2019.
This year has not been a good trading year for Botswana, from January the trade balance plummeted hard recording negatives. There was a promising slight revival from February to April 2020. Cleary all disruptions came with the first three announced cases of COVID-19, effectively forcing Masisi to put the country on an immediate lockdown. Everything stopped; most domestic activities ceased while trade slowed down.
But the trade deficit did not stop from going down despite everything being on pause. According to IMTS released in July- from April which was the month of lockdown to May- the trade balance keep on deteriorating.
The trade status of Botswana was still sick even before the April lockdown. Statistics Botswana says that there was a decline of 30.7 percent (P2 billion) from the P6.5 billion recorded in March 2019 to P4.5 billion realized in March 2020. In March this year Botswana registered a trade deficit of P1. 8 billion in March 2020.
Statistics Botswana said: “This was mainly attributed to the decrease in the exportation of diamonds, having declined by 38.0 percent (P2.3 billion), from P6 billion registered in March 2019 to P3.8 billion in March 2020.” Botswana relies heavily on diamonds. Botswana’s sick trade status which has been in the red since 2018, also needs the glitter of diamond exports.
But for May statistics, Botswana in lockdown imported more than it exported. The glitter of diamond exports which accounted for 25 percent of the total exports could not withstand the weight of imports. The total imports were valued at P4.4 billion, displaying an increase of over 100.0 percent (P3 billion) when compared to the revised April 2020 imports figure.
“The growth in imports was mainly due to the lifting of the COVID-19 restrictions by the Government of Botswana,” says Statistics Botswana, in the recently released trade report. The most imported thing in May was fuel, which contributed to 22.8 percent or P1 billion of the total imports. Fuel, even in the first months of lockdown, was the most imported commodity despite most vehicles parked due to stay home restrictions which allowed only essential services to drive around.
Total exports for May 2020 were valued at P274.6 million and the 25.1 percent or P68.8 million attributed to diamonds could not help the P4billion of imports and this led to a dire trade deficit. The greater account of total imports were too big for the total exports for May 2020 which displayed a growth of 87.7 percent (P128.3 million) from the revised April 2020 value of P146.3 million.
According to Statistics Botswana, the significant increase is attributed to the exportation of diamonds valued at P68.8 million through a chartered flight. Botswana closed borders and the country’s diamond seller -De Beers- had to postpone its sight viewing before moving them to Belgium, hence the use of chartered flights to trading.
The increase in May exports was not enough to put Botswana trade in recovery, this country if it were a coronavirus patient, it would be “an active case.” A trade deficit of P4.2 billion was recorded during May 2020, even larger than the one realized in July 2019. Batswana are not the only the ones infected with Covid-19, so is this country’s trade and the deficit is expected to be even larger than the recently recorded P4.2 billion.
Trucks were the main mode of transport during lockdown hence Botswana used road as its main mode of transport during the reference period. Road transport accounted for 58.2 percent of exports and 46.5 percent of imports.
Food, Beverages & Tobacco and Chemicals & Rubber Products made contributions of 12.7 percent (P564.2million) and 11.0 percent (P448.5 million) to Botswana’s total imports respectively. Most of these commodities were from South Africa, which is Botswana’s main importer with a contribution of 65.5 percent of the country’s total imports.
Other sellers of goods to Botswana are Namibia, China and India with contributions of 16.5 percent, 5.1 percent and 1.9 percent respectively. With regard to regional groupings, SACU was the major source of imports with a contribution of 82.2 percent.
According to Statistics Botswana, Asia and the EU followed with contributions of 10.7 percent and 2.9 percent respectively. USA contributed 1.8 percent worth of imports to Botswana’s total imports during the same month.[/ihc-hide-content]
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.