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PPPs critical to economic recovery – Serame

Peggy Serame

Special Elected Member of Parliament, Peggy Serame who is also Minister of Investment Trade and Industry says Government should accelerate uptake of Public Private Partnership (PPPs) models for massive infrastructural projects that are proving too steep for fiscal financing alone.

When deliberating on Midterm Review put before parliament by Minister of Finance & Economic Development, Dr Thapelo Matsheka, Serame said PPPs could be used to develop major projects with significant economic stimuli like Railway lines, road networks and agricultural infrastructure.

Predominantly due to chronic fiscal stress since the 2008/9 global financial crisis, there have been calls for alternative ways of financing economic development. Public Private Partnerships (PPPs) have been identified as such alternatives.

On the other hand Professor Botlhale, a lecturer at the University of Botswana observes in one of his academic papers that there is an increasing understanding that the private sector is not a competitor but a strategic partner in the drive for economic development. Therefore, governments are leveraging on the benefits of PPPs.

In the recent past, PPPs have been used to procure public works and services all over the world . Although initially restricted to public infrastructure in the form of roads, railways, prisons, government buildings, power generation, or water and waste treatment facilities, PPP has increasingly moved into the provision of so-called “social infrastructure” such as schools, hospitals, and health services.

There is a reason to believe that PPPs will continue in their ascendancy and will overshadow the traditional/conventional public procurement model where the government provides the sole financing for projects. In a study on PPPs in Botswana undertaken in 2016, Professor Botlhale underscored that since 2008/9 financial crisis, Botswana’s revenue has been feeling pressure from depressed diamond business.

He noted that though PPP model has not been explored to the fullest there has been an upsurge in the uptake of PPPs as sufficiently instanced by the building of shopping malls, for example, Rail Park Mall in Gaborone and Mongala Mall in Kanye.

BR Properties (Pty) Ltd, a division of wholly Government owned Botswana Railways, partnered with Botswana Insurance Fund Managers (BFIM), Eris Botswana and Tredinnick to build the Rail Park Mall on September 2010 and the mall was opened on the 24 April 2012. The Mongala Mall is a PPP venture between the Southern District Council and Time Projects and was officially opened on 26 March 2014.

On Tuesday Minister Serame noted that that there was need to seriously explore PPP financing models as a way of resuscitating the economy post depressed government revenue caused by COVID-19 pandemic. “We need to engage capital markets, pension funds and the private sector at large and come up with winning partnership models in financing our big infrastructural projects such as bridges, railway lines and road networks,” she said.

Government established a PPP Unit within the Ministry of Finance & Economic Development. At a workshop organized by Business Botswana and Ministry of Finance in 2018, Orono Otweyo a privatization expert from Uganda described PPP as a commercial transaction between government entity and a private party.

In a PPP model, private party performs institutional functions, establishes or manages public property. The arrangement, substantial risk, financial, technical and operational are all passed to the private party and that private party is expected to benefit through payments from government or end user fees.

According to Otweyo, during the construction phase of a project under PPP, government does not incur any cost to the private party and only pays once the project is completed, the costs of construction resting with the private entity. Usually for big, high capital intensive projects private companies would form a consortium and incorporate a company that will enter into an agreement with government.

The company formed will be a Special Purpose Vehicle (SPVs) which shall solely exists for the purpose of implementation of that particular project and cannot undertake any business that is not part of the project. Government can also have nominal representation in the SPV which may be due to strategic, financial or economic interest. The SPV will in turn get funding from equity or any other form of financing to carry out the project.

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Matsheka seeks raise bond program ceiling to P30 billion

14th September 2020
Dr Matsheka

This week Minister of Finance & Economic Development, Dr Thapelo Matsheka approached parliament seeking lawmakers approval of Government’s intention to increase bond program ceiling from the current P15 Billion to P30 billion.

“I stand to request this honorable house to authorize increase in bond issuance program from the current P15 billion to P30 billion,” Dr Matsheka said. He explained that due to the halt in economic growth occasioned by COVID-19 pandemic government had to revisit options for funding the national budget, particularly for the second half of the National Development Plan (NDP) 11.

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Lucara sits clutching onto its gigantic stones with bear claws in a dark pit

14th September 2020
Lesedi La Rona

Botswana Stock Exchange (BSE) has this week revealed a gloomy picture of diamond mining newcomer, Lucara, with its stock devaluated and its entire business affected by the COVID-19 pandemic.

A BSE survey for a period between 1st January to 31st August 2020 — recording the second half of the year, the third quarter of the year and five months of coronavirus in Botswana — shows that the Domestic Company Index (DCI) depreciated by 5.9 percent.

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Botswana Diamonds issues 50 000 000 shares to raise capital

14th September 2020

Botswana Diamond PLC, a diamond exploration company trading on both London Stock Exchange Alternative Investment Market (AIM) and Botswana Stock Exchange (BSE) on Monday unlocked value from its shares to raise capital for its ongoing exploration works in Botswana and South Africa.

A statement from the company this week reveals that the placing was with existing and new investors to raise £300,000 via the issue of 50,000,000 new ordinary shares at a placing price of 0.6p per Placing Share.

Each Placing Share, according to Botswana Diamond Executives has one warrant attached with the right to subscribe for one new ordinary share at 0.6p per new ordinary share for a period of two years from, 7th September 2020, being the date of the Placing Warrants issue.

In a statement Chairman of Botswana Diamonds, John Teeling explained that the funds raised will be used to fund ongoing exploration activities during the current year in Botswana and South Africa, and to provide additional working capital for the Company.

The company is currently drilling kimberlite M8 on the Marsfontein licence in South Africa and has generated further kimberlite targets which will be drilled on the adjacent Thorny River concession.

In Botswana, the funds will be focused on commercializing the KX36 project following the recent acquisition of Sekaka Diamonds from Petra Diamonds. This will include finalizing a work programme to upgrade the grades and diamond value of the kimberlite pipe as well as investigating innovative mining options.

Drilling is planned for the adjacent Sunland Minerals property and following further assessment of the comprehensive Sekaka database more drilling targets are likely. “This is a very active and exciting time for Botswana Diamonds. We are drilling the very promising M8 kimberlite at Marsfontein and further drilling is likely on targets identified on the adjacent Thorny River ground,” he said.

The company Board Chair further noted, “We have a number of active projects. The recently acquired KX36 diamond resource in the Kalahari offers great potential. While awaiting final approvals from the Botswana authorities some of the funds raised will be used to detail the works we will do to refine grade, size distribution and value per carat.”

In addition BOD said the Placing Shares will rank pari passu with the Company’s existing ordinary shares. Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that such admission will become effective on or around 23 September 2020.

Last month Botswana Diamond announced that it has entered into agreement with global miner Petra Diamonds to acquire the latter’s exploration assets in Botswana. Key to these assets, housed under Sekaka Diamonds, 100 % subsidiary of Petra is the KX36 Diamond discovery, a high grade ore Kimberlite pipe located in the CKGR, considered Botswana’s next diamond glory after the magnificent Orapa and prolific Jwaneng Mines.

The acquisition entailed two adjacent Prospecting Licences and a diamond processing plant. Sekaka has been Petra’s exploration vehicle in Botswana for year and holds three Prospecting Licenses in the Central Kalahari Game Reserve (Kalahari) PL169/2019, PL058/2007 and PL224/2007, which includes the high grade KX36 kimberlite pipe.

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