The highly anticipated reopening of BCL mine will not happen anytime soon. Permanent Secretary in the Ministry of Mineral Resources, Green Technology & Energy Security, Mr Mmetla Masire says it is still way too early to imagine or even think about return of operation at the once regional copper and nickel mining giant.
In September of this year, Lefoko Moagi – Minister of Mineral Resources told Parliament that government had identified three (3) potential investors who are interested in bringing the BCL mine back to life. The process of choosing new owners, Moagi said, was expected to be completed by December 2020.
Speaking to Weekendpost on Monday, Permanent Secretary Masire said the BCL Liquidator has reported to the Ministry that they are still evaluating bids/proposals from a number of interested potential investors. “At this stage they have not yet concluded the evaluation therefore we do not know how well they are progressing,” he said.
Masire explained that the process will take some time as it is the nature with companies under liquidation. “The Liquidator reports to the Master of the High Court and they will update us on their finds and decisions when they are ready,” said Masire.
Quizzed on whether or not Government would be interested in buying a stake, or partnering with any of the investors Mmetla Masire said that conversation was not applicable at the moment. “It is premature to talk about Government partnering with any of the bidders when we are not even sure if any of the bidders will be successful,” he said.
The Permanent Secretary reiterated that it would therefore be unrealistic to expect BCL mine to be back in operation any time soon. “It is premature to be talking about reopening all or parts of BCL, the process of arriving at that stage is a very complex one and it takes time,” Masire said.
BCL Group which comprises of Phikwe BCL Mine and Tati Nickel mine in Francistown was put under provisional liquidation in October 2016, a decision which according to Government, stemmed from decline of copper prices on global markets thus rendering BCL an uneconomic business case.
Prior to BCL liquidation Government had already pumped over P1 billion in cash through a loan that was later transformed into equity giving government full ownership following a series of transactions aimed at buying out Russian Norilsk. The closure of BCL mine in Phikwe resulted in over 5000 job losses, majority of which were semi and non-skilled personnel from Selibe Phikwe and surrounding areas.
THE RACE TO TAKE OVER BCL
Information gathered by Weekendpost revealed that while government had announced that three (3) potential investors are bidding for the takeover of BCL mine, the quest has narrowed to a two (2) horse race. Two Former BCL Executives are said to be leading two (2) set of investors in a pursuit to assume the reins of resurrecting BCL.
Montwedi Mphathi, former General Manager of BCL has partnered with a team of Canadian Investors to bid for the Mine. Mphathi, a shrewd miner, is credited for leading BCL to profitability during his time before leaving under a cloud to head Botash, Botswana‘s sole soda ash producer. Sources close to the matter told this publication that Mphati and his partners are likely to emerge as the preferred bidders.
He is said to be banking on his credentials as the first Motswana to head BCL, leading it to profitability, and a combination of his Canadian partners’ financial capacity and knowledge of the market. “Mphathi actually knows BCL better , he has worked there for over 30 as a junior until General Manager , if his Canadian partners have the money and guaranteed market access , they stand a better chance,” said one industry expert who preferred anonymity.
The seasoned mining industry giant who also worked in the highest level of Government told this publication that BCL‘s business case remains viable. “The Phikwe mine would obviously not be back to pre liquidation capacity; at most it’s likely to hire about 1500 people,” he said.
The other set of investors are led by Mark Williams. The former Divisional Manager – Corporate Strategy at BCL Mine is said to have convinced well resourced Qataris investors’ to also enter the race. Mark William is often referred to as the master mind behind BCL Polaris II, an ambitious strategy that was coiled to diversify BCL‘s portfolio and secure the company‘s future beyond its own mineral resource.
Polaris II which entailed multibillion pula purchase of Nkomati Mine in South Africa was later criticized as one of the ill advised moves that sunk BCL into financial dark hole. Efforts to get hold of BCL liquidator who is based in Cape Town, South Africa were not fruitful as had not responded to Weekendpost questionnaire at press time. His Phikwe based staff declined commenting on the matter.
Mowana Copper Mine in Dukwi will finally pay its former employees a total amount of P23, 789, 984.00 end of this month. For over three years Mowana Copper Mine has been under judicial management. Updating members, Botswana Mine Workers Union (BMWU) Executive Secretary Kitso Phiri this week said the High Court issued an order for the implementation of the compromise scheme of December 9, 2021 and this was to be done within 30 days after court order.
“Therefore payment of benefits under the scheme including those owed to Messina Copper Botswana employees should be effected sometime in January latest end of January 2022,” Kitso said. Kitso also explained that cash settlement will be 30 percent of the total Messina Copper Botswana estate and negotiated estate is $3,233,000 (about P35, 563,000).
Messina Copper was placed under liquidation and was thereafter acquired by Leboam Holdings to operate Mowana Mine. Leboam Holdings struck a deal with the Messina Copper’s liquidator who became a shareholder of Leboam Holdings. Leboam Holdings could not service its debts and its creditors placed it under provisional judicial management on December 18, 2018 and in judicial management on February 28, 2019.
A new company Max Power expressed interest to acquire the mining operations. It offered to take over the Mowana Mine from Leboam Holdings, however, the company had to pay the debts of Leboam including monies owed to Messina Copper, being employees benefits and other debts owed to other creditors.
The monies, were agreed to be paid through a scheme of compromise proposed by Max Power, being a negotiated payment schedule, which was subject to the financial ability of the new owners. “On December 9, 2021, Messina Copper liquidator, called a meeting of creditors, which the BMWU on behalf of its members (former Messina Copper employees) attended, to seek mandate from creditors to proceed with a proposed settlement for Messina Copper on the scheme of compromise. It is important to note that employee benefits are regarded as preferential credit, meaning once a scheme is approved they are paid first.”
A savingram the Ministry of Local Government and Rural Development sent to Town Clerks and Council Secretaries explaining why councilors across the country should not have access to their terminal benefits before end of their term has been revealed.
The contents of the savingram came out in the wake of a war of words between counselors and the Ministry of Local Government and Rural Development. The councilors through the Botswana Association of Local Authorities (BALA) accuse the Ministry of refusing to allow them to have access to their terminal benefits before end of their term.
This has since been denied by the Ministry. In the savingram to town councils and council secretaries across the country, Permanent Secretary in the Ministry of Local Government and Rural Development Molefi Keaja states that, “Kindly be advised that the terminal benefits budget is made during the final year of term of office for Honorable Councilors.” Keaja reminded town clerks and council secretaries that, “The nominal budget Councils make each and every financial year is to cater for events where a Councilor’s term of office ends before the statutory time due to death, resignation or any other reason.”
The savingram also goes into detail about why the government had in the past allowed councilors to have access to their terminal benefits before the end of their term. “Regarding the special dispensation made in the 2014-2019, it should be noted that the advance was granted because at that time there was an approved budget for terminal benefits during the financial year,” explained Keaja. He added that, “Town Clerks/Council Secretaries made discretions depending on the liquidity position of Councils which attracted a lot of audit queries.”
Keaja also revealed that councils across the country were struggling financially and therefore if they were to grant councilors access to their terminal benefits, this could leave their in a dire financial situation. Given the fact that Local Authorities currently have cash flow problems and budgetary constraints, it is not advisable to grant terminal benefits advance as it would only serve to compound the liquidity problems of councils.
It is understood that the Ministry was inundated with calls from some Councils as they sought clarification regarding access to their terminal benefits. The Ministry fears that should councils pay out the terminal benefits this would affect their coffers as the government spends a lot on councilors salaries.
Reports show that apart from elected councilors, the government spends at least P6, 577, 746, 00 on nominated councilors across the country as their monthly salaries. Former Assistant Minister of Local Government and Rural Development, Botlogile Tshireletso once told Parliament that in total there are 113 nominated councilors and their salaries per a year add up to P78, 933,16.00. She added that their projected gratuity is P9, 866,646.00.
A surge in consumer spending is expected to be a key driver of Botswana’s economic recovery, according to recent projections by Fitch Solutions. Fitch Solutions said it forecasts household spending in Botswana to grow by a real rate of 5.9% in 2022.
The bullish Fitch Solutions noted that “This is a considerable deceleration from 9.4% growth estimated in 2021, it comes mainly from the base effects of the contraction of 2.5% recorded in 2020,” adding that, “We project total household spending (in real terms) to reach BWP59.9bn (USD8.8bn) in 2022, increasing from BWP56.5bn (USD8.3bn) in 2021.” According to Fitch Solutions, this is higher than the pre-Covid-19 total household spending (in real terms) of P53.0 billion (USD7.8bn) in 2019 and it indicates a full recovery in consumer spending.
“We forecast real household spending to grow by 5.9% in 2022, decelerating from the estimated growth of 9.4% in 2021. We note that the Covid-19 pandemic and the related restrictions on economic activity resulted in real household spending contracting by 2.5% in 2020, creating a lower base for spending to grow from in 2021 and 2022,” Fitch Solutions says.
Total household spending (in real terms), the agency says, will increase in 2022 when compared to 2021. In 2021 and 2022, total household spending (in real terms) will be above the pre-Covid-19 levels in 2019, indicating a full recovery in consumer spending, says Fitch Solutions. It says as of December 6 2021 (latest data available), 38.4% of people in Botswana have received at least one vaccine dose, while this is relatively low it is higher than Africa average of 11.3%.
“The emergence of new Covid-19 variants such as Omicron, which was first detected in the country in November 2021, poses a downside risk to our outlook for consumer spending, particularly as a large proportion of the country’s population is unvaccinated and this could result in stricter measures being implemented once again,” says Fitch Solutions.
Growth will ease in 2022, Fitch Solution says. “Our forecast for an improvement in consumer spending in Botswana in 2022 is in line with our Country Risk team’s forecast that the economy will grow by a real rate of 5.3% over 2022, from an estimated 12.5% growth in 2021 as the low base effects from 2020 dissipate,” it says.
Fitch Solutions notes that “Our Country Risk team expects private consumption to be the main driver of Botswana’s economic growth in 2022, as disposable incomes and the labour market continue to recover from the impacts of the Covid-19 pandemic.” It says Botswana’s tourism sector has been negatively impacted by the Covid-19 pandemic and the related travel restrictions.
According to Fitch Solutions, “The emergence of the Omicron variant, which was first detected in November 2021, has resulted in travel bans being implemented on Southern African countries such as South Africa, Botswana, Lesotho, Namibia, Zimbabwe and Eswatini. This will further delay the recovery of Botswana’s tourism sector in 2021 and early 2022.” Fitch Solutions, therefore, forecasts Botswana’s tourist arrivals to grow by 81.2% in 2022, from an estimated contraction of 40.3% in 2021.
It notes that the 72.4% contraction in 2020 has created a low base for tourist arrivals to grow from. “The rollout of vaccines in South Africa and its key source markets will aid the recovery of the tourism sector over the coming months and this bodes well for the employment and incomes of people employed in the hospitality industry, particularly restaurants and hotels as well as recreation and culture businesses,” the report says.
Fitch Solutions further notes that with economies reopening, consumers are demanding products that they had little access to over the previous year. However, manufacturers are facing several problems. It says supply chain issues and bottlenecks are resulting in consumer goods shortages, feeding through into supply-side inflation. Fitch Solutions believes the global semiconductor shortage will continue into 2022, putting the pressure on the supply of several consumer goods.
It says the spread of the Delta variant is upending factory production in Asia, disrupting shipping and posing more shocks to the world economy. Similarly, manufacturers are facing shortages of key components and higher raw materials costs, the report says adding that while this is somewhat restricted to consumer goods, there is a high risk that this feeds through into more consumer services over the 2022 year.
“Our global view for a notable recovery in consumer spending relies on the ability of authorities to vaccinate a large enough proportion of their populations and thereby experience a notable drop in Covid-19 infections and a decline in hospitalisation rates,” says Fitch Solutions. Both these factors, it says, will lead to governments gradually lifting restrictions, which will boost consumer confidence and retail sales.
“As of December 6 2021, 38.4% of people in Botswana have received at least one vaccine dose. While this is low, it is higher than the Africa average of 11.3%. The vaccines being administered in Botswana include Pfizer-BioNTech, Sinovac and Johnson & Johnson. We believe that a successful vaccine rollout will aid the country’s consumer spending recovery,” says Fitch Solutions. Therefore, the agency says, “Our forecasts account for risks that are highly likely to play out in 2022, including the easing of government support. However, if other risks start to play out, this may lead to forecast revisions.”