Botswana Power Corporation (BPC) and Tlou Energy, a Botswana Stock Exchange (BSE) listed energy development company signed a watershed Power Purchase Agreement deal to mark commencement of Botswana’s first CMB backed power generation project. Under the terms of agreement of the Power Purchase Agreement (PPA) Botswana Power Corporation (BPC) will purchase up to 10 Megawatts of power generated at Tlou Energy’s Lesedi Power Project.
The Power Purchase Agreement is for an initial five-year term, with the 10 Megawatt project being the first phase of Tlou’s planned power project expansion. Tlou Energy’s Lesedi project is the company’s most advanced operation and is located in the Central District of Botswana. Once in full production, the 10 Megawatt project is expected to generate revenue of up US$ 10 million (over P110 million) annually meaning from the first 5-year deal the company will rake in over P550 million in revenue from the project.
So far, gas production has started from Lesedi wells and mining licence has been secured which permits project development and operation until 2042. Environmental approvals have been granted by relevant authorities for 20MW of Gas-fired power and 20MW of solar power. With the 10MW Power Purchase Agreement now signed with BPC, the Generation Licence has also been approved by Botswana Energy Regulatory Authority (BERA). Tlou Energy plans to construct 66kV Transmission Lines to connect the Lesedi project to the grid (~100 Km) and also install generation assets and drill additional gas wells.
Once the initial 10MW is in place, the company plans further expansion to secure further off take agreements and supply power into the SADC region. Tlou Energy was established in 2009 by Australian businessmen, the company listed on BSE in December 2017. The company’s biggest shareholders are Botswana’s largest pension fund, Botswana Public Officers Pension Fund, (BPOPF). Speakers at the signing ceremony of the Power Purchase Agreement described the event as a major milestone towards Botswana attaining energy security.
Expansion of Tlou operations to produce 10MW will result in additional 300 jobs created. About 100 workers will be required to operate the plant after expansion. Officiating at the signing ceremony, Minister of Mineral Resources, Green Technology and Energy Security, Lefoko Moagi revealed that the government had committed itself to procuring up to 100MW of CBM from local developers in the next few years, as part of a shift towards renewable energy.
“The CBM resources remain largely unexplored and thus not yet available for base-load generation,” he said. “However, I am pleased to inform you that further prospecting work is ongoing to prove commercial viability of CBM, with the method of extracting being one of the main areas of focus.” Representing Tlou Energy’s Gabaake Gabaake said the company expected to provide the first supply under the contract in the next 48 months. Tlou’s CBM licences are estimated to hold about 41 billion cubic feet of natural gas, and gas wells in the area have already been tested operationally.
“Since our establishment in 2009, our investors have put in P500 million studying the viability of CBM and that commitment is because they believe the gas’ development is possible in Botswana,” Gabaake said. “We know the funds Botswana is spending in importing power and if that money could be invested into the economy, one wonders what we could achieve in terms of employment and generation of wealth.”
Tlou Energy is focused on delivering Power solutions to Botswana and Southern Africa to alleviate some of the chronic power shortage in the region. The Tlou group is planning development of renewable solar power projects and also separate gas-fired power and Hydrogen projects. Botswana has a significant energy shortage and generally relies on imported power and diesel generation to fulfil its power requirements.
Gabaake said Tlou’s provides its investors with access to a compelling opportunity to displace expensive, carbon intensive coal and diesel fired electricity with a more environmentally friendly alternative. In addition to plans for cleaner energy, the company is also committed to developing community projects in Botswana, adding real value to peoples’ lives in a region with sparse services and where few opportunities exist for the local population.
The company aims to assist communities to become self-sustaining, develop business opportunities, build schools, get access to medical professionals and create employment.The Company is listed on the Australian Securities Exchange (ASX), London’s AIM market (AIM) and the Botswana Stock Exchange (BSE).
The recent study on youth entrepreneurship in Botswana has identified difficult access to funding, land, machinery, lack of entrepreneurial mindset and proper training as serious challenges that continue to hamper youth entrepreneurship development in this country.
The study conducted by Alliance for African Partnership (AAP) in collaboration with University of Botswana has confirmed that despite the government and private sector multi-billion pula entrepreneurship development initiatives, many young people in Botswana continue to fail to grow their businesses into sustainable and successful companies that can help reduce unemployment.
University of Botswana researchers Gaofetege Ganamotse and Rudolph Boy who compiled findings in the 2022 study report for Botswana stated that as part of the study interviews were conducted with successful youth entrepreneurs to understand their critical success factors.
According to the researchers other participants were community leaders, business mentors, Ministry of Trade and Industry, Ministry of Youth, Gender, Sport and Culture, financial institutions, higher education institutions, non-governmental institutions, policymakers, private organizations, and support structures such as legal and technical experts and accountants who were interviewed to understand how they facilitate successful youth entrepreneurship.
The researchers said they found that although Botswana government is perceived as the most supportive to businesses when compared to other governments in sub-Saharan Africa, youth entrepreneurs still face challenges when accessing government funding. “Several finance-related challenges were identified by youth entrepreneurs. Some respondents lamented the lack of access to start-up finance, whereas others mentioned lack of access to infrastructure.”
The researchers stated that in Botswana entrepreneurship is not yet perceived as a field or career of choice by many youth “Participants in the study emphasized that the many youth are more of necessity entrepreneurs, seeing business venturing as a “fall back. Other facilitators mentioned that some youth do not display creativity, mind-blowing innovative solutions, and business management skills. Some youth entrepreneurs like to take shortcuts like selling sweets or muffins.”
According to the researchers, some of the youth do not display perseverance when they are faced with adversity in business. “Young people lack of an entrepreneurial mindset is a common challenge among youth in business. Some have a mindset focused on free services, handouts, and rapid gains. They want overnight success. As such, they give up easily when faced with challenges. On the other hand, some participants argue that they may opt for quick wins because they do not have access to any land, machinery, offices, and vehicles.”
The researchers stated that most youth involved in business ventures do not have the necessary training or skills to maintain a business. “Poor financial management has also been cited as one of the challenges for youth entrepreneurs, such as using profit for personal reasons rather than investing in the business. Also some are not being able to separate their livelihood from their businesses.
Lastly, youth entrepreneurs reported a lack of experience as one of the challenges. For example, the experience of running a business with projections, sticking to the projections, having an accounting system, maintaining a clean and clear billing system, and sound administration system.”
According to the researchers, the participants in the study emphasized that there is fragmentation within the entrepreneurial ecosystem, whereby there is replication of business activities without any differentiation. “There is no integration of the ecosystem players. As such, they end up with duplicate programs targeting the same objectives. The financial sector recommended that there is a need for an intermediary body that will bring all the ecosystem actors together and serve as a “one-stop shop” for entrepreneurs and build mentorship programs that accommodate the business lifecycle from inception to growth.”
Botswana Housing Corporation (BHC) is said to have recorded an operating surplus of P61 Million, an improvement compared to the previous year. The housing, office and other building needs giant met with stakeholders recently to share how the business has been.
The P61 million is a significant increase against the P6 million operating loss realized in the prior year. Profit before income tax also increased significantly from P2 million in the prior year to P72 million which resulted in an overall increase in surplus after tax from P1 million prior year to P64 million for the year under review.
Chief of Finance Officer, Diratsagae Kgamanyane disclosed; “This growth in surplus was driven mainly by rental revenue that increased by 15% from P209 million to P240 million and reduction in expenditure from P272 million to P214 million on the back of cost containment.” He further stated that sales of high margin investment properties also contributed significantly to the growth in surplus as well as impairment reversals on receivables amounting to P25 million.
It is said that the Corporation recorded a total revenue of P702 million, an 8% decrease when compared to the P760 million recorded in the prior year. “Sales revenue which is one of the major revenue streams returned impressive margins, contributing to the overall growth in the gross margin,” added Kgamanyane.
He further stated professional fees revenue line declined significantly by 64% to P5 million from P14 million in the prior year which attributed to suspension of planned projects by their clients due to Covid-19 pandemic. “Facilities Management revenue decreased by P 24 million from P69 million recorded in prior year to P45 million due to reduction in projects,” Kgamanyane said.
The Corporation’s strength is on its investment properties portfolio that stood at P1.4 billion at the end of the reporting period. “The Corporation continues its strategy to diversify revenue streams despite both facilities management income and professional fees being challenged by the prevailing economic conditions that have seen its major clients curtailing spending,” added the CEO.
On the one hand, the Corporation’s Strategic Performance which intended to build 12 300 houses by 2023 has so far managed to build 4 830 houses under their SHHA funding scheme, 1 240 houses for commercial or external use which includes use by government and 1 970 houses to rent to individuals.
BHC Acting CEO Pascaline Sefawe noted that; BHC’s planned projects are said to include building 336 flat units in Gaborone Block 7 at approximately P224 million, 100 units in Maun at approximately P78 million, 13 units in Phakalane at approximately P26 million, 212 units in Kazungula at approximately P160 million, 96 units at approximately P42 million in Francistown and 84 units at approximately P61 million in Letlhakane. Emphasing; “People tend to accuse us of only building houses in Gaborone, so here we are, including other areas in our planned projects.”
Researchers from some government owned regulatory institutions in the financial sector have projected that the banking sector’s profitability could increase, following Bank of Botswana Monetary Policy Committee recent decision to increase monetary policy rate.
In its bid to manage inflation, Bank of Botswana Monetary Policy Committee last month increased monetary policy rate by 0.50 percent from 1.65 percent to 2.15 percent, a development which resulted with commercial banking sector increasing interest rate in lending to household and companies. As a result of BoB adjustment of Monetary Policy Rate, from 1.65 percent to 2.15 percent commercial banks increased prime lending rate from 5.76 percent to 6.26 percent.
Researchers from Bank of Botswana, the Non-Bank Financial Institutions Regulatory Authority, the Financial Intelligence Agency and the Botswana Stock Exchange indicated that due to prospects of high inflation during the second half of 2022, there is a possibility that the Monetary Policy Committee could further increase monetary policy rate in the next meeting in August 25 2022.
Inflation rose from 9.6 percent in April 2022 to 11.9 percent in May 2022, remaining above the Bank of Botswana medium-term objective range of 3 – 6 percent. According to the researchers inflation could increase further and remain high due to factors that include: the potential increase in international commodity prices beyond current forecasts, logistical constraints due to lags in production, the economic and price effects of the ongoing Russia- Ukraine conflict, uncertain COVID-19 profile, domestic risk factors relating to possible regular annual administered price adjustments, short-term unintended consequences of import restrictions resulting with shortages in supplies leading to price increases, as well as second-round effects of the recent increases in administered prices “Furthermore, the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices could add upward pressure to inflation,” said the researchers.
The researchers indicated that Bank of Botswana could be forced to further increase monetary policy rate from the current 2.15 percent if inflation rises persistently. “Should inflation rise persistently this could necessitate an upward adjustment in the policy rate. It is against this background that the interest rate scenario assumes a 1.5 percentage points (moderate scenario) and 2.25 percentage points (severe scenario) upward adjustment in the policy rate,” said the researchers.
The researchers indicated that while any upward adjustment on BoB monetary policy rate and commercial banks prime lending rate result with increase in the cost of borrowing for household and compnies, it increase profitability for the banking sector. “Increases in the policy rate are associated with an overall increase in bank profitability, with resultant increases in the capital adequacy ratio of 0.1 percentage points and 0.2 percentage points for the moderate and severe scenarios, respectively,” said the researchers who added that upward adjustment in monetary policy rate would raise extra capital for the banking sector.
“The increase in profit generally reflects the banking industry’s positive interest rate gap, where interest earning assets exceed interest earning liabilities maturing in the next twelve months. Therefore, an increase of 1.5 percentage points in the policy rate would result in industry gains of P71.7 million (4.1 percent increase), while a 2.25 percentage points increase would lead to a gain of P173.9 million (6.1 percent increase), dominated by large banks,” said the researchers.