ODC 2021 sales revenue set to surpass P10bn
Business
Okavango Diamond Company(ODC), the 100 percent Botswana Government owned rough diamonds marketing and sales company is recovering well from the 2020 economic downturn. ODC, established in 2012 as a homegrown entity to sell Botswana diamonds outside De Beers price book and channels has so far registered sales revenue exceeding US$830 million for its trading year 2021.
This was achieved in the first eight (8) months of the current financial year 2021, a 484% jump from the 2020 sales revenue of US$181 million. The 2020 sales revenue was a 48% decline from US$371 million sales revenue in 2019). The decline in 2020 was mainly due to several cancelled sales (and ODC not generating any revenue) since the end of March 2020 as markets showed signs of uncertainty, because of to the COVID-19 pandemic.
ODC started the year 2020 on such precarious grounds and was unfortunate given that 2019 was also a weak trading year for the industry and by extension ODC. ODC a key player in rough diamond trading in the world, anticipates growth until at least the end of Q1 next year. “We are still left with the last quarter of our 20201 trading year, so we anticipate out sales revenue to reach US$1 billion, and if you convert that to Pulas, that’s a lot of money,” said Okavango Diamond Managing Director, Mmetla Masire.
Masire said industry profitability remains healthy and demand throughout the diamond pipeline remains robust with slight softening in some categories of diamonds. Furthermore, overall liquidity is generally good, and the state-owned entity believes that this healthy trend is positive news that was needed given the negative impact of the COVID-19 pandemic that almost crippled the entire industry.
“As you are all aware our diamonds are sourced from Debswana, Botswana’s flagship diamond mining company that accounts for over 98% of Botswana’s diamond production. Therefore, when Debswana sneezes, ODC catches a cold, we are therefore, relieved, and happy to see that Debswana has recently increased production and look forward to future increases,” ODC’s Board Chairman, Dr Gape Kaboyakgosi said in his welcome remarks.
According to the ODC, its sales revenues showed improved growth this year, due to a lot of positive market dynamics and the company’s response to being able to read their customer buying behaviour as accurately as possible, and make informed decisions about how, when and what they should sell.
The company explained that last year in June, it took very radical decisions about what ODC would and would not be prepared to sell and at what prices as this was validated by the company’s market intelligence and its perceptions of the market. “To date ODC has continued to be very careful in managing its diamond inventory to ensure that they are not encumbered by excessive stock which is difficult to sell in a downward market,” explained Masire.
The company has seemingly so far been making the right decisions to ensure it protects the long-term sustainability of its business. “Early on, prior to the government lockdown, ODC started pre-emptively planning its business continuity framework to handle Covid-19 situation while helping generate sustainable economic benefits for Botswana and Batswana. Our vision is to be to be a world leader in the sales and marketing of natural diamonds, and we are excited by the journey ahead,” Masire said during the business update press briefing.
In addition, ODC board Chairman, Dr Kaboyakgosi explained that “ODC has proven to be an agile organisation that can pivot in line with prevailing operating conditions. The impact of COVID-19 on the whole world and the perations of the global diamond market couldn’t have been foreseen and yet ODC has managed to not only survive the pandemic but to thrive with record sales volumes.”
ODC earned US$110 million during its October Spot Auction sale which coincided with the company’s participation at the world-acclaimed EXPO 2020 Dubai. Prior to the October sale, ODC’s September Spot Auction sale generated US$123 million. The September 2021 sale is said to represents the largest one-day Diamond Auction sale ever conducted for rough natural diamonds, however, ODC recently broke the September record again.
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The P300 million Selebi Phikwe Citrus project in Botswana has reached its first harvest milestone, with the first export dispatched to the UAE and Saudi Arabia last week. This project, aimed at diversifying the country’s export earnings from diamond mining, is a significant step towards achieving this goal.
The project, which has successfully planted 840,000 seedlings in Phase 1 and completed a 17,000 square meter pack house, is set to employ 1,000 people and create business opportunities across various value chains. These opportunities include manufacturing of juice and packaging materials, transport and logistics, and honey production.
The first export from the Selebi Phikwe Citrus project marks a major achievement for Botswana, as it opens up lucrative export markets in the Middle East and beyond. The project has met market access requirements for countries such as the EU, Canada, China, The Philippines, UAE, and Saudi Arabia, paving the way for future exports to these regions.
The economic impact of the project on the SPEDU region, where it is located, is already being felt. The construction of a 12 km water pipeline and the installation of a power line have driven infrastructure development in the area, benefiting businesses in the vicinity at minimal cost.
The project’s success is the result of collaborative efforts between various government departments and agencies, including the Botswana Investment & Trade Centre (BITC) and SPEDU. Through the BITC’s One Stop Services Centre (BOSSC), the project was able to access red-carpet investor facilitation services and unlock necessary business enablers.
The Ministry of Trade & Industry and the Ministry of Agriculture have played crucial roles in facilitating market access for the project. The Department of Plant Health has opened up protocol and permit markets for citrus exports, ensuring that the project can access international markets with ease.
Botswana has met the European Union (EU), Canada, China, The Philippines, United Arab Emirates and Saudi Arabia market access requirements. “I am happy to report that our desire to export has been actualised as the first consignment was dispatched last week to the United Arab Emirates and Saudi Arabia” Minister Kgafela revealed.
The Selebi Phikwe Citrus project is not only beneficial for the project sponsors but also for other citrus growers in Botswana. With 172 citrus growers in the country, over 90% of whom are small-scale farmers, the project presents opportunities for growth and expansion in the citrus industry.
Massive value chain opportunities are presented by the project, including fertilizer and agrochemical supplies, agro-processing opportunities, and more. The project’s spending on imports presents an opportunity for local production, further boosting the country’s economy.
On 21s March 2024, His Excellency Dr Mokgweetsi EK Masisi will officiate at a ceremony to mark the first harvest of the Selebi Phikwe Citrus project and officially open the pack house. Harvest from this multimillion pula project is expected to reach the United States, Europe and other lucrative export markets.
The project was first launched on the 11th December 2020 with a ground breaking by President Masisi. This multimillion pula private sector funded agricultural enterprise, the likes of which this country has never seen before, is widely touted as a major catalyst to revitalising and catapulting the SPEDU region back to economic glory following the closure of BCL mine in 2016.
The project promoters leased 1500 hectors of land from Mmadinare Multi- Purpose Cooperative Society which will benefit directly through proceeds.
Highlighting the ripple economic impact of the project to the SPEDU region, Assistant Minister of Trade & Industry Honourable Beauty Manake said the Selebi Phikwe Citrus project has been able to drive the development of infrastructure in the area, with the construction of a 12 km water pipeline and ensured the installation of a power line.
She said during a briefing in Gaborone on Thursday that businesses within the vicinity have tapped into these infrastructural developments at minimal cost.
The Selebi Phikwe Citrus project came into being through collective efforts of various government departments and agencies. The Botswana Investment & Trade Centre (BITC) in collaboration with SPEDU courted the investors from South Africa to venture into the project.
Through the Botswana One Stop Services Centre (BOSSC) under the BITC, the project was able to establish and take off by enjoying red-carpet investor facilitation services to unlock required business enablers.
BITC has also through its export promotion arm, facilitated the project by identifying potential export markets in the European Union (EU) and lend crucial support to the Citrus Project to access the identified markets.
About 70 percent of the produce from the Selebi Phikwe Citrus will be exported, while 30% will remain in the country. Assistant Minister Manake revealed that the Ministry of Trade of Industry has been working closely with the project sponsors to explore export markets and facilitate entry into those markets.
The Selebi Phikwe Citrus project’s first harvest and export mark a significant milestone in Botswana’s efforts to diversify its export earnings. With the potential for growth and expansion in the citrus industry, this project is set to have a lasting impact on the country’s economy and agricultural sector.
Business
Botswana’s first coal-gas fired power station to start commercial production
Botswana is set to achieve a significant milestone with the upcoming commencement of commercial production at the country’s first coal-gas fired power station. Tlou Energy Limited, an Independent Power Producer listed on multiple stock exchanges, has been at the forefront of developing this groundbreaking project, which is expected to start generating electricity for both the local and export markets later this year.
Situated in the Central District, just 100 km west of Serowe, the coal-gas fired power station represents a major step towards reducing Botswana’s reliance on expensive power imports. Tlou Energy has confirmed the presence of abundant coal-gas resources in the area, making it suitable for commercial power production. The company has obtained all the necessary approvals, including environmental assessments, production licenses, power generation licenses, and a Power Purchase Agreement, to move forward with the project.
One of the key achievements for Tlou Energy has been the completion of a 100km 66kV transmission line, connecting the power station directly to Botswana’s power grid and the Southern African Power Pool. This connection opens up a vast market for the project, allowing for the sale of electricity both domestically and regionally. The company’s Managing Director, Tony Gilby, expressed optimism about the project’s progress, stating that they are on track to start generating revenue soon.
In terms of the project’s timeline, Tlou Energy is currently focused on completing the construction of the power station, installing generators, and finalizing the gas gathering line. The initial target is to generate around 2MW of power, with plans for rapid expansion to 10MW, generating approximately $10 million in revenue per annum. The company is also in discussions with investors to secure the necessary funds for project completion.
The key remaining items to be completed prior to first power sales, according Tlou Energy, include completing the construction of the power station, installation of generators, completing the short gas gathering line (from the gas wells to the generators) and energizing the power line. “Minor finishing works on the transmission line and the addition of switchgear at Serowe will also be completed prior to first power. The initial target is ~2MW of power, followed by rapid expansion to 10MW, generating approximately $10m in revenue per annum.” The company has confirmed that it’s in discussions with some investors to secure funds required for project completion.
Tlou’s power is expected to help reduce Botswana’s reliance on expensive power imports. In addition to supplying power in Botswana, the company may sell electricity to the regional market via the Southern African Power Pool, a development which could open up a bigger market for the project.
The successful operation of Botswana’s first coal-gas fired power station will not only contribute to the country’s energy security but also have a positive impact on the regional market. By potentially selling electricity through the Southern African Power Pool, Tlou Energy could tap into a larger market, further solidifying its position as a key player in the energy sector.
Overall, the progress made by Tlou Energy in developing Botswana’s first coal-gas fired power station is a testament to the company’s dedication and vision. With the project nearing completion and commercial production on the horizon, Botswana is poised to enter a new era of energy independence and sustainability.
Food prices could potentially go up in 2024/2025 due to the current El Niño conditions in Southern Africa, as reported by the Food and Agriculture Organization (FAO) of the United Nations. The update released by FAO indicates that countries in the region, including Botswana, may experience a decrease in food production, leading to higher food inflation.
The update highlights that Southern Africa has been experiencing below-average rainfall, with key cropping zones in countries such as Malawi, Mozambique, Zambia, Zimbabwe, and Namibia receiving only up to 80 percent of average rainfall quantities between November 2023 and February 2024. This has resulted in significant rainfall deficits, particularly in February, which is a critical period for crop development. The warmer than average temperatures and erratic distribution of rains have further exacerbated the situation, leading to stressed vegetation conditions and potentially lower crop yields in 2024.
In South Africa, the leading cereal producer in the region, a dry spell between late January and February 2024 has negatively impacted crop production prospects. Maize production is expected to fall this year, further contributing to the potential decrease in cereal production in the region.
As a result of the anticipated decline in cereal production in Southern Africa, import needs are projected to increase in the 2024/25 year. This could lead to the importation of cereals from outside of the region, such as the United States of America, Mexico, Brazil, Australia, and Argentina. However, importing food from global markets comes with higher transport costs and import tariffs, which may put upward pressure on food prices in Botswana.
FAO projects that based on the likely scenario of a fall in cereal production in Southern Africa, import needs are set to increase in the 2024/25 year. “Furthermore, if production declines in South Africa and Zambia materialize in 2024, cereal export availabilities in the region would be low and this could necessitate the importation of cereals from outside of Southern Africa.” According to analysts from the organization cereal prices were at higher levels in December 2023 and January 2024 in Southern Africa, reflecting the cumulative impacts of weather shocks on 2023 domestic production, elevated international commodity prices and weak currencies that intensified exchange rate pass-through effects to domestic prices. “Farther ahead, a key risk to the price growth is represented by the impact of El Niño-related rainfall deficits on cereal production in 2024.”
Some local analysts believes that Botswana could import sorghum, maize and wheat from as far as United States of America, Mexico, Brazil, Australia and Argentina as South Africa and Southern African countries which are potential suppliers of cereals, are highly likely to record decline in crop production as a result of the impact of El Niño-related rainfall deficits on cereal production in 2024. The analysts added that food imports from the global markets come with higher transport costs and import tariffs which may have an upward pressure on food prices in Botswana.
Overall, the impact of El Niño-related rainfall deficits on cereal production in 2024 poses a significant risk to food prices in the region. It is important for policymakers and stakeholders to closely monitor the situation and take necessary measures to mitigate the potential increase in food prices in 2024/2025.