BSE hits record
The Botswana Stock Exchange’s flagship platform, the Domestic Companies Index (DCI) was the talk of the town this year, cruising towards a share price performance last seen 10 years ago. As at mid-day Wednesday, the DCI was up 15.4% for the year, sitting just south of the 2013 full-year performance of 17.8%.
Analysts say this year’s rally is a market correction or a repricing of the positive outlook investors hold on the earnings of listed companies, finally being priced into share prices. In addition, robust corporate earnings of listed counters have driven an increased appetite for stocks.
The strong performance of listed counters has been underpinned by rallies in banking profits due to high interest rates, tourism sector recovery as international travel restrictions eased, and property firms’ revival as consumers have returned to malls, sustaining the bullish outlook on the DCI. Top performers leading the market this year as the DCI heads for Christmas include Chobe Holdings at the helm with a net 88% gain in its share price, followed by Standard Chartered (83%) and SeedCo (30%).
Diamond dreams born
After five years of increasingly tense negotiations, negotiators representing government and De Beers sealed an 11th-hour deal at the stroke of midnight on June 30. The deal, known as an agreement in principle, extended the 54-year-old partnership which is correctly viewed as the global diamond industry’s most important and valuable covenant. Under the deal, Botswana’s state-owned diamond trader, the Okavango Diamond Company, is entitled to purchase and independently market 30% of the output from Debswana, up from the current 25%. The allocation will rise to 50% over the next 10 years. The two sides also agreed to establish a multi-billion pula Diamonds for Development Fund, with an upfront investment by De Beers of P1 billion. Further contributions over the next 10 years of the deal would be made that could total up to P10 billion “which will aim to create substantial additional value to the Botswana economy”. The concessions by De Beers are part of the extension of the company’s sales arrangement with government which covers the marketing of stones from Debswana by another 10 years, as well as the renewal of mining leases in the country by another 25 years from when they expire in 2029. Other terms of the agreement in principle reached in June include: * Jointly processing exceptional or special stones emerging from the mines * Jointly exploring for diamonds across the world * Funding arrangements for the expansion of Debswana mines, which include the underground project planned for Jwaneng and the deepening of the Orapa open-cast
Khoemacau’s $1.9bn deal
Chinese mega-investors announced their arrival into the country’s mining landscape, with the $1.9 billion (P25.5 billion) acquisition of Khoemacau Copper Mining. The deal, finalised in November, is the country’s single largest-ever private sector acquisition and also highlights how local assets have become targets in the global hunt for energy transition minerals. MMG, a Chinese mega-firm with state-owned shareholding, is finalising regulatory requirements and expects to close the deal in the first half of the year. In determining the consideration, MMG referred to Khoemacau’s mineral resources, the proposed expansion of production capacity, the mine plan, and development rates, tailings management, Environment, Social and Governance factors as well as its own in-house valuation. Before the sale, the mine was finalising plans for a $700 million (P9.4 billion) expansion of its operations to double its production to 130,000 tonnes by 2036. At that level, Botswana would be within the top 30 copper producers in the world.
Botswana Oil makes moves
State oil company, Botswana Oil, shook up the industry this year as government announced that from April 1 next year, the firm will enjoy the exclusive right to import 90% of the country’s fuel supplies. BOL has been angling for a dedicated quota for years, under which it would exclusively import most of the 1.2 billion litres of fuel consumed in the country every year and resell this to retailers such as Engen, Total, Puma, Caltex and the wholesalers. BOL argues that an exclusive import quota will help it promote effective citizen empowerment in an industry dominated by large, foreign multinationals. In addition, BOL says the import quota would ensure the security and stability of supply while anchoring the business cases of other developments such as the long-planned Coal to Liquids project. In 2021, BOL attempted to secure a 50% exclusive import quota from the Botswana Energy Regulatory Authority but was only granted a conditional 25%. Last August, through a parliamentary amendment, BOL apparently secured the 50% import quota, which was increased to 90% earlier this year. Responding to the development, executives at the oil companies expressed outrage, saying BOL had neither the capacity nor depth to carry out the mandate. They also said the move would kill innovation in the industry, expose the country to the risks of concentrating responsibility in a single entity and render the industry’s long-built assets useless.
Jindal’s surprise deal
Government decided to double its contract with Jindal Africa and require the firm to deliver 600MW of coal-fired electricity, in a project that will be the country's largest Independent Power Producer (IPP) initiative. As delegates assembled for the signing of the 300MW contract in July, Minerals and Energy minister, Lefoko Moagi announced that the contract was being doubled and awarded exclusively to the Indian mega-firm. As an IPP, Jindal will carry the costs of building the power station, running and maintaining it, while selling the power to the Botswana Power Corporation (BPC) under an agreement known formally as a Power Purchase Agreement (PPA). The PPA for the initial 300MW plant will cover 30 years, with Jindal expecting to spend more than $1 billion (P13.4 billion) on the coal mine, power station and associated infrastructure. Moagi said government had been revising its Integrated Resource Plan (IRP) and had noted an opportunity to go for the 600MW rather than the 300MW, given Jindal’s proven capacity in such projects. He said since the procurement had already been done for the 300MW, the ministry had gone to Cabinet to seek an additional 300MW so that “it ties into the procurement that’s already there, going straight to Jindal rather than another procurement process”. Jindal Steel & Power, a multibillion-dollar global group, is financing the 300MW from its balance sheet. With global funding of coal drying up, Moagi said government saw an opportunity to tap into the available funding and build a larger project.
