Securities business on way out
Group says it now wants to focus on capital-light, high-annuity businesses with limited key-man risk
country, Minergy says it has an advantage over SA coal producers in its ability to supply industrial users in the northern parts of the country.
CEO Andre Bojé says Minergy’s coal will not aim to plug the holes for Eskom, which is facing a supply crunch. But its customers, industrial users such as cement makers, are going to get “consistent quality and guaranteed supply at similar pricing”.
Critically, cement makers and the like can take the finer coal — the duff — while the larger pieces (“peas” and “nuts”) could be sent further into SA at competitive prices.
Astrup says that while it seems Minergy will be the first Botswana coal producer to market, it doesn’t want to be the only one. At this rate, it’s not likely it will be.
Maatla Energy is pursuing a licence to mine its Mmamabula project in Botswana. And Shumba Energy’s Mabesekwa mine is reportedly at an advanced stage and due to be commissioned by 2021.
African Energy Resources also has a project in the works and Morupule, spurred on by high global coal prices, is ramping up production
Many people proved there was a lot of coal in Botswana but … coal being there is only half the story. You need a market John Astrup
aimed for export.
“There are so many synergies when you have a coal industry — better infrastructure, more wagons, more capacity on the railway lines, which brings your tariffs down,” says Astrup. “So we don’t want to be a mine on our own. Everyone will have to find their little piece of the market.”
Once in production, Minergy plans to list on the London Stock Exchange’s Alternative Investment Market.
The company expects a warm welcome. “They like mining, they like Africa and they specifically like Botswana,” Bojé says.
Pieter du Preez, senior economist at NKC African Economics, agrees that Botswana is a premier investment destination in
It has strong macroeconomic fundamentals, solid economic and fiscal policies, and remarkably low public debt levels. It is perceived as one of the least corrupt countries in Africa.
“Botswana also has the most favourable sovereign credit ratings on the African continent, well above the junk-status grade. On the political front, Botswana will continue to be one of the continent’s model democracies,” he says.
Still, the country has numerous challenges to overcome, he says.
Mainly, it remains over-reliant on the volatile diamond mining industry despite “significant efforts” to diversify the economy.
Efforts have been complicated by a shortage of skilled labour coupled with relatively high labour costs. Recurring droughts have contributed to a weak performance by the agricultural sector.
Though the fledgling junior coal-mining industry has potential, for now, the biggest challenge for Botswana remains diversification away from diamonds, Du Preez says.
Previous Peregrine CEOS considered its broking and structuring business to be the glue that kept the group together.
After all, the Peregrine Capital hedge fund manager was an important client and it was a supplier to other group businesses such as wealth manager Citadel and its Uk-based family office Stenham.
Now, subject to Competition Commission approval, Peregrine will dispose of its securities business altogether. CFO Claire Coward says Peregrine Securities no longer fits into the current group model, which is to focus on capital-light, high-annuity businesses with limited key-man risk. Peregrine Securities had numerous calls for capital.
“The market is starting to see that we have been evolving into a wealth manager with some strong asset-management skills,” says Coward. For Peregrine, 56% of its earnings in the six months to September are in dollars and pounds, up from 38% in the comparable period.
It even acquired a toehold in the institutional market through its 30% holding in investment boutique Electus.
Peregrine’s results are messy, as the R65m return from proprietary assets, which were unbundled into Sandown Capital, were not repeated. And Peregrine Securities is treated as a discontinued operation, ironically having a great swansong, with earnings up 54% to R77m. Normalised headline earnings for the group were up 4% to R283m.
The proceeds from the Peregrine Securities sale will be R1bn, which Jacques Plaut of Allan Gray (the group’s largest institutional shareholder) considers to be a low multiple.
Group CEO Rob Katz says some of this will come back to shareholders, through
The Minergy opencast coal mine, north of Gaborone