Mmegi Online :: Expert points to changing times in primary resources sector
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Last Updated
Tuesday 25 September 2018, 17:23 pm.
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Expert points to changing times in primary resources sector

An expert in the private equity fund business has said that Botswana's management capacity should allow it to access the capital needed to invest in the booming mining resources, energy and infrastructure sectors.
By Staff Writer Tue 25 Sep 2018, 18:01 pm (GMT +2)
Mmegi Online :: Expert points to changing times in primary resources sector








Ndaba Mpofu, chief investment officer of VPB, a local equity and venture capital firm, said the financing of the sectors is now firmly in the private equity spotlight in the region.
He was speaking at an investment seminar organised by the South African High Commission in Gaborone at Phakalane Golf Estate. The seminar attracted local investors, banks and institutional investors from South Africa such as ABSA Capital, Development Bank of Southern Africa and the Invest North West.

Mpofu said traditionally, the primary resources sector has not been attractive to private equity, but times are changing. Investment opportunities in mining or resources are now needed in exploration, junior mining, beneficiation, mining services and supplies, transport and logistics, and social amenities. Mpofu believes there is a future role of private equity in mining ventures in the country.

"There is now demonstrated capacity in private equity fund management in Botswana - VPB and other fund managers are established in the market. The mining and resources expertise are available in the country, or can be procured. The mining reserves are there in abundance including coal, gold, copper, base metals and significant exploration," he said.

He added that there is a move towards local beneficiation of resources and citizen economic empowerment in the country.

"The time is right for private equity to enter the primary mining and resources arena in Botswana," he said.

The Botswana Stock Exchange (BSE) has traditionally been the source of financing for mining ventures in Botswana. The BSE Venture Capital Board acts as a platform for raising capital for new mining ventures, with primary or secondary listings offshore.

The listed mining and exploration companies include CIC Energy, which is raising capital for its P50 billion Mmamabula Power Project; A-Cap Resources, which is involved in broad minerals exploration and uranium prospecting in Serule: and African Copper which is raising capital for exploration and development of Mowana mine in Dukwi. Others are

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African Diamonds which is involved in diamond exploration and development of the AK project near Orapa; and IamGold with a mine in Mupane near Matsiloje. Some of the companies have used their own resources and borrowing to finance mining ventures.

Mpofu said the region is currently planning to develop similar projects but domestic sources of capital cannot adequately finance these mega- projects. He advised that the financing of the projects can be attainable if specialised funds are developed. This will enable the region to tap from international capital flows.

Private equity funds focused on mining resources in the region have included; the R550 million (P456.5 million) New Africa Mining Fund launched in 2003, followed by a R2 billion (P1.66 billion) fund this year. The US$1.3 billion (P8.41 billion) Pamodzi Resources Fund 1, raised entirely from offshore investors in 2007 is currently the largest private equity fund on the African continent.

"This activity demonstrates that there are significant opportunities for private equity funds in mining and resources sectors in the region," Mpofu said. He added that the financing of infrastructure through private equity has been in the spotlight of the asset class for a while. The financing is usually a  long-term investment of 15 years.

Infrastructure funds in the region include the South African Infrastructure Fund worth US$150 million (P970.5 million); the Africa Infrastructure Investment Fund capitalised at US$125 million (P808.75 million); the US$400 million (P2.59 billion) AIG African Infrastructure Fund and the CDC/Actis Infrastructure Fund (US$1 billion).

Mpofu said with energy prices at an all time high, and the challenges of global warming now a reality, energy efficiency and sustainability have attracted greater private equity interest in the last two years.

Focus has been on alternative forms of energy such as biofuels, wind and solar power.
"Energy as a private equity asset class is growing, with new technologies developing to harness cleaner and renewable energy sources," Mpofu said.

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