MACIG Connect Series
Ecsponent is an investment company breaking into Botswana’s largely unexploited financial services market.
Can you provide an overview of Ecsponent’s exposure to the mining sector?
Given the nature of our business as an asset management company, we are approached by mining individuals. Just yesterday, we had somebody come to our door with a license but who did not have the means to develop his project. We do an assessment of their proposals to see if we can assist them. We are approached by individuals and companies alike. In the Palapye area, a company with a quarry approached us; they had a cash flow issue and they wanted us to assist them to put their operations back into full swing. Others even seek a partnership, particularly those at the smaller end of the spectrum who do not have large financial capabilities.
Are your clients mainly small and medium-sized players in the industry?
So far this has been the case but we are quite diverse in our operations. We render financial assistance where we can.
What are the particularities of operating in Botswana?
I don’t know if this is peculiar to Botswana but you find individuals that are knowledgeable in their industry but do not have financial capabilities. Some would even want us to buy the license from them but we focus on local enterprise development.
What type of projects are you currently operating?
So far we have been working on the quarry. We are also currently in talks with Debswana about rehabilitation projects for their mines once they reach the end of their economic lives. We are working on the financial services side but it is all at the discussion stages.
What are Ecsponent’s competitive advantages?
Our business model is slightly different from your traditional assets manager company. We are an investment company with variable capital. We go a little further than traditional asset managers. Part of what we do besides looking after the funds is that we take a portion of what is invested with us and deploy it for enterprise development. Also, we work with local and central governments through contractors and suppliers. Our rates are very competitive; we can compete with asset managers and big banks. Banks currently do not offer very attractive returns because of the state of the economy. This is what gives us a competitive edge. Moreover, we can compete with banks in terms of the scale of projects, as we can take on projects ranging from 500,000 to 3 million pula or more.
Does the project assessment process take place entirely within the company?
We have a sister company in South Africa that helps us with project assessment. We seek expertise from within our parent companies although we have specific criteria that needs to be met. The Botswana company is autonomous but for technical and management support we liaise with South African counterparts.
How would you describe financial inclusion in Botswana?
Financial literacy hasn’t reached the desired level. This narrows the scope of the people that we can assist. However, we engage with those financially excluded as long as there is proof that their tenders or licences are legitimate. In this sense, we promote financial inclusion.
In what other sectors is Ecsponent involved in?
We are currently funding a small company that has been awarded a tender to participate in the construction of the road to Jwaneng and we have also assisted another infrastructure company with capital and equipment needs.
What are your perceptions on government policies?
I believe the government is taking the right steps. The government has youth and women empowerment projects that are tailor made for financial inclusion. The only thing that I think should be stepped up is individual skills, since these are required to execute projects successfully.
How has Botswana’s economic stability boosted your business?
For us, I would say it is a question of being in the right place at the right time. The economy is recovering, inflation has been coming down within the objectives of the central bank. This allows us to do business at reasonable rates. If the rates are exorbitant, they scare away investors. The macroeconomic environment is suitable for what we are doing. Capital flow within the financial industry is not restrictive per se. You can mobilize funds within certain parameters. There is no cap on what you can do.
What has been the impact of the BCL closure for the sector?
My hope is that the government will be able to compensate through various channels for the job losses. Where we come in is if there are retrenchment packages we can give the best returns for them. In a way, even though the outlook is subdued, there is a silver lining. We are in discussions with the mining house and the principal officer of the pension fund of the BCL mine. Even if the mine closes, the pension fund will be operational.
What are your prospects for the year ahead?
I think that investors are interested in various projects, particularly in copper, but they are waiting until prices recover more, which will happen over time. Things will look better over time; they have done so in the past.