The ever on and off Morupule B Power Station is, according to latest research and statistical reports, almost short circuiting this country’s economy as its operational woes are infecting the country’s GDP, coal production and Botswana Power Corporation(BPC) credit rating.
Recently, when assigning a rating to power utility BPC, internationally respected credited rating agency, Moody's Investors Service gave the corporation a Baa2 rating but not without taking out from the good credit. What dented BPC’s good marks was Morupule B, which is said to be delayed in construction and will not be fully available to supply this country’s growing electricity demand. Botswana will remain less electricity sufficient until 2023, as it is the year which the works of Morupule B is expected to fully complete. Morupule B is currently undergoing remediation programme on its boilers.
“Moody's assessment of very high support for the company were revised downwards. In addition, severe delays or uncertainty around the remediation programme of Morupule B plant could also put downward pressure on the rating,” said Moody’s recent report on BPC highlighting operational challenges facing BPC.
Because of Morupule B woes, Moody’s expects upward rating pressure is unlikely to be in the medium term. According to Moody’s, its rating also reflects the company's significant asset concentration and poor asset quality, with multiple design and construction issues affecting output from BPC's coal fired plants. The poor reliability of its power plants increases Botswana's reliance on electricity imports reducing visibility over the company's internally generated cash flows, says Moody’s.
“While the Morupule A power plant (132 megawatt (MW) is expected to come back fully online this year, the remediation programme for the larger Morupule B power plant (600 MW), has only started and there is uncertainty around the improvement in the plant's availability once the works have been completed in 2023, as per the current schedule,” said Moody’s.
Moody’s assessment comes after the third quarter of 2019, when the 600MW Morupule B was said to be “fully operational” and this was for the first time since its seven years of woes. There was much hope after BPC injected a P1.2 billion overhaul on Morupule B. Since its inception in 2012, as an expansionary projection to Morupule A, Morupule B lived on four years and had a documented exposure of it failing to launch due to poor design.
After coming with much fanfare from as an answer to Botswana’s growing power demand, this country was left to go back to the drawing board of reliance on its insufficient 120MW, Morupule A plant and two emergency diesel plants with output of 195MW. Botswana was left to starve for electricity as South Africa’s Eskom became increasingly unreliable and was slowly pulling out the socket that supplies Botswana.
Adding to depression of BPC crediting by Moody’s pointing a finger towards Morupule B, is the latest Statistics Botswana Gross Domestic Product (GDP) report for the quarter under review (Q3) released in December which says the plant was not operating at full capacity. The report showed a decrease in the Electricity real value added which attributed to a decline in the local electricity production by 39.6 percent. Furthermore, imports of Electricity went up by 119.6 percent during the quarter under review (Q3).
Statistics Botswana said the significant decrease in local Electricity production were largely due to reduced performance of the Morupule B Power Station which was not operating at full capacity. Another report which shows Morupule B to be hampering Botswana’s economy is the Index of the Physical Volume of Mining Production by Statistics Botswana, which also lays all the blame on the same plant for sabotaging coal production. The report says the decline in coal production is mainly as a result of low uptake by Morupule B Power station.
“Coal production dropped by 28.6 percent during the third quarter of 2019, compared to production registered during the same quarter of the previous year, the decline is mainly as a result of low uptake by Morupule B Power station which has resumed remedial works on the boilers. Although production fell, it is important to note that there was no shortfall in supply of coal due to stockpiling undertaken during the previous months. The quarter-on-quarter comparison, likewise, reflects a decrease of 23.5 percent when compared to the preceding quarter,” said the Index of the Physical Volume of Mining Production.
However, a report contradicting assessment and statistical information which paints a gloomy picture and far-fetched hope on Morupule B progress was also released recently. The recent Electricity Generation and Distribution Q3 2019 report which acknowledges the plant’s major contribution on domestic electricity production saying it eases Botswana’s over-reliance on electricity imports.
According to the Electricity Generation and Distribution Q3, when looking at the quarter-on-quarter comparison being Q2 versus Q3, it shows an increase of 16.0 percent, from 96.0 during the second quarter of 2019 to 111.3 during the current quarter. According to Statistics Botswana, the Index of Electricity Generation stood at 111.3 during the third quarter of 2019, reflecting a year-on-year decrease of 39.6 percent compared to 184.3 recorded during the corresponding quarter in 2018.
According to the national statistics, the quarter-on-quarter perspective shows that local electricity generation increased by 16.0 percent from 403, 576 MWH during the second quarter of 2019 to 467, 974 MWH during the period under review. The 16.0 percent increase is said to emanate from improved performance of power generators at the Morupule B power station during the current quarter.
When comparing the corresponding quarters, the Q3 of 2018 and 2019, the physical volume of electricity generated decreased by 39.6 percent, from 774,822 MWH during the third quarter of 2018 to 467,974 MWH during the current quarter. Morupule B also became the MVP of the quarter under review as it helped Botswana to import less electricity from South Africa’s less sufficient Eskom. In Q3 of 2019 Eskom was the main source of imported electricity at 58.5 percent of total electricity imports.
After a new power deal signed last year, Electricidade de Mozambique supplied 20.7 percent while 14.9 percent, 4.5 percent and 1.4 percent were sourced from the Southern African Power Pool (SAPP), Cross-border markets and Namibia’s Nampower respectively. When looking at the quarter-on-quarter comparison, there is a decrease of 3.4 percent (17,906 MWH), from 522,021 MWH during the second quarter of 2019 to 504,115 MWH during the period under review.
This decrease in imported electricity is attributed to improvement in local generation, jumpstarted by improvement of Morupule B. However the physical volume of imported electricity increased by 119.7 percent (274,688 MWH), from 229,427 MWH during the third quarter of 2018 to 504,115 MWH during the current quarter.Contribution of Electricity Generation to Distribution
According to Statistics Botswana electricity generated locally contributed 48.1 percent to electricity distributed during the third quarter of 2019, compared to a contribution of 77.2 percent during the same quarter in 2018. This gives a decrease of 29.1 percentage points. On the other hand, said the National Electricity Statistics, a quarter-on-quarter comparison shows that the contribution of electricity generated to electricity distributed during the current quarter increased by 4.5 percentage points compared to the 43.6 percent contribution of locally generated electricity during the second quarter of 2019.
Most of Botswana’s electricity has been imported from South Africa’s power utility, Eskom, but in 2008 South Africa’s electricity demand started to exceed its supply resulting in the country restricting power exports. For more than a decade Botswana has been struggling with electricity imported from South Africa, as dependency on the country’s electricity import became increasingly unreliable, hence government efforts to increase local generation of electricity at Morupule Power Station. The Morupule Power A plant has a capacity of 132 MWH and was augmented with Morupule Power B, which is to have a capacity of 600 MWH upon completion. but has been dogged with scandals and lack of or slow progress.
Newly established wholly indigenous citizen owned retail chain Payless Retail (PTY) Ltd is set to partake in the first session of Botswana Stock Exchange (BSE)’s Tshipidi Mentorship Program (TMP) on Monday June 29th.
The TMP aims to train and capacitate SMEs so they can operate as corporates and eventually list on the local bourse. According to local bourse, BSE, the program aims to provide practical training to potential issuers through a comprehensive and interactive program that covers the key themes necessary to position a company to list on the BSE.
Payless Retail is a newly established supermarket chain whose mission is to become a convenient one-stop shopping destination as it is one of the Botswana oldest retailing brands. It started off as Corner Supermarket in January 1976, and to date boasts of nine stores in, among others, Gaborone, Mochudi, Molepolole and Tlokweng. Payless was recently acquired by Ellis Retail Group, which is led by businessman Elliot Moshoke.
The takeover catapulted Ellis Retail to the envious position of being the first wholly indigenous owned major retail chain. “We jumped at this opportunity because it gave us a chance to prove to Batswana that the retail business is open and lucrative.”
The objective is to create a proudly Botswana retail chain that fully supports our national Vision, economic development and citizen economic empowerment ambitions,” Moshoke told BusinessPost.
He further emphasized that Batswana are capable and able to run large scale businesses hence they need to accept invite foreign investors who will come in to support us not take the business. “Our win as Payless in the Fast Moving Consumer goods (FMCG) industry is a win for Batswana. We need their support in this difficult and challenging journey.
As you are aware, Payless is the only retail chain in the hands of Batswana ba Sekei. We need to take advantage of this to generate employment and create small businesses in retail and Agri businesses,” he explained.
The retailer has also partnered with Botswana Investment & Trade Center (BITC) on their #PushaBW campaign with a view to initiating earnest engagement with local producers to iron out bottlenecks and ensure seamless trading.
“Local producers have to be part of the phenomenal growth of the Payless brand. This will in turn facilitate employment creation and economic growth. We did this because we have the utmost respect for local manufacturers and producers,” he mentioned.
Payless is currently restocking all of its stores; a development that Moshoke says is testament to the retailer’s commitment to growing the brand and ensuring continuity of business. He further revealed that renowned retail suppliers like PST and CA Sales have reignited their trust in Payless, opening their doors for Payless as they have faith in the retailer’s new owners.
The takeover has reportedly saved more than 200 jobs and gave a new lease of life to the previously fledging Payless brand. According to a press release from the management team, the Payless work forces are also extremely excited about what the future holds. The TMP is a comprehensive and interactive program that covers the key themes necessary to position a company to list on the BSE.
The program is administered by experts within the listing ecosystem and seeks to bring the potential issuers closer to the listings advisers, investors and leaders of already listed companies. “As a strategic initiative, the BSE decided to set up this mentorship program in a bid to assist SMEs to strategize, corporatize and acclimatize in order to list to access equity finance and expand operations,” said the BSE.
The TMP will avail to SMEs practical insights, knowledge and feedback from institutional investors, increased awareness of the BSE listing requirements as well as an intimate network of advisors and CEOs of listed companies. After training, Payless will graduate with improve governance structures and better knowledge of articulating its business strategy. The retailer will also gain increased visibility through BSE marketing platforms.
Despite Covid-19 interrupting trade worldwide, exporting companies in Botswana which benefited from the Botswana Investment and Trade Centre (BITC) services realised P2.96 billion in export earnings during the period from April 2020 to March 2021.
In the preceding financial year, the sale of locally manufactured products in foreign markets had registered export revenue of P2, 427 billion against a target of P3, 211 billion BITC, which celebrates 10 years since establishment, continues to carry out several initiatives targeted towards expanding the Botswana export base in line with Botswana’s desire to be an export led economy, underpinned by a robust export promotion programme in line with the National Export Strategy.
The main products exported were swamp cruiser boats, pvc tanks and pvc pipes, ignition wiring sets, semi-precious stones, veterinary medicines, hair braids, coal, textiles (towels and t-shirts) and automobile batteries. These goods were destined mainly for South Africa, Zimbabwe, Austria, Germany, and Namibia.
With Covid-19 still a problem, BITC continues to roll out targeted virtual trade promotion missions across the SADC region with a view to seeking long-lasting market opportunities for locally manufactured products.
Recently, the Centre facilitated participation for Botswana companies at the Eastern Cape Development Council (ECDC) Virtual Export Symposium, the Botswana-Zimbabwe Virtual Trade Mission, the Botswana-Zambia Virtual Trade Mission, Botswana-South Africa Virtual Buyer/Seller Mission as well as the Botswana-Namibia Virtual Trade Mission.
BITC has introduced an e-Exporting programme aimed at assisting Botswana exporters to conduct business on several recommended e-commerce platforms. Due to the advent of COVID-19, BITC is currently promoting e-trade among companies through the establishment of e-commerce platforms and is assisting local companies to embrace digitisation by adopting e-commerce platforms to reach export markets as well as assisting local e-commerce platform developers to scale up their online marketplaces.
During the 2019/2020 financial year, BITC embarked on several initiatives targeted at growing exports in the country; facilitation of participation of local companies in international trade platforms in order to enhance export sales of local products and services into external markets.
BITC also helped in capacity development of local companies to compete in global markets and the nurturing of export awareness and culture among local manufacturers in order to enhance their skills and knowledge of export processes; and in development and implementation of trade facilitation tools that look to improve the overall ease of doing business in Botswana.
As part of building export capacity in 2019/20, six (6) companies were selected to initiate a process to be Organic and Fair Trade Certified. These companies are; Blue Pride (Pty) Ltd, Motlopi Beverages, Moringa Technology Industries (Pty) Ltd, Sleek Foods, Maungo Craft and Divine Morula.
In 2019 seven companies which were enrolled in the Botswana Exporter Development Programme were capacitated with attaining BOBS ISO 9001: 2015 certification. Three (3) companies successfully attained BOBS ISO 9001:2015 certification. These were Lithoflex (Pty) Ltd, General Packaging Industries and Power Engineering.
BITC’s annual flagship exhibition, Global Expo Botswana (GEB) to create opportunities for trade and strategic synergies between local and international companies. The Global Expo Botswana) is a premier business to business exposition that attracts FDI, expansion of domestic investment, promotion of exports of locally produced goods and services and promotion of trade between Botswana and other countries.
The portal also provides information on; measures, legal documents, and forms and procedures needed by Botswana companies that intend on doing business abroad. BITC continues to assist both potential and existing local manufacturing and service entities to realise their export ambitions. This assistance is pursued through the ambit of the Botswana Exporter Development Programme (BEDP) and the Trade Promotion Programme.
BEDP was revised in 2020 in partnership with the United Nations Development Programme (UNDP) with a vision to developing a diversified export-based economy. The programme focuses mostly on capacitating companies to reach export readiness status.
Prices for goods and services in this country continue to increase, with the latest figures from Statistics Botswana showing that in May 2022, inflation rate rose to 11.9 percent from 9.6 percent recorded in April 2022.
According to Statistics Botswana update released this week, the largest upward contributions to the annual inflation rate in May 2022 came from increase in the cost of transport (7.2 percent), housing, water, electricity, gas & other Fuels (1.4 percent), food & non-alcoholic beverages (1.1 percent) and miscellaneous goods & services (0.8 percent).
With regard to regional inflation rates between April and May 2022, the Rural Villages inflation rate went up by 2.5 percentage points, from 9.6 percent in April to 12.1 percent in May 2022, according to the government owned statistics entity.
In the monthly update the entity stated that the Urban Villages inflation rate stood at 11.8 percent in May 2022, a rise of 2.4 percentage points from the April rate of 9.4 percent, whereas the Cities & Towns inflation rate recorded an increase of 1.9 percentage points, from 9.9 percent in April to 11.8 percent in May.
Commenting on the national Consumer Price Index, the entity stated that it went up by 2.6 percent, from 120.1 in April to 123.2 in May 2022. Statisticians from the entity noted that the transport group index registered an increase of 7.3 percent, from 134.5 in April to 144.2 in May, mainly due to the rise in retail pump prices for petrol and diesel by P1.54 and P2.74 per litre respectively, which effected on the 13th of May 2022.
The food & non-alcoholic beverages group index rose by 2.6 percent, from 118.6 in April 2022 to 121.6 in May 2022 and this came as a result of increase in prices of oils & fats, vegetables, bread & cereal, mineral waters, soft drinks, fruits & vegetables juices, fish (Fresh, Chilled & Frozen) and meat (Fresh, Chilled & Frozen), according to the Statisticians.
The Statisticians said the furnishing, household equipment & routine maintenance group index rose by 1.0 percent, from 111.6 in April 2022 to 112.7 in May 2022 and this was attributed to a general increase in prices of household appliances, glassware, tableware & household utensils and goods & services for household maintenance.
The prices for clothing & footwear group index moved from 109.4 to 110.4, registering a rise of 0.9 percent during the period under review. Bank of Botswana has projected higher inflation in the short term, associated with the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices and added that the possible increase in public service salaries could add also upward pressure to inflation in this country.