A less known but old company from the South African city of Cape Town, Sanek Trust Recovery Services, this week assumed the heavy task of managing the insolvent mine of BCL and provisional liquidation of Tati and BCLI.
BCL creditors and the nation waited in anticipation for the man who is going to replace Nigel Dixon-Warren who was fired abruptly, and Trevor Glaum is now at helm. Leading a company established in 1970, Glaum has a bigger challenge of liquidating a 63 year old mine whose abrupt liquidation was a matter of controversy since BCL was placed under liquidation which stalled for three years.
No much information of how Glaum or his company Sanek landed the role of BCL liquidation but on Wednesday this week outgoing liquidator Nigel Dixon-Warren wrote a communication that was spread to creditors and other stakeholders announcing that he is stepping down. Furthermore Dixon-Warren announced the takeover by Glaum of Sanek. Dixon-Warren announced that Sanek’s Glaum will be the sole liquidator of the controversial BCL liquidation starting from Wednesday this week following his (Dixon-Warren)’s resignation on Tuesday of the same week.
Glaum will also be a jointly co-provisional liquidator of BCL Investments or BCLI with Stephen Gore of Sanek. BCLI is an investment arm owned by BCL Limited. BCL limited also owns the BCL mine.Dixon-Warren also reminded that on the 26 July 2019 the Court of Appeal issued a provisional order that the estates of BCL and BCLI should be inter alia wound up as one company, in terms of section 468 of the Companies Act.
The matter has been referred back to the High Court to determine the time periods before which the order will become final. Glaum together with Sivalutchmee Moodliar, his colleague at Sanek, are co-provisional liquidators of Tati mine which is owned by BCL Limited with a stake of 85 percent.
When handing over BCL to Dixon-Warren in October 2016 the then vice president Mokgweetsi Masisi who is now the state leader pleaded that the man be given a chance without any interference. However Dixon-Warren found himself caught in a political storm as his liquidation fees caught the attention of legislators who felt he was getting too much or was out to rip government off. Dixon-Warren’s call for resignation came as a backlash coming from across the entire political divide agreeing that his head be chopped.
A political pressure started by an MP coming from an area with people who are affected by the closure of the mine who asked how much the Dixon-Warren was earning for BCL liquidation, and then it reached a minerals minister who also felt the liquidator was a liability. The BCL closure and its liquidation has become a huge political project and Glaum’s character will be tested beyond measure as politics became the demise of his predecessor.
Financial position of BCL
In the Tenth Status Report to the creditors the outgoing BCL liquidator Dixon-Warren said the financial position of BCL since 26 October 2016 was at P108 923 527. This is the money reflected 19 days after BCL was closed. “On 28 February 2019 the level of funding in the estate went down rapidly to P78.5 million and the rate continues to diminish. Government of Botswana is the lead creditor in this liquidation with and its claims against BCL account for a total of P1.35 billion or 94 percent of the proven claims,” Dixon-Warren.
Minister of Mineral Resources, Green Technology and Energy Security Eric Molale recently told Parliament that government has already spent P600 million on liquidation since the process began in 2016.Glaum will see himself out of the total recurrent budget estimates for the financial year 2019/2020 which is P733 061 670 and represents an increase of P327 127 210 or 81 percent from this year’s allocation of P405 934 460 because the significant increase is mainly due to BCL funding for rehabilitation.
This means the mine will continue to gobble a lot from government fiscal budget in this coming financial year. In his report to creditors Dixon-Warren said for the Phase 1 of the project of rehabilitation around P50 million and P100 million is needed, hinting that more money from the government until winding off.
Legal battles waiting for Glaum
Glaum got into an office which is not without a headache or stress. The hot seat of being a BCL liquidator also comes with burning litigations being thrown from all places as the mine was closed down abruptly while overlooking at many underlying legal issues. Standing tall before Glaum is the fight for the sale of Nkomati and Tati mines with Russian mining giant Norilsk.
Another impending legal tussle waiting for Glaum and Sanek is the one with a Zimbabwean mining company RioZim. The outgoing liquidator Dixon-Warren reported to the creditors recently that he already has commenced recovery proceedings against RioZim in Zimbabwe for P340 million owed to BCL. In this court application BCL alleges that it is owed P340 million for some minerals sold to its Zimbabwean counterpart RioZim. In this application BCL seeks to attach RioZim refinery or have it put under the hammer.
“The replacement liquidator will need to apply to the High Court of Zimbabwe to be recognized as a foreign liquidator in order to continue with this litigation. Thereafter, the replacement liquidator will need to file security with the Zimbabwean Master in order to be allowed to proceed with the litigation,” Dixon-Warren who is handing over to Glaum advised creditors in his last liquidation report.
Glaum will also have to put on his legal amour and lock horns with construction and building materials giant PPC which is said to have failed to adequately rehabilitate the waste rock dump over which it was granted a lease by BCL. This litigation is on-going. According to documents, the quantum of this claim has yet to be finally determined but will amount to several million Pula, according to Dixon-Warren.
BCL should also sue Air Liquide for failing to deliver equipment pre-liquidation to a subsidiary of Tati and as a consequence of this failure substantial storage costs have been incurred by the BCL Group, the BCL is claiming P20 million for any incurred damages or liabilities. Outgoing BCL liquidator said these goods which Air Liquide failed to deliver are stored in Belgium, South Korea and France.Air Liquide deals supplies industrial and specialty gases to the steel, automotive & fabrication, food & beverage, mining, petrochemical, pharmaceutical and glass industries.
Glaum leads BCL as it will go on head-on with Barclays Botswana for what the previous liquidator in the last creditors report being the Twelfth Status Report said the bank for three years failed to return a sum of P1.4 million which was incorrectly paid to the BCL pre-liquidation account. Glaum may also decide to go to court as Dixon-Warren suggested in the creditors report the bank has ignored several attempts by BCL to have the money recovered or the account in question closed.
Sale of the mine
Selling BCL mine has been a daunting task for Dixon-Warren who said many fear investing on an old mine which will come with a lot of uncertainties. Glaum inherits that problem of the mine which remains unable to get a buyer. Many investors are reported to be at qualms with the P2.8 billion which should be set aside for Environmental Rehabilitation Liability even in the event of a closing plan when the mine goes for closure. The sum of P2.8 billion was seen as an environmental rehabilitation and reclamation obligation by a report carried out by Dixon-Warren in 2015 and this amount remains an obligation few buyers would be willing to accept given the present value on site at BCL.
However there are reports that there has been interest shown from around the world. In an interview this year, Dixon-Warren did not want to divulge names of who he met as interested in buying the mine. Dixon-Warren said he has dealt with a number of international companies who have the skills, expertise and finance for BCL, but “none of them has made any offer after undertaking initial assessments of information. It doesn’t take much to assume who those big companies might be.”
Glaum and Sanek
As Glaum and Sanek take over the ruins that is left of the legendary BCL it is not clear whether the company has what it takes to handle the mine. Sanek is an acronym for Suid Afrikaanse Nasionale Ekseketeurskamer. In its website Sanek touts itself for being able to manage liquidation of a large property, Glen Anil, which was listed on the Johannesburg Stock Exchange (as it then was) found itself in financial difficulty and was wound up.
Stanbic Bank Botswana Quarterly Economic Review indicates that Botswana will fail to meet some of its Vision 2036 targets, particularly unemployment reduction and reaching high-income status.
The report says this is mainly due to the slow economic growth that the country is currently experiencing. This Quarterly Economic Review focuses on the 2020 Budget Speech.
The first paper reviews the entire budget with its key observations being that this budget is prepared as prescribed by the Public Finance Management Act; the priorities it seeks to address are drawn from Vision 2036 and the eleventh
The 2020 budget Speech, which was the maiden speech by the Minister of Finance and Economic Development, Dr. Thapelo Matsheka, and the first after the 2019 general elections, was delivered to Parliament on the 4th of February 2020.
It has been well received by the labour unions, business community, and the public at large as well as international organisations such as the International Monetary Fund (IMF).
It mainly derived its support from key facets including, emphasis on changing the business-as-usual approach to development; outlining the transformation agenda; fiscal reform that minimizes the negative impact on economic development and human welfare, competiveness and the decision to implement the 2019 negotiated and agreed public sector.
The budget’s progress review shows that economic growth was consistent with the NDP 11 projections, with growth of around 4 percent. At this growth rate, the country would neither ascend to a high-income status nor reduce unemployment towards the Vision 2036 target of a single digit.
Simple calculations of this review confirm that the economy will need to grow the Vision 2036’s target of 6 percent over the next 16 years for per capita income to increase from around USD 8,000.00 to above USD 12,000.00 in current prices.
Further, the population is anticipated to grow by only 2 percent per annum.
For this reason, the focal areas for the forthcoming FY’s budget include measures to increase economic growth towards an average of 6 percent per annum.
Economic diversification is reportedly progressing fairly well. The report says, the share of the non-mining private sector in value added has risen to 66 percent in 2018 from to 63 percent in 2015.
The sectoral pattern of growth showed that the performance of services sector (particularly transport & communications, trade, hotels & restaurants, and finance & business services) has been the silver lining and that of mining sector was subdued whilst the utility sector disappointed.
The drive towards the service sector of the economy, especially to low-productivity activities (tourism, public administration, wholesaling and retailing) does not bode well for the country’s development aspirations.
In the previous versions of this Quarterly Review, it was noted that there is need for the rethinking of economic diversification. Since the country’s domestic market is small, it is inevitable that economic diversification not only focus on broadening the product mix, but also the composition of exports and markets.
This understanding of economic diversification has not been embraced by this year’s budget. Consequently, Botswana’s exports are still overwhelmingly diamonds, which means that the rest of economic sectors are still highly dependent on foreign-exchange earnings from diamonds. Thus, “the transformation programme requires a review of the country’s entire ecosystem”.
The budget review of the economic context also depicts that an economy with positive medium-term prospects, with growth expected to recover to 4.4 percent in 2020 from the expected growth of 36 percent in 2019 largely due to faster growth of services sectors and, thereafter, to slow-down to 4 percent in 2021.
These projected growth rates are comparable to those of the IMF staff’s baseline scenario of 4.2 percent in 2020 and 4 percent in 2021. Thus, the business-as-usual scenario produces growth rates that are still too low to achieve Botswana’s development objectives and create enough jobs to absorb the new entrants into the labour market.
Trade tensions between the two major markets for diamond exports, viz., the United States of America and China, is one of the factors that are cited as contributing to, indeed, undermining not only the domestic growth, but also the fiscal position.
Another notable downside risk to both global and domestic growth is outbreak of the coronavirus in China around January 2020. This has been declared as a global health emergency. In an attempt to contain the spread of the novel coronavirus pneumonia, the Chinese authorities have ordered city lockdowns and extended holidays, of course, at the expense of near- term economic growth, according to the new Stanbic Bank Botswana report.
According to Nomura Holdings Inc., fewer migrant workers returned for work than in previous years and business activities have been slow to pick up. The havoc wreaked by the virus on the world’s second largest economy is likely to spill over to the global economy. In fact, it has resulted in a glut in crude oil and, thereby placed oil markets into a contango, i.e., a market structure where near-term prices trade at a discount to future contracts.
It also presents significant risks one of Botswana’s main drivers of economic growth, diversification and foreign exchange earnings. According to the Financial Times (February 13, 2020), Chinese tourists spent $130 billion overseas in 2018. Regardless of whether the growth materializes, the projected domestic growth rate would not transform the economy to a high-income one.
Progress towards reduction of unemployment, to a target of single digit, and poverty and achieving inclusive growth has also been relatively slow, the Stanbic Bank Botswana Review says.
Ministry of Presidential Affairs, Governance and Public Administration (MOPAGPA) has through the Office of the President (OP) proposed to avail Orapa House for use by private training institutions as well as research institutions involved in the area of technology development.
For a very long time the monumental building located in the heart of the city has been a white elephant, despite government purchasing it for nearly P80 million from De Beers in 2012.
However, government has now identified a productive use for the iconic building. “The overall vision is for the building to be transformed into a hub for digital technology research and development to be carried-out by institutions, such as; Limkokwing University, BIUST, BITRI and other relevant stakeholders.”
The decision was taken as government traverse a new path of transforming the economy from a mineral led economy to a knowledge based economy through the promotion of research and innovation. However, the facility will need major maintenance to be carried-out in order to meet the requirements of the proposed change in use.
“The work will include provision of laboratories, work stations, production areas and seminar rooms; audio visual centre, high speed internet connectivity, exhibition areas and offices,” reads the proposal note for the development.
These developments will be done through the refurbishment and maintenance of the main building, workshop, and ablution block, gate house, parking area, grounds, and access control and security service.
“There will be minimal modifications to the structure as it stands. The project is estimated to cost approximately P50, 000, 000,” says the report. In this regard, it is said, the initial scope of the OP facility will be modified to accommodate the envisaged digital technology research and development hub.
With funds needed to improve the building, OP has requested that; “the 2020/21 annual budget provision for Orapa House will need to be increased by P37,500,000 from P2,500,000 to P40,000,000 to kick start the maintenance works.” Funds will be sourced from the projects that have been delayed due to Covid-19 protocols during the 2020/21 financial year.
The building has been a thorny issue for government for years. Initially, OP was expected to move there but the move never materialised. At one point it was a question of whether the Office of the President and the Ministry of Finance and Economic Development were planning to override a decision by Parliament which rejected the proposal to buy Orapa House under the belief that government may be buying its own property. The building was to be bought at a negotiated cost of P79 million.
Again in 2012, Government had wanted to buy Orapa House for a negotiated P79m but the Finance and Estimates Committee of Parliament had rejected the request because of the inconsistencies realised in the supporting documents of the proposed procurement. The valuation of the building was put at P74 million.
The Ministry of Lands and Housing had initially offered De Beers P73, 000,000 as the purchase price. However, De Beers countered with P85, 000,000. On negotiation and converging of the minds, the selling price was finally agreed at P79, 000,000.
Auditor General, Pulane Letebele, has expressed discontentment at the worrying and deteriorating state of brigades in the country.
In an audit inspection which was carried out at Tshwaragano Brigade in Gabane, a number of observations showed weaknesses and shortcomings in the conduct of the financial affairs of the institution.
According to Letebele’s report, former students of the brigade had been engaged to carry out maintenance works on the school premises, comprising of painting, tiling, plumbing and electrical works, which covered the period from July 2017 to June 2018.
Although the agreed maintenance period had elapsed, the works had not been completed because of unavailability of funds and this situation had persisted up till the time of inspection in November 2019.
Auditor General says arrangements should have been made in time for funds to be available to complete these relatively minor works even before the works commenced.
Various contractors had been engaged for clearing the bush and for the supply of concrete stones, pit and river sand and hiring equipment for digging the trench towards the construction of an auto mechanics workshop, the report said.
It stated that the cost of services and supplies provided totalled P117 949.80. However, despite the services and the supplies having been paid for, the construction works had not commenced for a long period afterwards, resulting in the trench filling back in.
The audit inquiries had not elicited satisfactory responses as both the institution and the Ministry had not accepted the responsibility for the project, although orders for the provision for the supplies had been made. For their part, the Ministry had stated that they had sub warranted funds for the purchase of porta cabins.
Letebele indicated that it is therefore confusing that a project which is critical to the functioning of an institution such as this one would commence without a well-defined plan.
Furthermore, the accounting and maintenance of records for the supplies items were not of the standard prescribed by the Supplies Regulations and Procedures in that the supplies ledger cards, the main accounting records for Government assets, were not properly maintained for the recording of receipts and issues.
This had resulted in significant discrepancies between physical and ledger balances, while in other instances the supplies items had not been recorded at all.
The report says 24 of the 91 new computers found in the computer laboratory at Kumakwane ABC campus were not recorded anywhere, as were the other computers in the storeroom which could not be counted due to the disorderly storage conditions.
The institution had entered into a contract agreement with a security company for the provision of security services at Tshwaragano Brigade, ABC and Horticulture campuses at Kumakwane for a 2-year period which ended in June 2018, WeekendPost learnt.
After the contract expired in June 2018, an extension was granted till the 30th September 2018. Since then, there has been no security service coverage for the institution to-date. According to Auditor General, in the face of prevailing crimes, it is of paramount importance that government properties be protected by provision of security services at all times.
At Tlokweng Brigade, it was noted that the kitchen staff were working under difficult conditions as the kitchen facilities and equipment, such as the cold room, tilting pot, food warmers and solar power for hot water were dysfunctional. The kitchen roof was leaking and men’s restrooms was not working. All these need to be brought to a reasonable and functional state of repair.
The kitchen staff should use a purpose-designed Rations Ledger for the recording of receipts and issues of foodstuffs to reflect the usage of those items. As far back as 2014 the Department of Buildings and Engineering Services had found that the house occupied by the bursar was uninhabitable on account of structural defects, the report said.
A site visit during the audit had established that the house was indeed unfit for occupation as there were cracks on the walls, power switches were not working and the roof was leaking. On a sadder note, there were a number of finished items of clothing, such as dresses, shirts, and jackets from students’ practical exercises from the Fashion Design Textiles Workshop.
Auditor General shared her take on this, saying: “I have not been able to ascertain the policy on the disposal of products from these practicals. A trace of 103 green acid-proof overalls which had been purchased in August 2018 had indicated that there was no record of these items having been recorded or issued, nor were they available in stock. I was not able to obtain any explanation for this situation.”
Kgatleng brigade was also audited and inspected by Auditor General who observed that the brigade has 26 institutional houses at Bokaa, both old campus and new campus. Some of these houses are very old and dilapidated, with two declared uninhabitable. The condition of the houses is a clear indication of lack of care and maintenance of these properties.
At the time of the audit, there was no contractor engaged for the provision of security guard services at the new campus, after expiry of the previous one in July 2019. It is hoped that steps would be taken to safeguard the security of the premises and government properties against any acts of hooliganism.
In August 2019, there was a break-in at the electrical and at the plumbing maintenance workshops and a number of high value items, such as drilling machines, bolt cutters, spanners and cables, were stolen. The break-in and theft were reported to the police.
“However, at the time of writing this report I was not aware of the outcome of the police investigation, nor of any loss report submitted in terms of the Supplies Regulations and Procedures,” Letebele said.