Tlou Energy, a Botswana Stock Exchange (BSE) listed gas-to-power Company this week revealed that it has been selected by Ministry of Mineral Resources, Green Technology and Energy Security to develop Coal Bed Methane fueled power projects for Government of Botswana.
The company shared this information in a communique dispatched by to the market on Monday 20 May 2019. In October 2018 the Company submitted its comprehensive response to the Request for proposal (RFP) for the Development of a Maximum of 100 MW of Coal Bed Methane Fueled Power Plants in Botswana after Government published an inquiry to the market and requested for prospective bidders to express interest.
Tlou says its submission outlined a staged development commencing with up to 10MW of generation as well as outlining project feasibility, proposed field development, installation of power generation facilities and supply of power into the grid in Botswana. The RFP was assessed across three different criteria, Compliance, Technical and Financial of the competing bidders, of which Tlou’s proposal received the highest pass mark for the compliance and technical stage.
The financial stage required the calculation of a Leveled Cost of Energy (LCOE) for the project, with Tlou’s proposal having the most competitive LCOE. Furthermore Tlou says it emerged victorious because of its ability to operate efficiently using very experienced personnel coupled with the geological knowledge gained over many years of operating in Botswana.
“We can confirm that the Company has now received written confirmation from the government of Botswana that it has been chosen as a preferred bidder for the Development of a “Maximum of 100 MW of Coal Bed Methane Fueled Power Plants in Botswana” states Tlou in this week’s statement.
Last week in a statement dated 15 May 2019, Tlou Energy alerted the market of a decision by Public Procurement and Asset Disposal Board (PPADB) published in the Botswana Daily Newspaper dated 14 May 2019 which Government requested negotiations between two bidders being Tlou Energy and Sekaname (Pty) Ltd, a decision that posed uncertainty on Tlou’s camp.
On Monday Tlou’s Managing Director, Tony Gilby said the approval of the Company’s tender now represents great relieve and progress for Tlou. “The proposal that we submitted was very competitive and we welcome this decision by Government. We look forward to working together to deliver a successful power project. The effort put in by our team over recent years has been phenomenal and this result makes it all worthwhile,” he said.
Gilby highlighted that the company will now progress with additional work on the ground to deliver a Gasâ€toâ€Power solution that can bring significant benefits to the country and to our shareholders. Early this month Department of Environmental Affairs under the same Ministry approved Tlou Energy’s Environmental Impact Statement (EIS) for up to 20MW Coal Bed Methane power generation, a 66 KV Transmission Line to Serowe as well as a Sola Farm of up to 20 MW, the company revealed in a statement released 1st May 2019.
Tlou Energy commenced work on its application for an EIS for downstream development being power generation and transmission in late 2018. The EIS addresses the social and environmental context of the area surrounding the planned development of the Lesedi project which includes CBM power generation of up to 20MW, a 66kV transmission line to Serowe and a Solar Farm of up to 20MW.The Company already had approval in place for its upstream activities which comprises of development drilling and exploration.
In the statement, also published by Botswana Stock Exchange Limited, the BSE listed energy outfit noted that DEA approval confirmed that their EIS for proposed downstream development adequately identifies and effectively mitigates the anticipated impacts associated with the proposed activity. According to Tlou Energy The EIS authorization which will be valid for thirty (30) years and may be subject to renewal at the end of this period is another important project milestone which highlights the progress being made by the Company in its aim to deliver CBM power in Botswana and Southern Africa.
Tlou Energy, also listed on the Australian Securities Exchange (ASE) and the London Stock Exchange Alternative Investment Market (AIM) is focused on delivering Gasâ€toâ€ Power solutions in Botswana and southern Africa to alleviate some of the chronic power shortage in the region. The company is developing projects using coal bed methane (CBM) natural gas.
Botswana has a significant energy shortage and generally relies on imported power and diesel generation to fulfil its power requirements. As 100 percent owner of the most advanced gas project in the country, the Lesedi CBM Project, Tlou Energy says it provides investors with access to a compelling opportunity using domestic gas to produce power and displace expensive diesel and imported power.
Since establishment, Tlou has significantly derisked the project in consideration of its goal to become a significant gasâ€to power producer. The Company flared its first gas in 2014 and has a 100% interest over its Mining License and ten Prospecting Licenses covering an area of 9,300 Kilometer square in total The Lesedi and Mamba Projects already benefit from significant independently certified 2P gas Reserves of 41 BCF.
The partnership between Debswana and Botswana Oil Limited (BOL) which was announced a fortnight ago will create under 100 direct jobs, and scores of job opportunities for citizens in the value chain activities.
In a major milestone, Debswana and BOL jointly announced that the fuel supply to Debswana, which was in the past serviced by foreign companies, will now be reserved for citizen companies. The total value of the project is P8 billion, spanning a period of five years.
“About 88 direct jobs will be created through the partnership. These include some jobs which will be transferred from the current supplier to the new partnership,” Matida Mmipi, Head of Stakeholder Relations at Botswana Oil, told BusinessPost.
“We believe this partnership will become a blueprint for other citizen initiatives, even in other sectors of the economy. Furthermore, this partnership has succeeded in unlocking opportunities that never existed for ordinary citizens who aspire to grow and do business with big companies like Debswana.”
Mmipi said through this partnership, BOL and Debswana intend to impact citizen owned companies in the fuel supply value chain that include transportation, supply, facilities maintenance, engineering, customs clearance, trucks stops and its support activities such as workshop / maintenance, tyre services, truck wash bays among others.
“The number of companies to be on-boarded will be determined by the economics at the time of engagement,” she said. BOL will play a facilitatory role of handholding and assisting emerging citizen-owned fuel supply and fuel transportation companies to supply Debswana’s Jwaneng and Orapa Letlhakane Damtshaa (OLDM) mines with diesel and petrol for their operations.
“BOL expects to increase citizen companies’ market share in the fuel supply and transportation industries, which have over the years been dominated by foreign-owned suppliers. Consequently, the agreement will also ensure security of supply for Debswana operations, which are a mainstay of the Botswana economy,” Mmipi said.
“Furthermore, BOL will, under this agreement, transfer skills to citizen suppliers and transporters during the contract period and ensure delivery of competent and skilled citizen suppliers and transport companies upon completion of the agreement.”
Mmipi said the capacitating by BOL is limited to providing citizen companies oil industry technical capability and capacity to deliver on the requirements of the contract, when asked on helping citizen companies to access funding.
“BOL’s mandate does not include financing citizen empowerment initiatives. Securing funding will remain the responsibility of the beneficiaries. This could be through government financing entities including CEDA or through commercial banks. Further to this, there are financial institutions that have already signed up to support the Debswana Citizen Economic Empowerment Programme (CEEP),” Mmipi indicated.
While BOL is established by government as company limited by guarantee, it will not benefit financially from the partnership with Debswana, as citizen empowerment in the petroleum value chain is core to BOL’s mandate.
“BOL does not pursue citizen facilitation for financial benefit, but rather we engage in citizen facilitation as a social aspect of our mandate. Citizen facilitation comes at a cost, but it is the right thing to do for the country to develop the oil and gas industry,” she said.
Mmipi said supplying fuel to Debswana comes with commercial benefits such as supply margins. These have traditionally been made outside the country when supply was done by multi-nationals for a period spanning over 50 years. With BOL anchoring supply for Debswana, this benefit will accrue locally, and BOL will be able to pay taxes and dividends to the shareholders in Botswana.
PwC Africa has presented the eighth edition of the VAT in Africa Guide – Africa re-emerging. This backdrop of renewal informs on the re-emergence of African economies and societies which have been affected by the COVID-19 pandemic.
In this edition, which has been compiled by PwC Africa’s indirect tax experts, covers a total of 41 African countries. It is geared towards sharing insight with our clients based on the constantly changing tax environments that can have a significant impact on business operations.
Within Africa, governments continue to focus on expanding the tax net by improving revenue collection through efficient compliance systems and procedures. PwC Africa has observed that revenue authorities also continue to take a keen interest in indirect taxes as part of revenue mobilisation initiatives.
Maturing VAT system and upskilling SARS
“In South Africa, VAT is becoming more relevant as a revenue source for the government,” says Matthew Besanko, PwC South Africa’s Indirect Tax Leader. “Strides have been made to upskill South African Revenue Service (SARS) staff and identify VAT revenue leakages, particularly in respect of foreign suppliers of electronic services to people and businesses in South Africa.”
Broadening the tax base and digital economy
In the past year, South Africa, Mozambique and Zimbabwe saw updates to their VAT legislation, or introduced specific legislation targeting electronically supplied services (ESS), which is in line with the global trend of attempting to tax the digital economy. “The expectation is that Botswana will also introduce VAT legislation in due course, while the National Treasury in South Africa has also made mention of revising the rules to account for further developments in the digital economy,” Besanko says.
South Africa’s National Treasury has also drafted legislation with the intention to introduce a reverse charge on gold, which is expected to come into effect later in 2022. While in Zimbabwe, revenue authorities have introduced a tax on the export of raw medicinal cannabis ranging between 10% and 20%, which came into effect on 1 January 2021.
ESG and carbon tax
Key strides have also been made within the Environmental, Social and Governance (ESG) space. “ESG leadership, strategising and reporting is essential now for organisations that wish to flourish and remain relevant,” Kabochi says. He adds that companies need to consider how ESG and tax intersect, since tax is a significant value driver when businesses need to deliver on their ESG goals.
In South Africa, a carbon tax regime, which is being implemented in three phases, has been adopted. The second phase was scheduled to start in January 2023, however phase one was extended by three years until 31 December 2025.
Until then, taxpayers will enjoy substantial tax-free allowances which reduce their carbon tax liability. At the beginning of 2022, the South African government increased the carbon tax rate to R144 (about US$9), which is expected to increase annually to enable South Africa to uphold its COP26 commitments.
With effect from 1 January 2023, carbon tax payers in South Africa will also be required to submit carbon budgets and adhere to the provisions of the carbon budgeting system which will be governed by the Climate Change Bill. Where set carbon budgets are exceeded, the government plans to impose penalties. “At PwC, we are continuously focused on our renewed global strategy, ” The New Equation,” Kabochi says. “Through this strategy, a key focus area for PwC Africa is to support clients in adding value to their ESG ambitions and building trust through sustained outcomes.”
The New Equation is also an acknowledgement of the fundamental changes in the business environment in which PwC’s clients and other stakeholders operate. PwC continues to reinvent and adapt to these changes as a community of problem solvers, combining knowledge and human-led technology to deliver quality services and value.
Local and international economists have lowered their projections on Botswana’s economic growth for 2022 and 2023, saying the country is highly likely to fail to maintain high growth rate recorded in 2021 hence will not reach initial forecasts.
Economists this week lowered 2022 forecasts for Botswana’s economic growth rate, from the initial 5.3% to 4.8% and added that in 2023 growth could further decline to 4.0%. The lower projections come on the backdrop of an annual economic growth that recovered sharply in 2021 with figures showing that year-on-year real Gross Domestic Product (GDP) growth increased to 11.4%, up from a contraction of 8.7% in 2020.
Economists from the local research entity, E-consult, this week stated that the 2021 double digit growth that exceeded projections made at the time of the 2022 budget may be short lived due to other developments taking place in the global economy. E-consult Economist Sethunya Kegakgametse stated that the war in Ukraine has worsened supply problems in the global economy and added that before the war, macroeconomic indicators were seen as improving and returning to pre-COVID levels.
According to the economist the global economy was projected to improve in 2022 and 2023. Recent figures show that global growth projections have been revised downwards from the initial forecast of 4.9% in 2022 with the World Bank’s new estimate for global growth in 2022 at 3.2%.
The statistics also shows that International Monetary Fund revised their growth projections for 2022 and 2023 down by 0.8% and 0.2% respectively, falling to 3.6% for both years. “The outbreak of war has severely dampened the global recovery that was under way following the COVID-19 pandemic,” said the economist.
She stated that despite Botswana being geographically removed from the conflict, the country has not and will not be exempt from the disruptions in the global economy. “The disruptions to global supply chains resulting from the war will have a negative effect on both Botswana’s growth and trade activities.
The economic sanctions against diamonds from Russia will add uncertainty to the market which will have knock on effects to Botswana’s growth, exports, and government revenues,” said the economists who added that the disruptions are driving prices up and result with very high inflation in the local economy.
Kegakgametse projected that in an attempt to limit inflation Bank of Botswana will be forced to raise interest rate “Should the sharp increase in both global and local inflation persist, Bank of Botswana much like other central banks around the world will be forced to raise interest rates in a bid to control rising prices. This would mean an end to the expansionary monetary policy stance that had been adopted post COVID-19 to aid economic growth,” she said.
In the latest projections, the UK based economic research entity Fitch Solutions lowered 2022 real GDP growth forecast for Botswana from 5.3% to 4.8% “In 2023, we see economic growth rate decelerating to 4.0%,” said Fitch Solutions economists who also noted that the 2022 and 2023 economic growth projections may come out lower than the current forecasts, as it is possible that new vaccine-resistant virus variants may be identified, which could result in the re-implementation of restrictions. “In such circumstances, we cannot rule out that Botswana’s economy may post weaker growth than our baseline scenario currently assumes,” said the economists.
According to the projections, Fitch Solution stated that there is limited scope for Botswana government to increase diamond production and exports, following the economic sanctions imposed on Russian diamond mining companies operating in Botswana. The research entity added that De Beers is unlikely to scale up diamond output from Botswana in order to prop up diamond prices.