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Zambia culpable in delay of P2 billion Kazungula Bridge

Failure to make up readily available funds for construction of one of the biggest project in Southern Africa, the Kazungula Bridge, by Zambia may delay construction further hence a hindrance to Botswana which is showing positive progress.

The Kazungula Bridge Project is a P2 billion bilateral initiative between Botswana and Zambia referred as a multi-national and border crossing 923m long bridge at the confluence of the Zambezi and Chobe Rivers. In this project Botswana and Zambia should meet each other halfway to put together a state of the art crossover between the two countries.  

This project is divided into three separate contracts named “Packages.” Package 1 is taken by South Korea’s Daewoo E&C which is working on the construction of the 923m long by 18.5m wide bridge. Package 2 is the construction of the Botswana One Stop Border Post facility by Zhong Gan Engineering of China. Construction of One Stop Border Post on the Zambian side of the border which is referred to as Package 3 done by Foreign Economic Construction also from China.

However construction at the Zambian side of the border appears to be moving at a snail’s pace, BusinessPost understands that funds for the construction of the bridge from Botswana’s northern neighbours have not been forthcoming. Funds to be proceeded to Road Development Agency of Zambia from the country’s National Road Fund have been disappointing as per information received by this publication. Recently workers at the bridge downed tools pending payments which were delayed by the Zambian government.

Reports from Zambia suggests that the country failed to pay one contractor for the bridge an outstanding P140 million bill while Botswana managed to fulfil its part of commitments. Recently the Zambian government claimed to have proceeded 20 million Kwacha as its commitment, but the media reports in that country claims the money is not yet been paid.

Lending credence that Zambia has not been much forthcoming in the Kazungula Bridge project quickly, this week Minister of Transport and Communications Dorcas Makgato revealed that Package 3 or construction of One Stop Border Post on Zambian side is behind progress by16.38 percent. These utterances came amid reports that Zambia has been delaying in advancing funds for the projects causing workers strikes hence further delays.

“Zambian’s One Stop Border Post (Package 3) is currently at 57.6 percent progress to the planned 73.98 percent,” said Makgato when giving a presentation before parliament’s Committee of Supply. According to Makgato, those travellers between Botswana and Zambia who have been hoping to use the state of the art bridge this month as it was expected to have completed by now will have to wait until “mid 2020” as all packages are expected to have completed.

While Zambia seems to be dragging on the construction of the bridge, Botswana on the other hand is making a fair share as it is only far by progress by only 1.4 percent. Botswana’s One Stop Border Post project stands at 95.4 percent compared to 96.8 percent which was planned according to Makgato. The minister further revealed that construction of the bridge or Package 1 components is at 74 percent compared to 81 percent-observers blames this on Zambia’s unreliability when it comes to advancing funds.

One top Botswana government official who is a bit lenient on Zambia prefers that this country should add a side condition on this project-that Botswana finish all the remaining project and then Zambia pay Botswana at the end. According to this official, this will ensure that the bridge is not delayed. Zambia had started this project late when compared to Botswana, some of the factors that keep it on a back-foot and funding has only added salt to the wound, this publication understands.

When requesting for P1 402 436 080 for Roads Infrastructure Development for financial year 2019/20, Makgato had the Kazungula bridge in mind as she said the money will be used to continue implementation of the currently on-going projects like the bridge. The Kazungula project is jointly funded by governments of Zambia and Botswana with loans Japan International Cooperation Agency (JICA) and the African Development Bank (AfDB).

The objective of the Kazungula Bridge is to reduce transit time for freight and passengers, decrease time-based trade and transport cost and improved border management operations from the new One Stop Border Facilities. The bridge completion is expected to boost regional integration and trade and will be a key route linking the strategic economic areas like Durban harbour to at least seven SADC countries.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020

This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.

The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.

He was speaking in  Parliament on Tuesday delivering  Parliament’s Finance Committee report after assessing a  motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.

The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.

The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.

The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.

This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.

Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.

Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.

However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.

Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.

When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.

This  as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.

The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.

Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.

In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.

Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.

Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.

Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.

Acknowledging the need to draw down from GIA no more, current Minister of Finance   Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”

He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”

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