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Gov’t P350 million fuel outsourcing divides opinion

Members of the public and stakeholders in the oil and petroleum industry have expressed various and divergent views regarding a proposed move by government that intends to offload fuelling services of government vehicles to the private sector.

Public Enterprises Evaluation and Privatisation Agency (PEEPA) as the organisation assigned mandated to oversee smooth privatisation of any government service or entity is currently conducting consultations workshops countrywide gather public and stakeholder views regarding the move. Some attendants at a consultation workshop held in Gaborone late last week  raised  concerns that the proposed privatization would only stand to benefit a select few and further create industry monopoly at the advantage of already established fuel stations operators.

Some stakeholders have expressed fears around issues of efficiency saying an uncoordinated and disorganized move could result in a poor service which would halt government transport based operations and hurt economic activities. Currently government fleet is housed under Central Transport Organization (CTO) in the Ministry of Transport and Communication with fuelling, maintenance and servicing of vehicles as some of the organization‘s mandate. On an annual basis government expenditure on fuelling government fleet is in the region of P350 million.

PEEPA says the whole idea is for government to withdraw from commercial activities that could be better undertaken by the private sector and be left with planning, monitoring and creating a conducive environment for private sector to flourish and create employment.  “Government would then be relieved of administrative and implementation burden in turn private sector participation in the economy would expand,” explained Director of Public Service Outsourcing at PEEPA Ishmael Joseph.  

Joseph explained that contrary to some public concerns, outsourcing fuelling services would stand to benefit the whole entrepreneurial citizenry as it would promote direct participation of all business people in ownership of national assets. “In the process, privatizing these services would cultivate indigenous participation and push for more citizen ventures and participation in the fuel station operation business” said Joseph.

Currently government operates 33 fuel stations across the country under the CTO. According to information from PEEPA government will remain in operation of some fuel stations as strategic reserves and readiness facilities for times of shortages and crises in the fuel industry.
“We are convinced that this move would birth a significant number of new jobs in the private sector as government business brings in an additional P350 million boost into the industry,” he said.

However, some workshop attendants say venturing into the oil and petroleum business is steep for indigenous citizens considering the capital requirement associated with establishing such a business. It is therefore under this backdrop that the move to hand over fuelling government fleet to private owners has been labelled by many as a move that will only benefit privileged business people.  “The fuelling station operation business remains dominated by few business conglomerates that are linked to few business families,” argued one of the attendants at the workshop.

Various submissions at the workshop were centred on the fact that the capital intensive nature of the business would make it difficult for indigenous Batswana to have a share in the P350 million cakes. Botswana Oil Limited, a state owned enterprise established in 2015 has been tasked with amongst theirs   facilitation of citizen participation in the oil and gas industry. Botswana’s economy is largely driven by oil, with 67 percent of the country‘s energy driven by oil. Consuming at least 1.2 billion litres of fuel annually.

Botswana Oil has been conducting countrywide workshops to capacitate, encourage and promote indigenous citizen participation in the bulk procurement segment of this lucrative business. In an interview with BusinessPost this week Botswana Oil noted that for their part they have been pushing citizen participation in the bulk segment of the business. “Our country wide workshops were a strategic move that looks at empowering citizen companies to emerge as future oil and gas multinational companies capable of covering the nation with strategic stock in case of any disruption in the supply chain.”

Still at the PEEPA workshop stakeholders advised that the migration of this service to the private sector should be conducted with proper prior readiness to avoid inefficiencies that could possible hurt government operations and negatively affect the economy.
 “If the engaged private filling stations are not ready and organized for this load then we will have a problem”. However, Raphel Ramatu Deputy Director at CTO explained that his organisation has advertised a call for expression of interest calling independent entities to bid for a tender that would create an integrated system to enable proper evaluation, monitoring of the outsourced service.

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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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