On Thursday three bidders who participated in the recent public auction of the defunct Lerala mine showed keen interest, but failed to part with P2 million required as deposit for the auction.
This is after the mine had gone for an online auction May this year and a highest bidder pledged P80 million but failed to raise the money. The mine had to go back to traditional auctioning and last week the liquidator Kopanang Thekiso advertised the auction on newspapers. Buyers showed interest but could not pay the P2 million deposit. “It is true sir the mine is failing to find a buyer. It is also true that people who came forth this week have not paid the USD 200 000 (P2 million) deposit for the auction,” confirmed Thekiso in an interview.
Those who stand to lose big in this botched sale of the mine remain the twenty creditors who are owed P359 million and148 former employees awaiting payments amounting to close to P9 million by Lerala Diamond mine. Information received by this publication is that some buyers went even down to trying to buy the mine for P2 million while other wanted to pay P5 million. Everyone wanted to buy the mine cheaper and the liquidator admitted to this publication that the mine is going to be sold for a song. But the creditors will be given whatever the market offers, said the liquidator.
Also, the value of the mine is not known. Thekiso said they could not afford the money for valuation and they are just letting buyers to compete for the mine. Lerala mine auction included mining and water rights, five Kimberlite pipes ranging from 0.16 hectares to 2.35 hectares in area, a 200 metric tonnes per hour processing plant and a 4.2-megawatt diesel generator, among other assets.
The new buyer will get transfer of the mining license and rights; a complete processing plant, which includes a 200 t/h conventional fines plant and a course dense medium separation plant; final integrated X-ray recovery house; primary jaw crusher; secondary cone crusher; high-pressure roll crusher; scrubbers; material reticulation of conveyors; screens; bins; thickener plant and tailing dams; diesel generator plant; electrical reticulation; workshops; offices; and a mining camp.
Before the recent public auction Lerala used the online auctioneer GoIndustry DoveBid to sell the mine, but the efforts hit a snag after the attempted buyers failed to pay the money they promised. The Lerala Mine was opened in 2008 and had to be shut twice due to weak sales, until it finally was placed under judicial management in May last year, leaving 130 people out of work and millions in unpaid bills.
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.
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.
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”