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Dixon-Warren takes on Norilsk

BCL Liquidator Nigel Dixon-Warren has absolved government of any wrong doing, saying the company should rather take him on. This is after last month mining giant Norilsk Nickel released a statement attacking the Botswana Government for what it concluded as a mischievous attempt by Botswana of failing to pay for a mine it contractually purchased before subsequently putting it under liquidation with chicanery.

Norilsk painted Botswana with a dark brush of “disdain for investors’ rights.” Botswana is yet to respond to the statement as even media requests regarding Norilsk’s words remains pending. Dixon-Warren told Business Post this week that it is not fair to blame Botswana Government for bad investor relations because in the first place the BCL-Norilsk contract for purchase of the Nkomati and Tati mines were never put in force or effected but was just hanging on the air.

The statements by Norilsk against Botswana could harm Botswana’s reputation as an investment hub and mar President Mokgweetsi Masisi’s efforts to enhance Foreign Direct Investment according to many observers. The gripe of Norilsk against Botswana or BCL is a matter of a legal matter betters the courts in different jurisdictions, London, South Africa and Botswana. Norilsk is suing government of Botswana for breach of purchase contract, alleging that Botswana Government failed to pay about P2.8 billion for purchase of Nkomati and Tati mines.

 Norilsk said it sought to apply to Botswana courts to have its case heard by impartial and international arbitration in 2016 and the Botswana courts took 16 months to deny them the application. Norilsk is currently attempting to appeal the Botswana court decision.  The Botswana High Court however ruled that Norilsk had not complied with the legal requirements of applying for leave to pursue the case abroad, therefore dismissed the Russian company’s case.

Meanwhile Dixon-Warren has also launched a concurrent case against Norilsk at the Gauteng High Court challenging the legality of purported transfer of shares from Norilsk to BCL. As it has also been alleged that the transfer was approved by then mineral resources minister Mosebenzi Zwane, Dixon-Warren is challenging those allegation too.

While Norilsk also blames the Botswana courts of also refusing to have the company take its case to London Court of International Arbitration, Dixon-Warren argued that Norilsk wanted to omit Botswana courts legal proceedings and drag Government to the London Court of International Arbitration. He said any legal action against an insolvent company can only be pursued after obtaining leave of the High Court of Botswana to do so and such legal provisions are common around the world.

The BCL liquidator also believes Botswana courts were being robust and firm not to be taken from pillar to post by the Russian company. “Norilsk is free to withdraw its action at the LCIA, and approach the High Court to obtain the necessary leave prior to re-commencing action at the LCIA. There has been no attempt by the Botswana Government to preclude Norilsk from taking any legal actions it deems fit. The matters mentioned above are between Norilsk and the Liquidator of BCL,” said Dixon-Warren.

Dixon-Warren told this publication that when going back to this deal, it is clear that BCL was not in a position to conclude the acquisition of Nkomati. He said Norilsk is entitled to pursue a sale of its interests to a third party, and in the event it has suffered damages as a result of BCL not performing under the agreement, would be entitled to make a claim against BCL under the insolvency laws.
 

“BCL was placed into liquidation as it was fatally insolvent, and without further significant injections of funding, was unable to continue operating. I understand that Government considered requests by Management for additional funding immediately prior to liquidation, and concluded that it could no longer provide financial support to the detriment of other pressing budgetary requirements.

The date of liquidation (October 2016), the agreement (Norilsk-BCL) was not in force and had not been concluded. No guarantees were issued by Government of Botswana in respect of these transactions, and both BCL and Norilsk were fully aware at the time of signing the agreement that BCL was to raise its own funding for the acquisitions. Government has no legal obligation to settle the debts of any party in relation to the BCL liquidation," said the BCL liquidator.


Meanwhile, Dixon-Warren has revealed in an interview that at least two experienced and big companies are talking to him with keen interest on BCL. He said in there were about 140 companies and individuals who came with interest but never came back when he asked them on their capacity to buy or experience on mining projects. Dixon-Warren said some come to him interested in the mine’s waste dump to process it and some are interested in mining machinery.

He said most are skeptical of the value of BCL as a big old mine which might be difficult to run and close if there is a need. Dixon-Warren said currently he is working on cleaning up and pumping water from the mine. He said they are working on a hydro-geological process of taking out 6 litres of contaminated water from the mine. About 180 people have been employed to drain the water and work on maintaining the waste dump. He said BCL is a big old mine and people should know it is going to take a long time to be sold or closed.

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

21st September 2020
Botswana-on-high-alert-as-AML-joins-Covid-19-to-plague-mankind-

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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