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Air Botswana’s new wings did not come cheap

The two 70-seater ATR 72-600s recently purchased by government for Air Botswana might have cost around P500 million, BusinessPost has established. ATR 72-600 price ranges from P190 million to P260 million as it varies with many factors, but information received by this publication is that government has purchased brand new flying machines which might cost around P240 million each.

Launched in 2007 with first flight taking to the air in 2010, ATR 72-600’s highest value is at P260 million according to some news sources. According to Aircraft Value News the list price of ATR 72-600 was P216 million in 2015. Recently, Botswana signed an order for two ATR 72-600s. This is after the national flag carrier operated with old ATR-500s who are now outdated.

Air Botswana, founded 30 years ago, has been operating ATR -500 since 1996 and the national airline has been an operator for French based aviation company, Avions de Transport Regional(ATR) for two decades. This latest purchase comes after the national carrier operated with ageing fleet for years. Air Botswana is still waiting for the purchase of an unspecified 100-seater jet which is expected to take on the Gaborone-Cape Town route after the grounding of the Cemair plane leased to Air Botswana which operated the route for three years.

According to experts in aviation and engineering, operating with old planes is the reason that made the Air Botswana to be of low value as government has been trying to privatize it for years. Minister of Transport and Communications, Kitso Mokaila agrees with the pundits and wants to make Air Botswana a P1 billion project as it enters into privatization. Now valued around P300 million excluding the new purchased planes, the national airline has been operating at a loss for years, affecting the government purse and prompting a move to privatize it.

Mokaila refused to name the cost of the two ATR 72-600s purchased recently. Sources in the ministry said the contract has been signed and transactions were finalized this week. The turboprop machines are expected to be in Botswana November this year and will be used on the skies during the festive season.

After accepting the Air Botswana-ATR contract the national flag carrier CEO, Agnes Khunwana was quoted by the ATR website saying: “ATR is very reliable and has served us very well for over 20 years. The aircraft are very efficient and generally have favourable economics. Acquiring the new generation ATR 72-600 in a dual class configuration would be our most customer-centric development this year which I am confident, would greatly be embrace by our market.”

According to ATR, the ATR 72-600 series is the market leader in the regional aviation segment with a 40 % fuel burn advantage against its turboprop competitors. The ATR 72–600 features several improvements as it is also powered by the new PW127M engines which enable a 5% increase in takeoff power via a "boost function" used only when called for by takeoff conditions.

According to research, the 70-seater turboprop aircraft is more efficient and comfortable than Air Botswana’s older models of ATR-500 as it features lighter seats and larger overhead baggage bins. The aircraft also embraces the latest innovations in the cockpit technology with simplified, integrated LCD advance functions, enhancing safety, improved handling for pilots, in addition to maintenance cost saving and significant weight reduction. For those who want to buy Air Botswana, the latest purchase is touted to be a “proven route opener as it opened 150 routes in 2017 due to its versatility and operational efficiency.

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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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