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Mascom loses bitter money war with BOCRA

Mascom Wireless Botswana has lost with costs a case in which it had sought a review of the lawfulness of a directive promulgated by the Botswana Communications Regulatory Authority (BOCRA), to regulate the Mobile Termination Rates (MTRs) in Botswana. Mascom wireless says the rates as set by BOCRA are very low and wants them increased.

Many in the industry see Mascom’s bitter fight as an effort to protect the revenue it was making from Mobile Termination Rates (MTRs) since it has the largest subscriber based when compared to other operators. The directive sets out charges that mobile network operators charge each other for network interconnection. Botswana telecommunications Corporation Limited (BTCL) and Orange Botswana were also cited as second and third respondent but they chose to be spectators in this regulatory dispute.

Mascom wanted the court to determine if in issuing regulatory directive No1 of 2017 on the 24th March 2017, determining the charges that the mobile network operators have to charge each other for network interconnections, BOCRA had acted in accordance with its statutory obligations to take regulatory decisions in the open, transparent, accountable, proportionate and objective manner in terms of the Communications Regulatory Authority Act.

The mobile operator was also skeptical as to whether BOCRA acted duly in terms of its common law duty, arising under public administrative law, to act fairly and in accordance with the legitimate expectations it had created with the operators that it would, regarding the charges in case, complete the consultation process in which it was engaged with the operators. In essence Mascom Wireless is of the view that the directive that was issued by BOCRA is illegal, irrational, improper and wanted it reviewed and set aside.

On 24th March 2017, BOCRA issued a directive that set Mobile Termination Rules that were to apply on 1st June 2017 and further directed operators – Mascom, BTC and Orange – to review their prices to remove the Off Net Mobile voice calls by 1st June 2018. The Judge, Leburu was informed that Mobile Termination Rates (MTR) are wholesale rates per minute that the operators charge each other for voice calls that terminate in their respective networks, but that originate from one of the other operators’ networks.

Explained further, if a mobile telephone customer of Mascom makes a voice call to a customer of Orange, Mascom has to pay Orange for enabling the Mascom customer’s call to be connected to the Orange customer’s mobile telephone device via Orange network.
The stated purpose of the said directive was to implement the final recommendations of the 2016 Cost Model and Pricing Framework Study. The said Study was conducted by a United Kingdom firm of consultants named Interconnect Communications Ltd. There was a consultation process following the final report which was preceded by an interim report in March 2016 and the draft final report was delivered in September 2016.

“Before the draft reports and final draft report were submitted, consultation with the operators, spanning 14 months was done and presentations were made to the operators during information sessions about the project or study,” the court was told.  It was further revealed that following upon public notice to all relevant stakeholders about the study, BOCRA initiated a one-on-one project meetings with each of the operators in January 2016. At this meetings a presentation was made to each of the operators, including Mascom.

It was shared in court that data from Mascom and other operators was used as inputs to populate the first Draft Cost Model. In March 2016, BOCRA issued the interim Report on cost modeling and pricing framework. Evidence presented before the court indicates that on March 22nd 2016, a stakeholder consultative workshop was held whereat all stakeholders were granted an opportunity to make presentations, responses and input on the issues described in the interim report. “Mascom elected not to make oral presentations at the workshop. Instead, it chose to subsequently submit written comments on the interim report on 11th April 2016.

“Mascom acknowledged as a starting point that the approach in the interim report was “well balanced and sensible approach with respect to the considerations made on the key issues that underpin the development of costs models and a pricing framework suitable for Botswana.”  It further made its presentations with respect to potential remedies to the pricing issues on off-net compared to “on-net” voice tariffs. BOCRA then made a consolidated report based on the submissions made by all including Mascom. 

After a collective meeting with Mascom, Orange and BTCL whereat a presentation on the project status was given to the operators, a draft final report which set the preliminary results of the study was issued by BOCRA on September 2016. All stakeholders including Mascom were once again given an opportunity to make presentations and Mascom obliged through its written representations on the 24th October 2016.

Mascom at this stage made complaints that it had not been furnished with full access to the cost model, for purposes of verifying and validating the costs results; Mascom also complained that the level of the MTRs set out in the draft final report were too low. BOCRA however proceeded and came up with a draft final report and shared it with Mascom and other stakeholders on 29th November 2016. On 17 January 2017 BOCRA held a meeting with Mascom to afford it an opportunity to raise its concerns on the Draft Final report.

Mascom further raised its concerns on the study and arising from such concerns three teleconferences between Mascom and consultants were conducted and one was on the 31st January 2017. BOCRA Board on 6th March 2017 adopted the final report but modified the recommendation of a three year glide path and adopted a two year glide path. “It was the reduction from the three years to the two years that formed Mascom’s casus belli, hence the present review application.”

MASCOM’s QUALMS

According to Mascom, at all relevant times during the consultation period, the consultants and BOCRA executive management team, conveyed to the operators that a reduction in the MTRs will be implemented over a three year glide path period. Mascom contended that the three year glide path period was effected by the BOCRA Board without prior notice or consultation and further that it legitimately expected that a three year glide path would be implemented and that if BOCRA was minded to vary same, it should have give Mascom a further hearing. Mascom argued that the consultation process was incomplete.

“Although attacking the entire process leading to the issuance of the said directive, is not seeking to set aside the entire directive. Mascom’s sharp pointed arsenal is directed at paragraphs 11.2 and 11.3 of the said directive dealing with MTRs,” observed Judge Leburu. Currently Mobile Termination Rates excluding VAT stand at 0.295 and by 1st June 2017 they were at 0.220 and on 1st June 2018 MTRs will be 0.130. Mascom wants these provisions set aside on grounds of irrationality, unlawfulness and unfairness. “Interestingly, other operators Orange Botswana and BTCL have adopted a passive role and have filed notices to abide by the court’s decision,” Judge Leburu noted.

JUDGE QUASHES MASCOM

Judge Leburu found that the regulator in BOCRA invited relevant stakeholders to participate in the study at formative stages before the directive was promulgated. He also established that several documents that information was shared by the regulator, its consultants and the operators. He further pointed out that workshops were held in addition to telephone and teleconference ng. Further drafts interim reports were prepared, shared and revised up until version 13 (Draft Final report). The Judge noted that Mascom fully participated in the consultation process, right from inception of the study, up to including the preparation of the Draft Final Report.

“The process of consultation was thus open and transparent.” He dismissed Mascom’s assertion that the consultation process was incomplete and inchoate, “in my view, it is bereft of substance,” he said. The Judge also noted that it is in the public interest that a consultation process must at some point come to an end so that certainty and predictability can prevail.  He said the directive was issued for public good, particularly the reduction of MTRs rates as well as Off-net and On-net tariffs.

“The decision by BOCRA, within the context of its decision making powers in my view, demonstrates that a reasonable and rational choice and decision was made by BOCRA.” Mascom’s application was dismissed with costs, inclusive of costs related to engagement of Senior Counsel.

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Botswana’s development agenda in jeopardy

21st September 2020
Botswana’s-development-agenda-in-jeopardy--water-construction

Stanbic Bank Botswana Quarterly Economic Review indicates that Botswana will fail to meet some of its Vision 2036 targets, particularly unemployment reduction and reaching high-income status.

The report says this is mainly due to the slow economic growth that the country is currently experiencing. This Quarterly Economic Review focuses on the 2020 Budget Speech.

The first paper reviews the entire budget with its key observations being that this budget is prepared as prescribed by the Public Finance Management Act; the priorities it seeks to address are drawn from Vision 2036 and the eleventh

The 2020 budget Speech, which was the maiden speech by the Minister of Finance and Economic Development, Dr. Thapelo Matsheka, and the first after the 2019 general elections, was delivered to Parliament on the 4th of February 2020.

It has been well received by the labour unions, business community, and the public at large as well as international organisations such as the International Monetary Fund (IMF).

It mainly derived its support from key facets including, emphasis on changing the business-as-usual approach to development; outlining the transformation agenda; fiscal reform that minimizes the negative impact on economic development and human welfare, competiveness and the decision to implement the 2019 negotiated and agreed public sector.

The budget’s progress review shows that economic growth was consistent with the NDP 11 projections, with growth of around 4 percent. At this growth rate, the country would neither ascend to a high-income status nor reduce unemployment towards the Vision 2036 target of a single digit.

Simple calculations of this review confirm that the economy will need to grow the Vision 2036’s target of 6 percent over the next 16 years for per capita income to increase from around USD 8,000.00 to above USD 12,000.00 in current prices.

Further, the population is anticipated to grow by only 2 percent per annum.

For this reason, the focal areas for the forthcoming FY’s budget include measures to increase economic growth towards an average of 6 percent per annum.

Economic diversification is reportedly progressing fairly well. The report says, the share of the non-mining private sector in value added has risen to 66 percent in 2018 from to 63 percent in 2015.

The sectoral pattern of growth showed that the performance of services sector (particularly transport & communications, trade, hotels & restaurants, and finance & business services) has been the silver lining and that of mining sector was subdued whilst the utility sector disappointed.

The drive towards the service sector of the economy, especially to low-productivity activities (tourism, public administration, wholesaling and retailing) does not bode well for the country’s development aspirations.

In the previous versions of this Quarterly Review, it was noted that there is need for the rethinking of economic diversification. Since the country’s domestic market is small, it is inevitable that economic diversification not only focus on broadening the product mix, but also the composition of exports and markets.

This understanding of economic diversification has not been embraced by this year’s budget. Consequently, Botswana’s exports are still overwhelmingly diamonds, which means that the rest of economic sectors are still highly dependent on foreign-exchange earnings from diamonds. Thus, “the transformation programme requires a review of the country’s entire ecosystem”.

The budget review of the economic context also depicts that an economy with positive medium-term prospects, with growth expected to recover to 4.4 percent in 2020 from the expected growth of 36 percent in 2019 largely due to faster growth of services sectors and, thereafter, to slow-down to 4 percent in 2021.

These projected growth rates are comparable to those of the IMF staff’s baseline scenario of 4.2 percent in 2020 and 4 percent in 2021. Thus, the business-as-usual scenario produces growth rates that are still too low to achieve Botswana’s development objectives and create enough jobs to absorb the new entrants into the labour market.

Trade tensions between the two major markets for diamond exports, viz., the United States of America and China, is one of the factors that are cited as contributing to, indeed, undermining not only the domestic growth, but also the fiscal position.

Another notable downside risk to both global and domestic growth is outbreak of the coronavirus in China around January 2020. This has been declared as a global health emergency. In an attempt to contain the spread of the novel coronavirus pneumonia, the Chinese authorities have ordered city lockdowns and extended holidays, of course, at the expense of near- term economic growth, according to the new Stanbic Bank Botswana report.

According to Nomura Holdings Inc., fewer migrant workers returned for work than in previous years and business activities have been slow to pick up. The havoc wreaked by the virus on the world’s second largest economy is likely to spill over to the global economy. In fact, it has resulted in a glut in crude oil and, thereby placed oil markets into a contango, i.e., a market structure where near-term prices trade at a discount to future contracts.

It also presents significant risks one of Botswana’s main drivers of economic growth, diversification and foreign exchange earnings. According to the Financial Times (February 13, 2020), Chinese tourists spent $130 billion overseas in 2018. Regardless of whether the growth materializes, the projected domestic growth rate would not transform the economy to a high-income one.

Progress towards reduction of unemployment, to a target of single digit, and poverty and achieving inclusive growth has also been relatively slow, the Stanbic Bank Botswana Review says.

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OP leases Orapa House

21st September 2020
Orapa House

Ministry of Presidential Affairs, Governance and Public Administration (MOPAGPA) has through the Office of the President (OP) proposed to avail Orapa House for use by private training institutions as well as research institutions involved in the area of technology development.

For a very long time the monumental building located in the heart of the city has been a white elephant, despite government purchasing it for nearly P80 million from De Beers in 2012.

However, government has now identified a productive use for the iconic building. “The overall vision is for the building to be transformed into a hub for digital technology research and development to be carried-out by institutions, such as; Limkokwing University, BIUST, BITRI and other relevant stakeholders.”

The decision was taken as government traverse a new path of transforming the economy from a mineral led economy to a knowledge based economy through the promotion of research and innovation. However, the facility will need major maintenance to be carried-out in order to meet the requirements of the proposed change in use.

“The work will include provision of laboratories, work stations, production areas and seminar rooms; audio visual centre, high speed internet connectivity, exhibition areas and offices,” reads the proposal note for the development.

These developments will be done through the refurbishment and maintenance of the main building, workshop, and ablution block, gate house, parking area, grounds, and access control and security service.

“There will be minimal modifications to the structure as it stands. The project is estimated to cost approximately P50, 000, 000,” says the report. In this regard, it is said, the initial scope of the OP facility will be modified to accommodate the envisaged digital technology research and development hub.

With funds needed to improve the building, OP has requested that; “the 2020/21 annual budget provision for Orapa House will need to be increased by P37,500,000 from P2,500,000 to P40,000,000 to kick start the maintenance works.” Funds will be sourced from the projects that have been delayed due to Covid-19 protocols during the 2020/21 financial year.

The building has been a thorny issue for government for years. Initially, OP was expected to move there but the move never materialised. At one point it was a question of whether the Office of the President and the Ministry of Finance and Economic Development were planning to override a decision by Parliament which rejected the proposal to buy Orapa House under the belief that government may be buying its own property. The building was to be bought at a negotiated cost of P79 million.

Again in 2012, Government had wanted to buy Orapa House for a negotiated P79m but the Finance and Estimates Committee of Parliament had rejected the request because of the inconsistencies realised in the supporting documents of the proposed procurement. The valuation of the building was put at P74 million.

The Ministry of Lands and Housing had initially offered De Beers P73, 000,000 as the purchase price. However, De Beers countered with P85, 000,000. On negotiation and converging of the minds, the selling price was finally agreed at P79, 000,000.

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Sad state of Brigades: dumped and ignored!

21st September 2020
Brigades

Auditor General, Pulane Letebele, has expressed discontentment at the worrying and deteriorating state of brigades in the country.

In an audit inspection which was carried out at Tshwaragano Brigade in Gabane, a number of observations showed weaknesses and shortcomings in the conduct of the financial affairs of the institution.

According to Letebele’s report, former students of the brigade had been engaged to carry out maintenance works on the school premises, comprising of painting, tiling, plumbing and electrical works, which covered the period from July 2017 to June 2018.

Although the agreed maintenance period had elapsed, the works had not been completed because of unavailability of funds and this situation had persisted up till the time of inspection in November 2019.

Auditor General says arrangements should have been made in time for funds to be available to complete these relatively minor works even before the works commenced.

Various contractors had been engaged for clearing the bush and for the supply of concrete stones, pit and river sand and hiring equipment for digging the trench towards the construction of an auto mechanics workshop, the report said.

It stated that the cost of services and supplies provided totalled P117 949.80. However, despite the services and the supplies having been paid for, the construction works had not commenced for a long period afterwards, resulting in the trench filling back in.

The audit inquiries had not elicited satisfactory responses as both the institution and the Ministry had not accepted the responsibility for the project, although orders for the provision for the supplies had been made. For their part, the Ministry had stated that they had sub warranted funds for the purchase of porta cabins.

Letebele indicated that it is therefore confusing that a project which is critical to the functioning of an institution such as this one would commence without a well-defined plan.

Furthermore, the accounting and maintenance of records for the supplies items were not of the standard prescribed by the Supplies Regulations and Procedures in that the supplies ledger cards, the main accounting records for Government assets, were not properly maintained for the recording of receipts and issues.

This had resulted in significant discrepancies between physical and ledger balances, while in other instances the supplies items had not been recorded at all.

The report says 24 of the 91 new computers found in the computer laboratory at Kumakwane ABC campus were not recorded anywhere, as were the other computers in the storeroom which could not be counted due to the disorderly storage conditions.

The institution had entered into a contract agreement with a security company for the provision of security services at Tshwaragano Brigade, ABC and Horticulture campuses at Kumakwane for a 2-year period which ended in June 2018, WeekendPost learnt.

After the contract expired in June 2018, an extension was granted till the 30th September 2018. Since then, there has been no security service coverage for the institution to-date. According to Auditor General, in the face of prevailing crimes, it is of paramount importance that government properties be protected by provision of security services at all times.

At Tlokweng Brigade, it was noted that the kitchen staff were working under difficult conditions as the kitchen facilities and equipment, such as the cold room, tilting pot, food warmers and solar power for hot water were dysfunctional. The kitchen roof was leaking and men’s restrooms was not working. All these need to be brought to a reasonable and functional state of repair.

The kitchen staff should use a purpose-designed Rations Ledger for the recording of receipts and issues of foodstuffs to reflect the usage of those items. As far back as 2014 the Department of Buildings and Engineering Services had found that the house occupied by the bursar was uninhabitable on account of structural defects, the report said.

A site visit during the audit had established that the house was indeed unfit for occupation as there were cracks on the walls, power switches were not working and the roof was leaking. On a sadder note, there were a number of finished items of clothing, such as dresses, shirts, and jackets from students’ practical exercises from the Fashion Design Textiles Workshop.

Auditor General shared her take on this, saying: “I have not been able to ascertain the policy on the disposal of products from these practicals. A trace of 103 green acid-proof overalls which had been purchased in August 2018 had indicated that there was no record of these items having been recorded or issued, nor were they available in stock. I was not able to obtain any explanation for this situation.”

Kgatleng brigade was also audited and inspected by Auditor General who observed that the brigade has 26 institutional houses at Bokaa, both old campus and new campus. Some of these houses are very old and dilapidated, with two declared uninhabitable. The condition of the houses is a clear indication of lack of care and maintenance of these properties.

At the time of the audit, there was no contractor engaged for the provision of security guard services at the new campus, after expiry of the previous one in July 2019.  It is hoped that steps would be taken to safeguard the security of the premises and government properties against any acts of hooliganism.

In August 2019, there was a break-in at the electrical and at the plumbing maintenance workshops and a number of high value items, such as drilling machines, bolt cutters, spanners and cables, were stolen. The break-in and theft were reported to the police.

“However, at the time of writing this report I was not aware of the outcome of the police investigation, nor of any loss report submitted in terms of the Supplies Regulations and Procedures,” Letebele said.

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