Minister of Transport and Communications, Kitso Mokaila is clearly playing hardball with whoever wants to buy the national airline, Air Botswana as he now wants it to be sold at a price tag of over P1 billion. He is hopeful that the re-fleeting and other assets will push up its value.
The beleaguered national airline has been making losses over the years and its value is currently around P300 million, however Mokaila said at a press conference on Thursday that this price is too low and should be increased to over P1 billion. This effectively means Wilderness Holdings would have taken over the airline at a giveaway price had it not chickened out from taking over Air Botswana last year through a Presidential Directive. Wilderness Holdings, a company linked to former President Ian Khama had to withdraw from the bid after there was a public outcry due to the President being a buyer and a seller in the privatisation deal.
At a recent press conference Mokaila reiterated his last month plans of re-fleeting by buying a 70-seater jet, presumably an EMB-170 or similar variant and two ATR72-600s. Parliament has already approved P290 million which will be used to undertake the re-fleeting process. Mokaila was confident that before the end of the year all the three aircrafts would have arrived in the local shores. He said the re-fleeting will make the national airliner more attractive to would-be investors.
“We have not been asking for funds from government for the past years though we were making losses. Our losses have been decreasing from P87 million to P12 million recently. We have been trying to reduce costs all these years hence the stoppage of offering beverages and food on our passenger planes,” said Mokaila.
Sayed Jamali and Ram Ottapathuhad also made moves to own Air Botswanspecifically in February last year. They coined a joint venture proposal through a company called LongLeaf and Weekend Post has seen an initial proposal which was received by the Deputy Permanent Secretary Isaac Moepeng. LongLeaf was among the 17 bidders who coveted ownership of Air Botswana subsequently submitting an Expression of Interest on 28 February 2017. Investigations have revealed that Jamali and Ottapathu made another bid last year September after Wilderness Holdings withdrew from the tender following its success through a Presidential Directive.
Recently Ottapathu attempted to make a presentation to Mokaila, trying to convince him how the two men can be suitable owners of Air Botswana. However, according to sources, Mokaila flatly refused discussing Air Botswana. Some companies that had shown interest in buying Air Botswana when the deal was still being handled by the Board of Air Botswana pulled out after discovering that they will be compelled to retain the name of the Airline, the colours, and to a larger extent the staff that currently operates Air Botswana. Indications are that some companies were interested as long as they do as they please to make the Airline look attractive and become economically viable. Air Botswana is currently making huge losses and has an aging fleet.
MOKAILA ADDS SALT TO EMBATTLED SA AVIATION COMPANY WOUNDS
Mokaila recently revealed that Air Botswana will not renew its lease contract with beleaguered South African aviation company Cemair. The P3 million per month-three year lease agreement between Air Botswana-Cemair which ran the four times weekly Gaborone-Cape Town route expired earlier this year.
Mokaila’s decision not to renew Cemair’s lease agreement comes amidst the South African aviation company’s woes of having almost all its aircrafts grounded by South African Civil Aviation Authority (SACAA) due to regulatory concerns. Eleven of Cemair planes are currently grounded including the CRJ-100 capacity jet which the South African aviation company leased to Air Botswana.
Mokaila also revealed that Cemair was far away from the privatisation bid because it lost out on last year’s Expressions of Interest (EOI). Mokaila said even though Cemair was shortlisted with Wilderness Holdings, the EOI long expired and the privatisation bid is now open to everyone, but for those who are willing to dig deep into their pockets. The Transport Minister also said the Gaborone-Cape Town route will be brought back in a few months. He said the coming 70-seater jet will be used for the Gaborone-Cape Town route, meaning the Cemair lease will not be up for renewal any time soon.
Marcian Concepts have been contracted by Selibe Phikwe Economic Unit (SPEDU) in a P230 million project to raise the town from its ghost status. The project is in the design and building phase of building an industrial hub for Phikwe; putting together an infrastructure in Bolelanoto and Senwelo industrial sites.
This project comes as a life-raft for Selibe Phikwe, a town which was turned into a ghost town when the area’s economic mainstay, BCL mine, closed four years ago. In that catastrophe, 5000 people lost their livelihoods as the town’s life sunk into a gloomy horizon. Businesses were closed and some migrated to better places as industrial places and malls became almost empty.
However, SPEDU has now started plans to breathe life into the town. Information reaching this publication is that Marcian Concepts is now on the ground at Bolelanoto and Senwelo and works have commenced. Marcian as a contractor already promises to hire Phikwe locals only, even subcontract only companies from the area as a way to empower the place’s economy.
The procurement method for the tender is Open Domestic bidding which means Joint Ventures with foreign companies is not allowed. According to Marcian Concepts General Manager, Andre Strydom, in an interview with this publication, the project will come with 150 to 200 jobs. The project is expected to take 15 months at a tune of P230 531 402. 76. Marcian will put together construction of roadworks, storm-water drains, water reticulation, street lighting and telecommunication infrastructure. This tender was flouted last year August, but was awarded in June this year. This project is seen as the beginning of Phikwe’s revival and investors will be targeted to the area after the town has worn the ghost city status for almost half a decade.
The International Monetary Fund (IMF) has slashed its outlook the world economy projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.
On Wednesday when delivering its World Economic Outlook report titled “A long difficult Ascent” the Washington Based global lender said it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April. For 2021, IMF experts have projected growth of 5.4%, down from 5.8%. “We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” said Gita Gopinath Economic Counsellor and Director of Research.
The struggle of humanity is now how to dribble past the ‘Great Pandemic’ in order to salvage a lean economic score. Botswana is already working on dwindling fiscal accounts, budget deficit, threatened foreign reserves and the GDP data that is screaming recession.
Latest data by think tank and renowned rating agency, Moody’s Investor Service, is that Botswana’s fiscal status is on the red and it is mostly because of its mineral-dependency garment and tourism-related taxation. Botswana decided to close borders as one of the containment measures of Covid-19; trade and travellers have been locked out of the country. Moody’s also acknowledges that closing borders by countries like Botswana results in the collapse of tourism which will also indirectly weigh on revenue through lower import duties, VAT receipts and other taxes.
Latest economic data shows that Gross Domestic Product (GDP) for the second quarter of 2020 with a decrease of 27 percent. One of the factors that led to contraction of the local economy is the suspension of air travel occasioned by COVID-19 containment measures impacted on the number of tourists entering through the country’s borders and hence affecting the output of the hotels and restaurants industry. This will also be weighed down by, according to Moody’s, emerging markets which will see government losing average revenue worth 2.1 percentage points (pps) of GDP in 2020, exceeding the 1.0 pps loss in advanced economies (AEs).
“Fiscal revenue in emerging markets is particularly vulnerable to this current crisis because of concentrated revenue structures and less sophisticated tax administrations than those in AEs. Oil exporters will see the largest falls but revenue volatility is a common feature of their credit profiles historically,” says Moody’s. The domino effects of containment measures could be seen cracking all sectors of the local economy as taxes from outside were locked out by the closure of borders hence dwindling tax revenue.
Moody’s has placed Botswana among oil importers, small, tourism-reliant economies which will see the largest fall in revenue. Botswana is in the top 10 of that pecking order where Moody’s pointed out recently that other resource-rich countries like Botswana (A2 negative) will also face a large drop in fiscal revenue.
This situation of countries’ revenue on the red is going to stay stubborn for a long run. Moody’s predicts that the spending pressures faced by governments across the globe are unlikely to ease in the short term, particularly because this crisis has emphasized the social role governments perform in areas like healthcare and labour markets.
For countries like Botswana, these spending pressures are generally exacerbated by a range of other factors like a higher interest burden, infrastructure deficiencies, weaker broader public sector, higher subsidies, lower incomes and more precarious employment. As a result, most of the burden for any fiscal consolidation is likely to fall on the revenue side, says Moody’s.
Moody’s then moves to the revenue spin of taxation. The rating agency looked at the likelihood and probability of sovereigns to raise up revenue by increasing tax to offset what was lost in mineral revenue and tourism-related tax revenue. Moody’s said the capacity to raise tax revenue distinguishes governments from other debt issuers. “In theory, governments can change a given tax system as they wish, subject to the relevant legislative process and within the constraints of international law. In practice, however, there are material constraints,” says Moody’s.
‘‘The coronavirus crisis will lead to long-lasting revenue losses for emerging market sovereigns because their ability to implement and enforce effective revenue-raising measures in response will be an important credit driver over the next few years because of their sizeable spending pressures and the subdued recovery in the global economy we expect next year.’’
According to Moody’s, together with a rise in stimulus and healthcare spending related to the crisis, the think tank expects this drop in revenue will trigger a sizeable fiscal deterioration across emerging market sovereigns. Most countries, including Botswana, are under pressure of widening their tax bases, Moody’s says that this will be challenging. “Even if governments reversed or do not extend tax-easing measures implemented in 2020 to support the economy through the coronavirus shock, which would be politically challenging, this would only provide a modest boost to revenue, especially as these measures were relatively modest in most emerging markets,” says Moody’s.
Botswana has been seen internationally as a ‘tax ease’ country and its taxes are seen as lower when compared to its regional counterparts. This country’s name has also been mentioned in various international investigative journalism tax evasion reports. In recent years there was a division of opinions over whether this country can stretch its tax base. But like other sovereigns who have tried but struggled to increase or even maintain their tax intake before the crisis, Botswana will face additional challenges, according to Moody’s.
“Additional measures to reduce tax evasion and cutting tax expenditure should support the recovery in government revenue, albeit from low levels,” advised Moody’s. Botswana’s tax revenue to the percentage of the GDP was 27 percent in 2008, dropped to 23 percent in 2010 to 23 percent before rising to 27 percent again in 2012. In years 2013 and 2014 the percentage went to 25 percent before it took a slip to decline in respective years of 2015 up to now where it is at 19.8 percent.