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BCL: How the Arabs came, saw, and left

This week the Minister of Mineral Resources, Green Technology and Energy Security, Advocate Sadique Kebonang briefed Members of Parliament on the latest regarding the status of the Liquidation of BCL Limited and its subsidiaries (the BCL Group).

From his statement the Minister shared the steps that led to the liquidation of BCL as well as the failed attempt to entice Emirates Investment House (EIH) to acquire BCL. Kebonang indicated that Emirates Investment House (EIH) had shown interest in acquiring the BCL Group. “I met with representatives of EIH both in Botswana and also Dubai where they are based. My visit to Dubai was in my capacity as the Political Head of my Ministry and a Minister in Government, to assure this entity that should their interest eventually result in investment, there is security of tenure in terms of Botswana laws. I was accompanied on the visit by the Director of Mines in my Ministry,” he said.

The minister said the timing of the visit to Dubai was critical as he believed he had to do so before the return date to the High Court, on the 7th February 2017. He said the outcome of the visit informed the application for the extension of the provisional liquidation period the first time.  According to Kebonang, after further engagements with EIH, the Government, through the Ministry, entered into a Heads of Agreement which broadly defined Government’s undertaking on the terms under which the BCL Group could be sold to EIH.

“Any subsequent agreement on selling and purchasing was to be subject to a positive due diligence, an agreement with the Shareholder, Minerals Development Company Botswana, and on the settlements of debts to the BCL Group creditors,” the Minister shared.
Kebonang further indicated that the Provisional Liquidator facilitated access to site and to information in order to allow EIH to conduct the due diligence. However, EIH made no offer after the extension of the provisional order on the 15th May 2017 and resulting in lapse of exclusivity granted to EIH by GRB to conduct due diligence.

Furthermore there was no offer at the return date of the 15th June 2017 to purchase the BCL Group, thus a decision was taken to place BCL under final liquidation. Kebonang said the return date of Tati and the BCLI, as already indicated, was extended to the 14th December, 2017 pending discussions with interested buyers. “I am aware of the interest of EIH in making investments in other sectors of the economy of Botswana such as agriculture and transport; on these they are in direct contact with the relevant entities.

The Provisional Liquidator has also undertaken efforts to identify potential interested parties, a number of which have expressed interest primarily in Tati Nickel Mining Company. The Provisional Liquidator is pursuing these expressions of interest. The Provisional Liquidator received some expressions of interest from potential buyers of the BCL and Tati Nickel Mining Company assets prior to the return date of the 15th June 2017,” Minister Kebonang pointed out.

Gov’t still wants to sell BCL

Nevertheless, Government still wants to sell BCL, the minister said after the return date of 15th June 2017, the Provisional Liquidator placed advertisements in local and international media inviting all potential buyers of BCL and Tati assets to submit their expressions of interest. “The Provisional Liquidator has set up a data room accessible to all interested parties to assist them in the preparation of their indicative offers. The closing date for these adverts is 01st September 2017. After this, the Provisional Liquidator will collate all expressions of interest received and short list the most suitable submissions. These will then be invited to present final proposals for the purchase of BCL and Tati assets. The potential buyers will have to conduct their own due diligence activities prior to presenting their final proposals,” he said.

In addition, Kebonang shared that Government has also received a proposal from a Dubai based company seeking to re-process the BCL slag dump to recover metal values and to manufacture steel and cement products from these. He stated that the MDCB has been tasked to evaluate this proposal and advise government on the proposal and further advise government on the viability of the proposal. “A viable proposal will then be referred to the Provisional Liquidator for his decision.”

Dispute with Norilski Nickel

Meanwhile the Minister also updated Members of Parliament on the dispute between the BCL Investments and Norilski Nickel on the Nkomati share purchase agreement (SPA). He observed that the dispute has been a source of negative publicity on Botswana and has led to litigation against government. He indicated that Government has initiated action through MDCB to resolve the Nkomati SPA issue amicably. He observed that due diligence and valuation exercises are being carried out to establish the value of the Nkomati assets as a basis for negotiating a commercially acceptable solution to the parties involved. The minister said the due diligence and valuation exercise are expected to conclude by 15th August 2017 and negotiations with Norilski will follow thereafter.

Life after BCL

Minister Kebonang shared that the Government of Botswana is actively pursuing options of life beyond BCL mining operations for the SPEDU Region. He said as part of the Government effort to ensure the sustainability of the SPEDU Region beyond the life of BCL Mines, the Selebi Phikwe Economic Revitalisation Program has been formulated. He said the Programme is driven by the Ministry of Investment, Trade and Industry (MITI) and has a dedicated Coordinator. According to Kebonang MITI has formulated the SPEDU Revitalisation Strategy with a package of fiscal and non-fiscal incentives, launched on the 6th March 2017 in Selebi Phikwe.

BCL Ltd was eventually put under final liquidation on the 15th June 2017. Tati Nickel Mining Company and BCL Investments continued to be under provisional liquidation with the return date having been extended to the 14th December 2017. As a consequence of the provisional liquidation, the assets of the BCL Group are under the control of the Provisional Liquidator, who is accountable to the creditors and the High Court. Minister Kebonang indicated that the costs of the Provisional Liquidation have been met from funding provided by the Government of Botswana. The amount already disbursed by the Provisional Liquidator amounts to P832 Million, out of a total budget provision of P844 million, up to April 2017. The major costs to be met from the funding are the Care and Maintenance Costs and terminal benefits payments for the former employees.

“ The terminal benefits paid to the former employees are as defined under our employment laws for an entity under a liquidation process. These terminal benefits would normally only be paid at the end of the liquidation process when the claims of the creditors are settled. It was decided however that employees should not wait indefinately, and arrangements were made for the payments to be made and the terminal benefits amount to be ceded to Government.” On the 9th October 2016, BCL Limited and two of its subsidiaries, BCL Investments and Tati Nickel Mining Company, (the BCL Group), were placed under provisional liquidation. The application for provisional liquidation was prompted by continued loss making of the BCL Group, on account of the depressed metal prices and operational challenges.

The financial situation of the BCL Group had not improved in spite of an injection of cash amounting to USD100 million from a facility provided by Barclays Bank of Botswana, guaranteed by the Government of Botswana, which was disbursed to BCL in April 2016. At the time of provisional liquidation, projections by Management were that by March 2017, a further P2 billion cash injection would become necessary in order to continue the operations. Due to budgetary constraints and competing national needs, Government did not have the financial resources to make further cash injections into the BCL Group to sustain the mining and related operations.

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13 AUGUST 2022 Publication

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DIS blasted for cruelty – UN report

26th July 2022
DIS BOSS: Magosi

Botswana has made improvements on preventing and ending arbitrary deprivation of liberty, but significant challenges remain in further developing and implementing a legal framework, the UN Working Group on Arbitrary Detention said at the end of a visit recently.

Head of the delegation, Elina Steinerte, appreciated the transparency of Botswana for opening her doors to them. Having had full and unimpeded access and visited 19 places of deprivation of liberty and confidentiality interviewing over 100 persons deprived of their liberty.

She mentioned “We commend Botswana for its openness in inviting the Working Group to conduct this visit which is the first visit of the Working Group to the Southern African region in over a decade. This is a further extension of the commitment to uphold international human rights obligations undertaken by Botswana through its ratification of international human rights treaties.”

Another good act Botswana has been praised for is the remission of sentences. Steinerte echoed that the Prisons Act grants remission of one third of the sentence to anyone who has been imprisoned for more than one month unless the person has been sentenced to life imprisonment or detained at the President’s Pleasure or if the remission would result in the discharge of any prisoner before serving a term of imprisonment of one month.

On the other side; The Group received testimonies about the police using excessive force, including beatings, electrocution, and suffocation of suspects to extract confessions. Of which when the suspects raised the matter with the magistrates, medical examinations would be ordered but often not carried out and the consideration of cases would proceed.

“The Group recall that any such treatment may amount to torture and ill-treatment absolutely prohibited in international law and also lead to arbitrary detention. Judicial authorities must ensure that the Government has met its obligation of demonstrating that confessions were given without coercion, including through any direct or indirect physical or undue psychological pressure. Judges should consider inadmissible any statement obtained through torture or ill-treatment and should order prompt and effective investigations into such allegations,” said Steinerte.

One of the group’s main concern was the DIS held suspects for over 48 hours for interviews. Established under the Intelligence and Security Service Act, the Directorate of Intelligence and Security (DIS) has powers to arrest with or without a warrant.

The group said the “DIS usually requests individuals to come in for an interview and has no powers to detain anyone beyond 48 hours; any overnight detention would take place in regular police stations.”

The Group was able to visit the DIS facilities in Sebele and received numerous testimonies from persons who have been taken there for interviewing, making it evident that individuals can be detained in the facility even if the detention does not last more than few hours.

Moreover, while arrest without a warrant is permissible only when there is a reasonable suspicion of a crime being committed, the evidence received indicates that arrests without a warrant are a rule rather than an exception, in contravention to article 9 of the Covenant.

Even short periods of detention constitute deprivation of liberty when a person is not free to leave at will and in all those instances when safeguards against arbitrary detention are violated, also such short periods may amount to arbitrary deprivation of liberty.

The group also learned of instances when persons were taken to DIS for interviewing without being given the possibility to notify their next of kin and that while individuals are allowed to consult their lawyers prior to being interviewed, lawyers are not allowed to be present during the interviews.

The UN Working Group on Arbitrary Detention mentioned they will continue engaging in the constructive dialogue with the Government of Botswana over the following months while they determine their final conclusions in relation to the country visit.

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Stan Chart halts civil servants property loan facility

26th July 2022
Stan-Chart

Standard Chartered Bank Botswana (SCBB) has informed the government that it will not be accepting new loan applications for the Government Employees Motor Vehicle and Residential Property Advance Scheme (GEMVAS and LAMVAS) facility.

This emerges in a correspondence between Acting Permanent Secretary in the Ministry of Finance Boniface Mphetlhe and some government departments. In a letter he wrote recently to government departments informing them of the decision, Mphetlhe indicated that the Ministry received a request from the Bank to consider reviewing GEMVAS and LAMVAS agreement.

He said: “In summary SCBB requested the following; Government should consider reviewing GEMVAS and LAMVAS interest rate from prime plus 0.5% to prime plus 2%.” The Bank indicated that the review should be both for existing GEMVAS and LAMVAS clients and potential customers going forward.

Mphetlhe said the Bank informed the Ministry that the current GEMVAS and LAMVAS interest rate structure results into them making losses, “as the cost of loa disbursements is higher that their end collections.”

He said it also requested that the loan tenure for the residential property loans to be increased from 20 to 25 years and the loan tenure for new motor vehicles loans to be increased from 60 months to 72 months.

Mphetlhe indicated that the Bank’s request has been duly forwarded to the Directorate of Public Service Management for consideration, since GEMVAS and LAMVAS is a Condition of Service Scheme. He saidthe Bank did also inform the Ministry that if the matter is not resolved by the 6th June, 2022, they would cease receipt of new GEMVAS and LAMVAS loan applications.

“A follow up virtual meeting was held to discuss their resolution and SCB did confirm that they will not be accepting any new loans from GEMVAS and LAMVAS. The decision includes top-up advances,” said Mphetlhe. He advised civil servants to consider applying for loans from other banks.

In a letter addressed to the Ministry, SCBB Chief Executive Officer Mpho Masupe informed theministry that, “Reference is made to your letter dated 18th March 2022 wherein the Ministry had indicated that feedback to our proposal on the above subject is being sought.”

In thesame letter dated 10 May 2022, Masupe stated that the Bank was requesting for an update on the Ministry’s engagements with the relevant stakeholder (Directorate of Public Service Management) and provide an indicative timeline for conclusion.

He said the “SCBB informs the Ministry of its intention to cease issuance of new loans to applicants from 6th June 2022 in absence of any feedback on the matter and closure of the discussions between the two parties.”  Previously, Masupe had also had requested the Ministry to consider a review of clause 3 of the agreement which speaks to the interest rate charged on the facilities.

Masupe indicated in the letter dated 21 December 2021 that although all the Banks in the market had signed a similar agreement, subject to amendments that each may have requested. “We would like to suggest that our review be considered individually as opposed to being an industry position as we are cognisant of the requirements of section 25 of the Competition Act of 2018 which discourages fixing of pricing set for consumers,” he said.

He added that,“In this way,clients would still have the opportunity to shop around for more favourable pricing and the other Banks, may if they wish to, similarly, individually approach your office for a review of their pricing to the extent that they deem suitable for their respective organisations.”

Masupe also stated that: “On the issue of our request for the revision of the Interest Rate, we kindly request for an increase from the current rate of prime plus 0.5% to prime plus 2%, with no other increases during the loan period.” The Bank CEO said the rationale for the request to review pricing is due to the current construct of the GEMVAS scheme which is currently structured in a way that is resulting in the Bank making a loss.

“The greater part of the GEMVAS portfolio is the mortgage boo which constitutes 40% of the Bank’s total mortgage portfolio,” said Masupe. He saidthe losses that the Bank is incurring are as a result of the legacy pricing of prime plus 0% as the 1995 agreement which a slight increase in the August 2018 agreement to prime plus 0.5%.

“With this pricing, the GEMVAS portfolio has not been profitable to the Bank, causing distress and impeding its ability to continue to support government employees to buy houses and cars. The portfolio is currently priced at 5.25%,” he said.  Masupe said the performance of both the GEMVAS home loan and auto loan portfolios in terms of profitability have become unsustainable for the Bank.

Healso said, when the agreement was signed in August 2018, the prime lending rate was 6.75% which made the pricing in effect at the time sufficient from a profitable perspective. “It has since dropped by a total 1.5%. The funds that are loaned to customers are sourced at a high rate, which now leaves the Bank with marginal profits on the portfolio before factoring in other operational expenses associated with administration of the scheme and after sales care of the portfolio,” said the CEO.

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