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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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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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