The Botswana Unified Revenue Service (BURS) collected P35.335 billion during the 2015/16 financial year. The collection exceed the tax revenue target of P34,694 set by government by P641 million or 1.85% for the year under review.
These figures emerge from the BURS 2016 annual report tabled by the Minister of Finance and Economic Development, Kenneth Matambo this week for the Botswana Unified Revenue Service (BURS) Annual Report for the financial year ended 31st March, 2016. According to the report, the tax revenue collected in 2015/16 reflects a decline of 5.75% when compared to the P37.489 billion that was collected in 2014/15. It states that this decline is due to weak performance across the mining sector which resulted in a decline of income tax collections from P15.884 billion in 2014/15 to P13.832 billion in 2015/16. Furthermore, the report suggests that despite surpassing the target by 4.66%, the VAT collection declined by 3.76% while SACU receipts increased by 0.8% compared to the previous year.
Cost of Collection up
For the financial year 2015/16, BURS spent P534.079 million to collect P35.335 billion which translates into a cost to collection ratio of P1.00/P66.16. “This means for every P1.00 that BURS spent; the benefit to the Government in return was P66.16. Compared to the previous year’s cost to collection ratio which was P1/P79.85, this indicates a significant ratio decrease amounting to P13.69 collected per Pula spent. The decrease was due to the unsatisfactory economic performance which yielded less revenue and to the increase in the cost of goods & services.”
Tax Revenue as a Percentage of GDP
The report of the Commissioner General, Ken Morris informs that as a percentage of GDP, tax revenue collections showed an upward and consistent growth from 2010/11 from 20.9% to 25.4% in 2014/15. It further states that over the period since inception tax revenues as a percentage of GDP have been hovering around an average of 25%, generally indicating that the collections are roughly following the growth of the Gross Domestic Product (GDP). However, for the 2015/16 financial year tax revenue as percentage of GDP went down to 23.5% from 25.4% in the previous year.
Tax Revenue Collection declined
According to the report, tax revenue declined from P37.489 billion to P35.335 billion for the period under review. The decline in revenue collection is attributable to income tax which fell from P15.884 billion in 2014/15 to P13.832 in 2015/16. VAT also contributed to the decrease of the collection by falling from P5.907 billion to P5.685 billion as depicted in Figure 4.
Income Tax Revenue Collection
“Income tax revenue collection for the year is derived from different sources. The major source of the tax collection is from the Assessed tax whose contribution to the total collection was 50.12% followed by deducted tax which contributed 35.97%. Assessed tax registered a significant decrease of 27% due to the poor performance of the Mining sector which resulted in lower tax revenue assessed than in 2014/15,” states the BURS annual report.
Value Added Tax Revenue collection
The 2016 BURS annual report indicates that the gross VAT collection for the reporting period was P8.495 billion while the total VAT refunds paid to taxpayers amounted to P2.810 billion resulting in the net collection of P5.685 billion. “The major contributor to the total VAT is Import VAT since Botswana is a net importer. For the period under review import VAT and Internal VAT increased by 1.03% and 0.71% respectively while all other sources went down with penalties going down by a significant margin implying an improvement in compliance. The refunds went up by 9.67% compared to a 12.6% decrease in the previous year.”
SACU Revenue Shares
One of the biggest revenue earners for Botswana is the SACU revenue shares. The BURS annual report records that the total SACU Revenue Pool for Year under review was R88.898 billion. It notes that this was a slight decrease from the 2014/15 Pool which amounted to R89.201 billion. Despite this decrease, Botswana’s share from the Pool stood at R20.039 billion in 2015/16 compared to R19.276 in 2014/15, represents an increase of R763 million or 4%. SACU receipts continue to be an important source of revenue for the Government of Botswana, reports Commissioner General, Ken Morris.
Collections for Government Departments
The 2016 Annual report informs that during the period under review, BURS collected P507.9 million on behalf of Government departments and agencies compared to P475.4 million in the previous year as shown in Table 5 below. It further shares that a larger part of the collections came from the Alcohol Levy and Transport Permits which accounted for 64.1% and 23.8% respectively (compared to 62.8% and 22.4% respectively in 2014/15).
“Tobacco Levy which was introduced in the 2014/15 financial year contributed 9.4% in its first year of collection which was more than the 7.8% it contributed during 2015/16. The increase in Alcohol levy collection was occasioned by a change in the formula for calculating levy by including Excise duty on locally produced alcoholic beverages and therefore resulting in an increase in the tax base and hence an increase in levy collections,” reads the report. The BURS report states that the other contributing factor was the increase of the levy rate from 50% to 55% for alcohol beverages with an alcohol content of more than 5%. In case of Transport Permits, the increase was a result of an increase in the volume of foreign registered vehicles which entered Botswana during the reporting period
The state of the economy
The chairman of the BURS, Dr Taofila Nyamadzabo, in his Chairman’s Report indicates that for the period under review, the economy continued to face challenges, emanating from lower external demand for Botswana’s mineral exports mainly due to the continued weak recovery of the global economy and lower commodity prices.
“As a result, the country continued to experience slower growth in Gross Domestic Product (GDP). Nominal GDP recorded an increase of 0.3% from P148.0 billion in 2014/15 to P148.4 billion in 2015/16 driven mainly by General Government (12.6%), Finance and Business Service (11.6%), Transport and Communication (11.5%) and Construction (10.4%). As a consequence, the proportion of tax revenue to GDP slightly decreased from 23.6% to 23.5%,” he writes. Dr Nyamadzabo says real GDP declined by 2.0% from P88.2 billion in 2014/15 to P86.4 billion in 2015/16 mainly due to a drop in the performance of the Mining sector by 21.3% and Trade, Hotels and Restaurants sector by (3.3%).
Botswana Stock Exchange (BSE) moved swiftly this week to suspend BBS Limited from trading its securities following a brawl between Board of Directors and Managing Director, Pius Molefe, which led to corporate governance crisis at the organisation.
In an interesting series of events that unfolded this week, incumbent board Chairperson, Pelani Siwawa-Ndai moved to expel Molefe together with board Secretary, Sipho Showa, who also doubles up as Head of Marketing and Communications. It is reported that Siwawa-Ndai in her capacity as the board Chairperson wrote letters of dismissals to Molefe and Showa.
Following receipt of letters, the duo sought and was furnished with legal opinion from Armstrong Attorneys advising them that their dismissals were unlawful hence they were told to continue to report to work and carry out their duties.
Documents seen by BusinessPost articulate that in the meeting which was held on the 1st of April, the five outgoing board members, unlawfully took resolutions to extend their contracts by a further 90 days after April 30 2021 as they face tough competition from five other candidates who had expressed interest to run for the elections.
Moreover, at the said meeting, management explained that neither management nor the board have the authority to decline nominations submitted by shareholders or the interested parties which is in line with Companies Act and also BBS Limited constitution.
Molefe also revealed that as management they cautioned the board that it was conflicted and it would be improper for it to influence the election process as it seems they intended to do so. “Nonetheless, in a totally unprecedented move in the history of BBSL, the board then collectively passed the unlawful resolutions below. Leading to the illegitimate decisions, the board had brazenly directed that its discussions on the Board elections should not be recorded totally violating sound corporate governance,” reads the statement released by management this week.
When giving their legal advice, Armstrong Attorneys noted that notice for the AGM should state individuals proposed to be elected to the board and directors have no legal authority to prevent the process.
Armstrong Attorneys also noted that, “due process” cited by board members are simply to ensure that the five retiring Directors avoid competition from interested candidates to be appointed to the BBS Limited board. The law firm further opined that the resolution of the 90 day extension of term of the five directors pending re-election or election was unlawful.
Molefe expressed with regret that BBS has been suspended from trading by BSE until the current matter has been resolved. “I am concerned by this development and other potentially harmful actions on the business. As management, we are engaging with stakeholders to mitigate any negative impact on BBS Limited,” expressed a distressed Molefe.
He assured shareholders and the rest of Management that they are working very hard to ensure that the issues are being dealt with in a mature manner. BBS which hopes to become the first indigenous commercial bank has seen its shares halted barely four months after BSE lifted the trading suspension of shares for BBS following submission of their published 2019 audited financial statements.
According to Chief Executive Officer (CEO) of the local bourse, Thapelo Tsheole said the halting of shares of BBSL is to maintain fair, efficient and orderly securities trading environment. “The securities have been suspended to allow BBS to provide clarity to the market concerning the recent allegations which have been brought to the attention of the BSE relating to the company’s Board of Directors and senior management,” said Tsheole.
Meanwhile in their audited financial statements for the year ended 31 December 2020, BBS recorded a loss of P14.6 million as at 31 December 2020 compared to the loss of P35.7 million for the comparative year ended 31 December 2019. According to Molefe the year under review was the most challenging for the bank, its shareholders and customers endured the difficult economic environment and the negative impact of the coronavirus.
He revealed that as the bank, they were forced to put in place several measures to ensure that the business withstands the impact of coronavirus and also to cushion mortgage customers from the effects of the pandemic. “Since April 2020 up to the end of December 2020, BBS assisted 555 mortgage customers with a payment holiday,’’ he said.
This is the bank whose total balance sheet declined by 12 percent from P4, 626 billion for the year ended. 31 December 2019 to P4, 088 billion as at 31 December 2020. As if things were not bad enough, total savings and deposits at the bank declined by 14 percent from a balance of P2, 885 billion as at 31 December 2019 to P2, 494 billion as at 31 December 2020.
On a much brighter side, BBSL mortgage loans and advances improved from P3, 401 billion to P3.408 billion with impairment allowance significantly improving to P78, 648 million from P102, 532 million for the year under review, representing a positive variance of 23 percent. BBS maintained a strong capital base with capital adequacy ratios of 26.32% for the year ended 31 December 2020.
Molefe was optimistic and anticipated a positive outcome during the implementation of the new BBS corporate strategy, whose main drive is commercialization of operations, which is in full force. “It will be spurred on by the positive results we have achieved for the year ended 31 December 2020, and our planned submission of our banking license application to Bank of Botswana which we anticipate to operate as a commercial bank in the third quarter of 2021,” he alluded.
Chief Executive Officer (CEO) of Premium Nickel Resources Botswana (PNRB), Montwedi Mphathi, has said his company will resuscitate the formerly owned BCL assets and deliver a new, sustainable and cutting edge mining operation.
The new mine which will leverage on modern and next generation technology, will be environmentally sensitive and cognisant of the needs of its people and that of the communities around the area of influence.
In a statement last week, Premium Nickel Resources Botswana and its parent company, the Canadian headquartered Premium Nickel Resources announced that they have now completed the Exclusivity Memorandum of Understanding (MOU) with the Liquidator.
The MOU will govern a six-month exclusivity period to complete its due diligence and related purchase agreements on the Botswana nickel-copper-cobalt (Ni-Cu-Co) assets formerly operated by BCL Limited (BCL), that are currently in liquidation.
On February 10, 2021, Lefoko Moagi, the Minister of Mineral Resources, Green Technology and Energy Security of Botswana, affirmed in Parliament a press release by the Liquidator for the BCL Group of Companies, stating that PNR was selected as the preferred bidder to acquire assets formerly owned by BCL.
“This is encouraging for the company and for Botswana. Our ambition in this new project dubbed “Tsholofelo” is to redevelop the former BCL assets into a modern, environmentally sensitive, efficient NI-Cu-Co-water producer where sustainability and the people are at the forefront of the decisions we make,” said Mphathi in a statement last Thursday.
“We also understand that no matter how successful we are at building the “New BCL” , our success will only be measured at our ability to create local wealth , skills and support the continued transition of local economy to a longer term sustainable base.”
The next step during the exclusivity period will be the completion of the definitive agreement. Simultaneous to this the PNRB will be conducting additional investigative work on site to further its understanding of the potential of these assets.
Specifically the company will complete an environmental assessment, a metallurgical study, a review of legal and social responsibilities, a review of the mine closure and rehabilitation plans and an on-site inspection of the legacy mining infrastructure and equipment that has been under care and maintenance.
Mphathi said they continue to monitor the global Covid-19 developments noting that they are committed to working with health and safety authorities as a priority and in full respect of all government and local Covid-19 protocol requirements. PNRB has developed Covid-19 travel, living and working protocols in anticipation of moving forward to on site due diligence.
“We will integrate these protocols with the currently applicable protocols of Ministry of Health & Wellness as well as District Health Management Team ( DHMT) and surrounding communities,” reads a statement released by the Gaborone based Premium Nickel Resources team.
PNRB is looking to become a catalyst in participating and building a strong economy for Botswana, with a purpose where respect and trust are core to every single step that will be taken. “Our success will mean following international best-in-class practices for the protection of Botswana’s environment and the focus on its people, building partnerships and earning respect, through cooperation and collaboration,” explains PNRB on its website.
“We are committed to Governance through transparent accountability and open communication within our team and with all our stakeholders.” Mphathi, a former BCL Executive, is widely celebrated for achieving unprecedented profitability at the mine during his tenure as General Manager.
The Serowe-born mining guru obtained a Diploma in Mining Technology from Haileybury School of Mines in Canada. He later obtained a B.Eng. Mining degree from the Technical University of Nova Scotia. Mphathi went on to City University in London, UK and obtained a M.Sc. in Industrial and Administrative Sciences.
Before ascending to the top country managerial role of Premium Nickel Resources. Mphathi was General Manager of Botswana Ash (Botash), Southern Africa’s leading salt and soda ash producer. He was at some point linked to Debswana top post, which is still to date not substantively filled following the death of Managing Director, Albert Milton, in August 2019.
With Mphathi out of the race and now leading the rebuilding of his former employer, the top post at De Beers- Botswana joint venture is likely to be filled by current acting Managing Director Lynette Armstrong, a seasoned finance executive with unparalleled experience in the extractive industry.
“We are happy to hear that former General Manager of BCL, Mr Montwedi Mphathi, has a relationship with the new Company that intends to resuscitate the mine, he is an experienced Mining Executive who knows BCL better, we want the mine to be brought back to life so that our people can be employed ” said Dithapelo Keorapetse Member of Parliament for Selibe Phikwe West recently in Parliament.
BCL was liquidated in October 2016 following a series of losses and government bailout occasioned by low Copper prices and allegedly poor Investment decisions and maladministration. Recently PNR CEO, Keith Morrison said his team of seasoned experts both from Canada and Botswana are committed to resuscitate the BCL assets and deliver a high performance mining operation.
“The World, Botswana and the mining industry have changed dramatically since mining first started at the former BCL assets in the early 1970s. The nickel-copper-cobalt resources remaining at these mines are now critical metals, required for the continued development of a decarbonized and electrified global economy,” he said.
Morrison added: “As we move forward, it is our goal to demonstrate the potential economics of re-developing a combination of the former BCL assets to produce Ni-Cu-Co and water in a manner that is inclusive of modern environmental, social and corporate governance responsibilities.”
He explained that to attain this, extensive upgrades to infrastructure will be required with an emphasis on safety, sustainability and the application of new technologies to minimize the environmental impact and total carbon footprint for the new operations.
“Our team remains committed to working with the local communities and all of the stakeholders throughout this period and we encourage anyone with questions or feedback to reach out to us directly,” he noted.
Lucara Diamond Corporation, the Canadian 100% owners of iconic Karowe mine, this week announced the extension of its supply deal with Belgian diamond midstream giant HB Antwerp.
The definitive supply agreement is in respect of all diamonds produced in excess. of 10.8 carats in size from its rare gem producing Karowe diamond mine located in the Boteti district of Botswana. Large, high value diamonds in excess of 10.8 carats in size account for approximately 70% of Lucara’s annual revenue.
Though the Karowe mine has remained fully operational throughout the COVID-19 pandemic, Lucara made a deliberate decision not to tender any of its +10.8 carat inventory after early March 2020 amidst the uncertainty caused by the global crisis.
Under the terms of this novel supply agreement with HB, extended to December 2022, the purchase price paid for each +10.8 carat rough diamond is based on the estimated polished outcome, determined through state of the art scanning and planning technology, with a true up paid on actual achieved polished sales thereafter, less a fee and the cost of manufacturing.
“Lucara is beginning to see the benefits of this strategy in accessing a broader marketplace and delivering regular cash flow based on final polished sales,” said Lucara CEO, Eira Thomas on Wednesday.
“We believe these early results warrant an extension of the arrangement for at least 24 months to determine if superior pricing and market stability for our large, high-value diamonds can be sustained longer term.”
The Canadian junior miner initiated a supply agreement with HB for large stones from its Botswana Karowe mine in July 2020, after pausing its tenders shortly after the Covid-19 pandemic began. The deal enables Lucara to sell the rough diamonds to HB at a price based on an estimate of the polished outcome, which the companies determine using diamond scanning and planning technology. Once HB sells the goods, it adjusts the price that Lucara receives based on the actual selling price of the polished, minus a fee and manufacturing costs.
The extended supply deal will follow the same payment terms as the initial agreement, and will be in effect through to December 2022. Lucara said in a statement this week that the agreement also provides increased tax revenue and beneficiation opportunities for the government of Botswana, and creates a streamlined supply chain for Karowe’s rough.
“More than a supply agreement, this collaboration structurally embeds a new transparent and sustainable way of working in the diamond-value chain,” said HB CEO, Oded Mansori. “For the first time, different partners of the value chain are fully aligned, sharing data and information throughout the process from mine to consumer.”
Mansori added: “We are truly proud with this innovative and straightforward collaboration that has proven itself through the volatile and uncertain reality of 2020. We are confident to achieve even better results during the term of this new contract and demonstrate the power of a true partnership.”
Lucara, which early this year secured extension of Karowe mining license to 2040, announced over P2.4 billion funding for Karowe underground mining expansion project a fortnight ago. The Vancouver headquartered top large diamond producer says this supply agreement deal extension with HB will bring about regular cash flow for Lucara using polished pricing mechanism. Furthermore, the company says the deal has potential revenue upside, particularly suited for Lucara’s large, exceptional diamonds.
In the main, Botswana will benefit increased tax revenue and additional beneficiation opportunities for the Government and communities around Karowe mine. A streamlined supply chain that achieves alignment between Lucara and HB to maximize the value of each +10.8 carat diamond produced at Karowe.