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BPC gets biggest bite as Gov’t continues to bail out parastatals

Botswana Power Corporation will by beginning of government spending in April 2017 be over a billion pula richer at least on their operations & tariff subsidiary fund, Minister of Finance & Economic Development Kenneth Matambo announced last week in parliament when delivering the national budget speech.


According to Kenneth Matambo the mother ministry of Botswana’s electricity supplier, Mineral Resources, Green Technology and Energy Security will be allocated 2.93 billion, 17.8 % of the total 16.52 billion development budget forecasted for the 2017/18 financial year.
 “The largest share of the development budget is proposed for allocation to the Ministry of Mineral Resources, Green Technology and Energy Security at P2.94 billion or 17.8 percent. This is in recognition that, reliable and efficient sources of energy are a prerequisite for achieving NDP 11 priority area of Development of Diversified Sources of Economic Growth,” said Minister Matambo.


The specially elected National Treasurer explained that the major projects under the ministry would entail Northwest Transition grid, Morupule A power plant rehabilitation and construction of Rakola substation. Furthermore Matambo revealed that under the ministry P2.94 billion, the financially ailing Botswana Power Corporation will be allocated a whooping 1.46 billion pula to splash on their operation cost. Matambo‘s proposition comes at a time when parastatals are dismally failing to recover their operational costs and continue to make perennial losses.


Last year‘s final parliament sitting which debated the National Development Plan 11 Minister Matambo announced a total of  over 2 billion to  be owed to  government by losing making parastatals as unserviced loans and zero dividends pay  . Botswana Corporation which hasn’t being an exception led the loss making parastatals in 2014 with P1.25 billion loss “Furthermore, it is proposed that the Botswana Power Corporation be allocated an amount of P1.46 billion to cover operational costs,” he said, explaining that it was imperative to allot such funds to BPC considering its transition quest and current operation expenditure to keep the electricity tariffs as affordable to ordinary Batswana” With the operation cost increasing due high expenses in maintaining the plants , refurbishing  power station components and keeping up with increasing equipment prices,” said Matambo.


Botswana Corporation has been making losses  and receiving bail out for the past financial years, in 2014 the Auditor General reported a loss of P1.25billion for BPC, incurred from P4.48  billion expenses which exceeded P3.23billion income , a balance sheet which government enclave resolved by a bail out billions of pulas  for Batswana to continue receiving electricity at affordable tariffs.


Again in 2015 according to Botswana Power Corporation Annual report the corporation registered a loss before tariff subsidiary Grant  of P1.986 billion, in a bid to reduce the corporation losses BPC adjusted their tariff charges beginning of 2015 , a move which saw average consumer price rise to 61 thebe per kWH an increase which was added on top of the previous year’s 10 percent hike.

 

Charges for Small scale business consuming  500kWh or less per month were increased by 10 %  while 17.5 increase was applied for those consuming more than 500kWh.The corporation which heavily relies on Eskom for electricity supply after the failure of Morupule B was allocated P1.5 billion for tariff subsidiary and some operational cost during the 2015/16 financial years.


It incurred a net loss of P2.60 billion in 2015 compared to P1, 37 billion net losses in 2014 before a tariff subsidy grant of P2.33 billion. In 2016  BPC financial year which is currently  under review, Motlakase house already recorded a loss  P274.91 million which is a result of expenses amounting to over  P5.63 billion against the income of P5.36 billion, For 2016/17 financial year which ends in April, government allocated BPC a tariff subsidy and emergency power grant of P2.33 billion.


otswana Power Corporation which is now under the stewardship of  Sweden national Dr Schwarzfischer is reported to be moving into massive restructuring , a move that will see over 200 employees no longer on the corporation ‘s payroll when government spending begins in April 2017 for this financial year, sources from the January 23rd BPC media briefing reveal.

 

The national subsidized electricity provider which end of last year adopted a new strategy called Masa 2020 that intends to make it a profit making power distributor is said to be looking at relieving over 1000 employees off duties before the end of this year in a restructuring pursuit that will exe 50 % of over  2000 staff.


Currently Botswana Corporation is embattled with uncollected debts, non-performing assets, lack of borrowing capacity, amongst other challenges. BPC’s debtors currently seat at over P557 million from last year‘s over 400 million, largely due to non-payment of power bills by struggling mining companies choked by the international commodities crunch.

 

Talking of struggling mining companies, Botswana Power Corporation is reported to be one of highest BCL debtors, the corporation had BCL as its largest single consumer of its services, at least from the private sector. BCL is currently going through provisional liquidation. However there are reports that an Emirates company wants to buy the mine.


The budget speech which is  currently debated in parliament also indicate that solar energy will be allocated a significant funding to facilitate the country’s quest to shift from non renewable energy, a source of energy which proves to be unreliable and costly as evident to poor financial figures by the country’s national power supplier. Besides extending Morupule B with units 5 and 6 and Refurbishment of Morupule A Power Plant as additional power sources, the use of solar energy has been identified as a potential alternative source of electricity supply in the country,” It reads.


According to Minister Matambo It was against this background that a comprehensive renewable energy strategy which is aimed at attracting domestic and foreign investments is being developed, and will be completed by February, 2017. Further, Government, in collaboration with the German Agency for International Cooperation is undertaking a Green Energy Feasibility Study aimed at providing alternative sources of electricity.  


Water tariffs hike by April 2017

Mean while Water Utilities Corporation, another financially troubled state owned enterprise which is also undergoing business remodeling and administrative restructuring has announced that by April 2017 its services charge tariffs will go up.
According to Assistant Minister of Land Management, Water and Sanitation Services, Mr Itumeleng Moipisi water tariffs were increased by 10 per cent in 2012 and 15 per cent in 2013.

 

He indicated that the tariff would increase by 25 per cent for government and 15 per cent for domestic and business effective from April 1. The national water services provider Water Utilities Corporation is no exception from perennial loss making parastatals, in 2015 the corporation recorded a net loss of 367.0 million from 361.0 million in 2014.


Finance Mister Matambo however informed parliament of slightly positive news on Monday when delivering the budget speech that the Ministry of Land Management, Water and Sanitation Services will be allocated the second largest share of development budget at P2.80 billion, or 17.0 percent. According to Matambo this amount will be used for implementation of water projects inclusive of the North-South Carrier II to supply water to the Southern part of the country and reticulation of water from the Thune Dam to nearby villages.


 “Following the construction of a parallel pipeline to the existing line under the North-South Water Carrier Scheme, Government will fund the construction of various pipelines such as the ones connecting Thune Dam to Mathathane, Tsetsebye and Moletemane, which is expected to be completed in 2018, and the other connecting Kanye and Molepolole to the North South Carrier” he said.

 

Besides the implementation of emergency water projects throughout the country, other major water projects planned for 2017/2018 financial year include the rehabilitation of Shakawe Water Treatment Plant and its connection to Seronga, Gunotsoga, Beetsha and Gudigwa villages. In the mist of water tariff hikes all these projects are expected to provide adequate water supply to furfarial villages.”

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Mowana Mine to open, pay employees millions

18th January 2022
Mowana Mine

Mowana Copper Mine in Dukwi will finally pay its former employees a total amount of P23, 789, 984.00 end of this month. For over three years Mowana Copper Mine has been under judicial management. Updating members, Botswana Mine Workers Union (BMWU) Executive Secretary Kitso Phiri this week said the High Court issued an order for the implementation of the compromise scheme of December 9, 2021 and this was to be done within 30 days after court order.

“Therefore payment of benefits under the scheme including those owed to Messina Copper Botswana employees should be effected sometime in January latest end of January 2022,” Kitso said. Kitso also explained that cash settlement will be 30 percent of the total Messina Copper Botswana estate and negotiated estate is $3,233,000 (about P35, 563,000).

Messina Copper was placed under liquidation and was thereafter acquired by Leboam Holdings to operate Mowana Mine. Leboam Holdings struck a deal with the Messina Copper’s liquidator who became a shareholder of Leboam Holdings. Leboam Holdings could not service its debts and its creditors placed it under provisional judicial management on December 18, 2018 and in judicial management on February 28, 2019.

A new company Max Power expressed interest to acquire the mining operations. It offered to take over the Mowana Mine from Leboam Holdings, however, the company had to pay the debts of Leboam including monies owed to Messina Copper, being employees benefits and other debts owed to other creditors.

The monies, were agreed to be paid through a scheme of compromise proposed by Max Power, being a negotiated payment schedule, which was subject to the financial ability of the new owners. “On December 9, 2021, Messina Copper liquidator, called a meeting of creditors, which the BMWU on behalf of its members (former Messina Copper employees) attended, to seek mandate from creditors to proceed with a proposed settlement for Messina Copper on the scheme of compromise. It is important to note that employee benefits are regarded as preferential credit, meaning once a scheme is approved they are paid first.”

Negotiated estate is P35, 563,000

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Councilors’ benefits debacle-savingram reveals detail

18th January 2022

A savingram the Ministry of Local Government and Rural Development sent to Town Clerks and Council Secretaries explaining why councilors across the country should not have access to their terminal benefits before end of their term has been revealed.

The contents of the savingram came out in the wake of a war of words between counselors and the Ministry of Local Government and Rural Development. The councilors through the Botswana Association of Local Authorities (BALA) accuse the Ministry of refusing to allow them to have access to their terminal benefits before end of their term.

This has since been denied by the Ministry.  In the savingram to town councils and council secretaries across the country, Permanent Secretary in the Ministry of Local Government and Rural Development Molefi Keaja states that, “Kindly be advised that the terminal benefits budget is made during the final year of term of office for Honorable Councilors.”  Keaja reminded town clerks and council secretaries that, “The nominal budget Councils make each and every financial year is to cater for events where a Councilor’s term of office ends before the statutory time due to death, resignation or any other reason.”

The savingram also goes into detail about why the government had in the past allowed councilors to have access to their terminal benefits before the end of their term.  “Regarding the special dispensation made in the 2014-2019, it should be noted that the advance was granted because at that time there was an approved budget for terminal benefits during the financial year,” explained Keaja.  He added that, “Town Clerks/Council Secretaries made discretions depending on the liquidity position of Councils which attracted a lot of audit queries.”

Keaja also revealed that councils across the country were struggling financially and therefore if they were to grant councilors access to their terminal benefits, this could leave their in a dire financial situation.  Given the fact that Local Authorities currently have cash flow problems and budgetary constraints, it is not advisable to grant terminal benefits advance as it would only serve to compound the liquidity problems of councils.

It is understood that the Ministry was inundated with calls from some Councils as they sought clarification regarding access to their terminal benefits. The Ministry fears that should councils pay out the terminal benefits this would affect their coffers as the government spends a lot on councilors salaries.

Reports show that apart from elected councilors, the government spends at least P6, 577, 746, 00 on nominated councilors across the country as their monthly salaries. Former Assistant Minister of Local Government and Rural Development, Botlogile Tshireletso once told Parliament that in total there are 113 nominated councilors and their salaries per a year add up to P78, 933,16.00. She added that their projected gratuity is P9, 866,646.00.

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Households spending to drive economic recovery

17th January 2022

A surge in consumer spending is expected to be a key driver of Botswana’s economic recovery, according to recent projections by Fitch Solutions. Fitch Solutions said it forecasts household spending in Botswana to grow by a real rate of 5.9% in 2022.

The bullish Fitch Solutions noted that “This is a considerable deceleration from 9.4% growth estimated in 2021, it comes mainly from the base effects of the contraction of 2.5% recorded in 2020,” adding that, “We project total household spending (in real terms) to reach BWP59.9bn (USD8.8bn) in 2022, increasing from BWP56.5bn (USD8.3bn) in 2021.”  According to Fitch Solutions, this is higher than the pre-Covid-19 total household spending (in real terms) of P53.0 billion (USD7.8bn) in 2019 and it indicates a full recovery in consumer spending.

“We forecast real household spending to grow by 5.9% in 2022, decelerating from the estimated growth of 9.4% in 2021. We note that the Covid-19 pandemic and the related restrictions on economic activity resulted in real household spending contracting by 2.5% in 2020, creating a lower base for spending to grow from in 2021 and 2022,” Fitch Solutions says.

Total household spending (in real terms), the agency says, will increase in 2022 when compared to 2021. In 2021 and 2022, total household spending (in real terms) will be above the pre-Covid-19 levels in 2019, indicating a full recovery in consumer spending, says Fitch Solutions.  It says as of December 6 2021 (latest data available), 38.4% of people in Botswana have received at least one vaccine dose, while this is relatively low it is higher than Africa average of 11.3%.

“The emergence of new Covid-19 variants such as Omicron, which was first detected in the country in November 2021, poses a downside risk to our outlook for consumer spending, particularly as a large proportion of the country’s population is unvaccinated and this could result in stricter measures being implemented once again,” says Fitch Solutions.

Growth will ease in 2022, Fitch Solution says. “Our forecast for an improvement in consumer spending in Botswana in 2022 is in line with our Country Risk team’s forecast that the economy will grow by a real rate of 5.3% over 2022, from an estimated 12.5% growth in 2021 as the low base effects from 2020 dissipate,” it says.

Fitch Solutions notes that “Our Country Risk team expects private consumption to be the main driver of Botswana’s economic growth in 2022, as disposable incomes and the labour market continue to recover from the impacts of the Covid-19 pandemic.”
It says Botswana’s tourism sector has been negatively impacted by the Covid-19 pandemic and the related travel restrictions.

According to Fitch Solutions, “The emergence of the Omicron variant, which was first detected in November 2021, has resulted in travel bans being implemented on Southern African countries such as South Africa, Botswana, Lesotho, Namibia, Zimbabwe and Eswatini. This will further delay the recovery of Botswana’s tourism sector in 2021 and early 2022.”  Fitch Solutions, therefore, forecasts Botswana’s tourist arrivals to grow by 81.2% in 2022, from an estimated contraction of 40.3% in 2021.

It notes that the 72.4% contraction in 2020 has created a low base for tourist arrivals to grow from.  “The rollout of vaccines in South Africa and its key source markets will aid the recovery of the tourism sector over the coming months and this bodes well for the employment and incomes of people employed in the hospitality industry, particularly restaurants and hotels as well as recreation and culture businesses,” the report says.

Fitch Solutions further notes that with economies reopening, consumers are demanding products that they had little access to over the previous year. However, manufacturers are facing several problems.  It says supply chain issues and bottlenecks are resulting in consumer goods shortages, feeding through into supply-side inflation.  Fitch Solutions believes the global semiconductor shortage will continue into 2022, putting the pressure on the supply of several consumer goods.

It says the spread of the Delta variant is upending factory production in Asia, disrupting shipping and posing more shocks to the world economy. Similarly, manufacturers are facing shortages of key components and higher raw materials costs, the report says adding that while this is somewhat restricted to consumer goods, there is a high risk that this feeds through into more consumer services over the 2022 year.

“Our global view for a notable recovery in consumer spending relies on the ability of authorities to vaccinate a large enough proportion of their populations and thereby experience a notable drop in Covid-19 infections and a decline in hospitalisation rates,” says Fitch Solutions.
Both these factors, it says, will lead to governments gradually lifting restrictions, which will boost consumer confidence and retail sales.

“As of December 6 2021, 38.4% of people in Botswana have received at least one vaccine dose. While this is low, it is higher than the Africa average of 11.3%. The vaccines being administered in Botswana include Pfizer-BioNTech, Sinovac and Johnson & Johnson. We believe that a successful vaccine rollout will aid the country’s consumer spending recovery,” says Fitch Solutions.  Therefore, the agency says, “Our forecasts account for risks that are highly likely to play out in 2022, including the easing of government support. However, if other risks start to play out, this may lead to forecast revisions.”

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