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Selibe Phikwe: Failed diversification vs resuscitation plans

The ongoing provisional liquidation of BCL has left many in great suspense in the once smoking town of Selebi-Phikwe, as well as arguably a significant crush in the national economic operations.


WeekendPost takes a brief recap of both government and private sector efforts put in place to diversify the Selibe Phikwe economy over the past years, as well as an in-depth look on the current proposed resuscitation plans. The story of Selebi Phikwe can be traced back to the early 1970s, when the mining town was established to house and service the employees of the then BCL, a copper and nickel mine which began operations in 1973.

 

Originally there were two settlements, Selebi and Phikwe with livestock keeping and mixed farming activities. The settlements enclosed the then rich, unexploited deposits of nickel and copper in the area. When the minerals were discovered, the mine and township were built on the land between the two villages, and their names were combined to Selebi-Phikwe, the name we know today.


Upon realization of the possible economic crush of the town post copper and nickel depletion, the government introduced the Financial Assistance Policy (FAP) in the late 90s under which foreign investors were granted capital to setup manufacturing businesses, mainly in the textile industries through government investment arm, Botswana Development Corporation (BDC).


Member of Parliament for Selebi-Phikwe West, Hon Dithapelo Keorapetse, reminded the government of this failed efforts last week in his response to the National Development Plan 11, which was presented by Finance Minister Kenneth Matambo a fortnight ago. Keorapetse labelled the disaster in Phikwe today, a result of neglect, carelessness and lack of proper planning by the government of the day.


“There were many textile industries under Botswana Development Corporation partly owned by foreign investors who after enjoying tax holidays took profits and returned to their countries.” Keorapetse noted that this was because of government overly focusing on foreign investment and totally neglecting fostering domestic investment. He labelled such investors as pseudo fly by night business people who tricked the lazy thinkers in government.


In 2008 a number of textile factories were shut down and consequently over 2000 jobs were lost, leaving the Phikwe economy more dependent on BCL for employment. BDC also had to liquidate Talana farm, a mainly horticultural farm which employed hundreds of furfural settlers, as one of its failed projects in the region, although the farm operated for a number of years before new BDC management decided to let it go.


Another missed opportunity that is consistently noted as lack of planning by the government was the building of Botswana University of Science and Technology (BUIST) in Palapye instead of Selebi-Phikwe. Dithapelo Keorapetse explains that Selebi-Phikwe should have been turned into the Graham‘s town and Stellenbosch of Botswana where the economy is knowledge based and sustained by a world class university (University of Stellenbosch and Rhodes University).


“When expects advised that the second university be built in Phikwe, it was instead taken to Palapye, an already commercial town,’’ noted Keorapetse who added that,  “there were  discussions that Selebi-Phikwe technical college be expanded , but rather funds were diverted to Gaborone Technical College , and on top of that propositions that the college of applied arts be built in Phikwe were rubbished and it was taken to a more sustainable and economically congested south side of the country in Oodi!’’


Keorapetse observed that for over 40 years, government failed to add more value to the copper and nickel extracted in Phikwe. He noted that to add to mining, concentrating, and smelting which were BCL’s main operations, other metallurgical undertakings should have been explored to plan for post ore depletion .


Notably in the records of Selebi-Phikwe economic diversification is a massive undertaking by BCL; the beyond 2020 Polaris II initiative which the authorities believed was to be a huge turnaround in the economy of the town. To date the Polaris II financial figures alone account for more than 7 billion BCL debts and arguably the reason why the town has more than 5000 unemployed inhabitants today.


Again quoted during the BCL liquidation shocking news weeks ago, Keorapetse explained the Polaris II was a corrupt undertaking which cash striped BCL mine. Under the Polaris II, there were a string of un-procedural procurement transactions and multimillion pula questionable contracts. The Polaris II saw the purchase of all Norilsk Operations in Africa by BCL limited which include Nkomati mine in South Africa and Tati Nickel

Mine in Francistown, at a tune of P3 billion, more than 100 million Pula injection into Pula Steel Manufacturing, over 700 million Pula refurbishment of BCL smelter, all done in good will of keeping the BCL alive and a significant employer post ore deposits depletion.
Also, there is Selebi Phikwe Economic Diversification Unit (SPEDU) a government placed organ that could have possibly, if implemented correctly, turned Phikwe into Botswana’s investment and economic hub.

However, today, SPEDU is accused of misplacing 1.4 million pula in its rebranding exercise, further the parastatals established in 2008 is accused of chewing more than 200 million pula taxpayers’ money on administration only, since its inception 8 years ago. However the tangible diversification the parastatal has undertook is yet to be witnessed.


Meanwhile, this past week, a press release from SPEDU written by SPEDU‘s Community Economic facilitation Director, James Mathokgwane titled “The truth behind SPEDU’s rebranding” explains that SPEDU became a full fleshed company just 18 month ago.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020
Botswana-on-high-alert-as-AML-joins-Covid-19-to-plague-mankind-

This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.

The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.

He was speaking in  Parliament on Tuesday delivering  Parliament’s Finance Committee report after assessing a  motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.

The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.

The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.

The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.

This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.

Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.

Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.

However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.

Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.

When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.

This  as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.

The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.

Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.

In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.

Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.

Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.

Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.

Acknowledging the need to draw down from GIA no more, current Minister of Finance   Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”

He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”

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