The announcement in early October that BCL, Botswana’s major copper-nickel mining and smelting operation, was to be placed in provisional liquidation came as a major shock to many people. In part the shock was due to the anticipated impact on Selebi-Phikwe, the town where BCL is located, and on the company’s employees and suppliers.
With around 5,000 workers, state-owned BCL is (was) the second-largest corporate employer in the country (after Debswana).
The shock was also due to surprise that the Government was willing to take this decision, which marks a major turnaround from previous approaches, despite the potential short-term political costs. Because of both of these factors, the closure of BCL is one of the most significant economic events to have taken place in Botswana in recent years. It has some parallels with the diamond market collapse at the time of the global financial crisis in 2008-10, but its impact may be longer lasting, in that BCL may never recover, at least not in its present form. In this feature, we explore the background to the collapse, its likely economic impact, and prospects for resolution.
History / Background BCL Ltd was established following the discovery of copper in North-east Botswana in 1967. Originally named Bamangwato Concessions Ltd, it was established as a joint venture between two foreign investors – American Metal Climax (Amax) of the USA and Anglo American Corporation of South Africa – and the Botswana Government. The mine and the associated infrastructure developments of the Shashe Dam, rail, roads and the new township, were shortly after independence seen as the key to diversifying the economy away from the historical dependence on cattle and beef. However, the project has never lived up to those early expectations.
From the beginning, it was plagued by technical problems and huge cost overruns, such that the capital cost of the mine and smelter was more than twice the initial estimates, and from the beginning BCL was burdened by high levels of debt. This was compounded by volatile metals prices in the 1970s, and the company struggled to make a profit ever since. A commentary in 1978 noted: “It seems likely that the mining operation will remain marginal: it will be able to meet its costs only when world metal prices are close to cyclical highs. More efficient management, however, could compensate for some of the high cost of operation. Most important in determining the future profitability of the mine is the world price of nickel”
In the event, the two private investors eventually exited from the project, at a considerable financial loss, leaving the Government with a 93% stake, and as the major source of finance for the company through loans and guarantees. The 1978 comment quoted above proved very prophetic. During the 2000s, when nickel prices spiked to record highs, BCL was profitable and accumulated considerable cash reserves. But apart from that period, the company has struggled to operate profitably, which continues to be the case. In recent years, BCL has been haemorrhaging cash, at an unsustainable rate.
BCL’s recent problems
BCL’s recent problems have been brought about by a combination of events that have put the company’s finances under further pressure and led to demands for injections of substantial additional capital from the shareholder, i.e. government.
Declining ore grades
BCL operates four shafts in two mines, at Selebi and Phikwe, with some very deep mining operations. Two of these shafts in particular have very low ore grades and cannot operate profitably. There has been a lack of investment in mining operations in recent years, i.e. in the company’s core business. Overall, BCL’s reserves were reported as containing 0.67% nickel and 0.87% copper in 2014.
Low commodity prices Nickel and copper prices have weakened over the past five years, falling by around 50%. In real terms, the prices of the two metals are no higher now than they were in the early 1980s. Compared to the peak prices of $50,000/tonne for nickel and almost $9,000/tonne for copper in 2007-8, prior to the global financial crisis, prices had dropped to $8,500 and $4,500 for nickel and copper respectively in early 2016.
BCL has been implementing a turnaround strategy over the past two years (Polaris II), which was intended to move the company on to a sustainable long-term path. However, it has not achieved this objective. In part this is because it allowed inefficiencies in the core mining and smelting operations to grow as management attention was distracted. Unrelated ventures such as steelmaking, and prospecting for iron ore and diamonds, proved to be a waste of time and money.
The Norilsk deal
An important component of the turnaround strategy was the 2014 agreement with the Russian firm Norilsk Nickel to buy its assets in Southern Africa, which Norilsk was seeking to sell. These included 7% of BCL itself; 85% of Tati Nickel Mining Company (TNMC) (the other 15% owned by the Government of Botswana); and 50% of the Nkomati Nickel mine in South Africa (the other 50% owned by JSE-listed African Rainbow Minerals).
The logic behind this deal was that it would secure flows of concentrate from TNMC and Nkomati for processing in the BCL smelter. This was important not just to bring in a new revenue stream but also to optimise the use of the smelter, which needs to operate on a continuous basis, but which has insufficient supplies of copper-nickel concentrate from BCL’s own mines. Of course, ownership of these companies is not necessary for concentrate supplies, and TNMC concentrate has been smelted by BCL for years. But the thinking was that ownership stakes in TNMC and Nkomati would make those supplies more secure.
It was agreed that BCL would pay US$337 million for these assets, approximately P3.5 billion. Our view at the time was, and remains, that the deal made sense from a business perspective, but only if BCL was not overpaying for the Norilsk assets. And of course, BCL had to find some way of raising the P3.5 billion necessary to pay for it. By August 2016, the various conditions precedent for the Norilsk deal to be completed had been fulfilled, notably permission from the South African government for the transfer of Nkomati shares from Norilsk to BCL. Hence the payment to Norilsk became due. BCL’s financial crisis
By early 2016, the combination of declining ore grades, low metals prices, and an expensive smelter refurbishment – largely prompted by the need to accommodate the Nkomati concentrate – that interrupted production for many months, had depleted BCL finances. Indeed, in order to keep going, BCL had requested to defer mineral royalty payments to the Government, accumulating a debt of nearly half a billion Pula in the process. It had also depleted funds of over P1 billion that had been specifically put aside for end-of-life rehabilitation expenses.
Furthermore, it had borrowed USD100 million (almost P1.1 billion) from Barclays Bank, which was made available on the basis of a Government guarantee. It had also accumulated debts to suppliers. BCL had therefore accumulated debts of nearly P3 billion. On top of this, BCL needed to spend more money in order to stay in business. The acquisition of TNMC may have been at a low cost, but the company was in a parlous state. The operational Phoenix open cast pit near Francistown was approaching the end of its economic life. TNMC also owns the nearby Selkirk deposit, which had previously operated as an underground mine but had been mothballed since 2006.
TNMC intended to re-open the Selkirk mine as an open-cast operation, but this required considerable investment. And in both cases ore grades were low: in its last published report, Norilsk stated ore grades of 0.22% nickel and 0.18% copper at Phoenix, and 0.27% Ni/0.3% Cu at Selkirk. Despite mining at Selkirk being economically marginal, its development and re-opening was seen by BCL management as the mainstay of a restructured BCL, and crucial to securing a sustained concentrate flow to the BCL smelter.
BCL therefore required additional funds of at least P2 billion for expenditure on mining development at Selebi-Phikwe and TNMC. We understand that in total, BCL needed some P4.6 billion to clear existing debts and invest in production. And on top of that, with the completion of the conditions precedent for the Norilsk deal, that bill became due. It is not clear quite how much this amounted to. The original contract specified a price of US$337 million (P3.5 billion), but some reports say that this had been negotiated down substantially in view of the deteriorating values of copper and nickel deposits, or that Nkomati portion of the deal had been removed. But in total, BCL needed to raise somewhere between P5.5 billion and P7.5 billion to be put on a firm footing.
Where could this money come from? The company had already sought recapitalisation through a cash injection from the shareholder, which was declined. During 2015 the company had been canvassing the capital market to ascertain the appetite for a bond issuance of US$325 million (P3.5 billion). The response was that BCL itself was not credit-worthy, and that there would only be purchasers for the bond with a 100% government guarantee, and that even with this, the amount was far in excess of what the domestic market could absorb.
In view of BCL’s financial position, all of its funding would have to come from Government, through a mixture of direct finance (as a subvention to provide additional capital) and indirectly through guarantees. In the latter case, the proposed bond issue would virtually exhaust government’s ability to borrow or guarantee foreign currency debt, taking it up to the statutory ceiling of 20% of GDP, and restricting government’s ability to borrow externally for other projects. Any capital subvention or government lending to BCL would have to come directly from the budget.
With the Norilsk payment due imminently, a decision had to be made. BCL’s failure to pay Norilsk under the binding contract they had entered into would have most likely led to a petition to wind up the company and sell its assets to pay the debt. Given the many other demands on the budget, including from other parastatals such as BPC and WUC, as well as ongoing priority expenditures such as on anti-retroviral drugs, government decided that it could not afford to bail out BCL.
Rather than waiting for Norilsk or another creditor to initiate proceedings against BCL, government took a decision to enter voluntary provisional liquidation, which gave it a bit more control over the process and a possibility that BCL could be sold as a going concern. In some respects, the collapse of BCL should not be a surprise. It has long been known that eventually, BCL would close due to declining ore grades and rising production costs. And Botswana’s two other copper mines – Boseto near Maun and Mowana near Dukwe – have both closed down in the past 18 months due to high costs and low metal prices.
Economic impact of closure
What is the economic impact of the BCL closure likely to be? The brief answer is, at a national, macroeconomic level – significant, but not too serious, but at a regional level, in north-east Botswana – a major, negative and potentially long-lasting impact.
In the first half of 2016, copper-nickel mining accounted for 2.4% of Botswana’s total economic output (GDP). The BCL closure will reduce GDP by this amount. If the mine remains closed, over a full year it would reduce GDP growth from an estimated 3.5-4% to 1.0-1.5% in terms of the direct impact, and perhaps to zero once indirect impacts are taken into account. This would be a one-off impact and would not necessarily reduce future growth.
In the first half of 2016, exports of copper-nickel amounted to P2.03 billion, or 4.5% of total goods exports. While copper-nickel used to be Botswana’s second largest export, after diamonds, this is no longer the case as it has been substantially overtaken by tourism. Although the loss of copper-nickel export earnings would harm the balance of payments, the impact can be accommodated given that in the first half of 2016 there was a total balance of trade surplus of P11.7 billion. Reduced copper–nickel exports would also be offset to some extend by reduced imports, particularly of electricity.
With just over 5,000 employees at BCL and Tati Nickel, this amounts to around 1.5% of total formal sector employment. Total monthly payroll of P68.7 million amounts to an estimated 3% of total wage income in Botswana. Financial Sector
The Botswana banking system has substantial exposure to BCL group, to both the company and its employees, although there is no reliable figure for the total amount. Some of this is secured by a GoB guarantee, e.g. the loan of $100 million (approx. P1.07 billion) from Barclays. Of the remainder, some is secured against other assets, such as receivables or assets owned by employees including houses and vehicles.
It is likely that a proportion of the outstanding credit (apart from the Barclays loan) will not be recoverable. Although some of it will be secured, the banks are likely to be in the same queue as other creditors, and it is likely that a substantial proportion of this credit could be lost and hence written off. The impact of this on bank profits could be substantial. However, it is likely these losses can be absorbed by the banking system’s capital base without major disruption.
Regional impact BCL/Tati is the largest single employer outside of government in north-east Botswana. Its closure will have a major impact on the households affected, both directly and indirectly. BCL/Tati employs just over 5,000 workers directly, and injects P68 million a month into the local and regional economy through wages. Therefore, in addition, some workers will be employed as a result of spending by BCL employees. There are no reliable figures available on the indirect, multiplier effect of such spending, although in general spending multipliers in Botswana tend to be quite small given the tendency to spend wages on imported items (vehicles, clothing, food etc.).
Nevertheless, it is probably reasonable to assume that an equal number of people would be employed nationally (not necessarily regionally) as a result of spending by BCL/Tati employees, hence an additional 5,000 jobs. Selebi-Phikwe and the surrounding region (Central-Bobonong) had a total of 35,000 households at the time of the 2011 population and housing census, and a total population of 121,000 of this, Selebi-Phikwe has 16,000 households and a population of 49,000. Hence BCL directly supports a substantial proportion of the households in Selebi-Phikwe and the surrounding region through employment – perhaps 15% of the total.
TNMC has a smaller, but still significant effect on the Francistown regional economy. Although there are no accurate figures, our estimate is that BCL is directly responsible for around 20% to 25% of spending by households in the region (although not all of this is spent locally).
The impact of the BCL liquidation/closure on the economy of Selebi-Phikwe and the surrounding region is therefore likely to be substantial, through the impact on employment and household spending. There will also be a smaller impact on the Francistown regional economy, both from the closure of TNMC and money that would previously have been spent by BCL employees in Francistown.
Beside the impact on household incomes and spending, and hence on the firms that supply goods and services to households in the region, there will also be an impact on the private sector through the BCL supply chain. Various entities are suppliers to BCL and Tati, including BPC (electricity), MCM (coal), BR (rail freight services) and road haulage firms. Other affected firms include those providing engineering and maintenance services, accommodation/hotels, vehicles, consumables etc. There is no information readily available to estimate the magnitude of the impact on these suppliers.
However, in some cases it is no doubt a significant proportion of their business. On a positive note, the closure of BCL will relieve pressure on the national electricity grid, and make it less likely that other consumers and business will experience load-shedding in future.
Options for the future
Many commentators have said that government should have made more effort to save BCL from liquidation, because of the impact on the 5,000 employees of BCL and TNMC, and the region more broadly. While government could, in principle, have contributed the necessary funds, should it have done so? As noted above, the total cost to government of bailing out BCL would be in the region of P5.5 – P7.5 billion. This is a large sum, equivalent to nearly half of annual government development spending. It is also equivalent to P11,000-P13,500 per household in Botswana. Perhaps most importantly, the rescue plan would have cost government between P1.1 million and P1.5 million per job saved at BCL and TNMC.
With this magnitude of funds required, it is not surprising that the government said, “enough”. BCL management have claimed that their turnaround plan would pay off eventually, and that some or all of the capital injection requested would be repaid. But this is based on some ambitious expectations for recovery in nickel prices, as well as confidence in their ability to successfully implement an extensive restructuring process. Of course nobody knows what level prices will be in the future, but various estimates are available, and these vary a great deal. If the most optimistic of the sources below is correct, then much of BCL’s production would be profitable by 2019. However, these are only forecasts.
The only actual price is the one from the futures market, i.e. the price that would be realised today for a contract to sell nickel at a specified date in the future. At present, the futures market is not pricing in a recovery, with the price only 1.8% higher in December 2019 than it is today.
Given that some of BCL’s Selibe-Phikwe deposits are close to exhaustion, the management’s turnaround plan also involved developing the Selkirk mine (near Francistown) as the main source of ore within the BCL group. It also involved renegotiating the contract with Norilsk to reverse the commitment to buy 50% of Nkomati, while keeping the agreement to buy the Botswana assets. At the same time, it required securing a long-term contract with Nkomati to process its ore in the BCL smelter. All of which entailed considerable risk.
Now that BCL is in provisional liquidation, one of the liquidator’s tasks is to try and find a buyer for BCL as a going concern. This will be challenging, but not impossible. If other mining companies share the optimistic view of future price rises for nickel, then it could be a worthwhile investment to take over BCL and TNMC. However, government may still have to write off some of the money it is owed, and it should not expect to receive any significant monetary value from any sale.
Somewhat ironically, the government had a chance to sell its stake in BCL back in 2006, when the previous owners of Tati Nickel, Lion Ore, wanted to buy BCL. Lion Ore was subsequently taken over by Norilsk. Whether BCL would have been in a different position in 2016 if this option had been pursued is impossible to know, but clearly it would have been much better for government to have sold out at a time of booming metals prices. One of the positive outcomes from the BCL saga is that government has finally made a choice about where it should devote its limited resources.
As we have been arguing for some time, government cannot continue to throw money at problems, and given the many demands on fiscal resources, choices are necessary about where money is best spent. Having made such a choice, the challenge now is to make sure that the spending decisions that it makes in future do indeed lead to money being well spent, and not wasted on unproductive projects. It will also be necessary to aggressively support private sector development in Selebi-Phikwe and the surrounding region, particularly by accelerating long-overdue regulatory reform and removing barriers to local and foreign investment.
Botswana Football Association (BFA) leadership appears to be bowing down to Nicolas Zakhem’s football pressure. The development comes to the open roughly 24 hours after the Gaborone United director publicly labelled Maclean Letshwiti and his committee failures for deciding to chop five premier league clubs under the pretext of club licensing disqualification.
As early as Wednesday noon, the BFA emergency committee met with one agenda item to discuss the possibility of reinstating the clubs. This publication gathers that the committee saw it fit to pardon the five clubs without entertaining a second thought. The committee even invited the clubs to the meeting, sources say.
Late last month, the five teams were disqualified from playing in the premier league, pending the appeal outcome. The teams are Notwane, Extension Gunners, BR Highlanders, Mogoditshane Fighters, together with Gilport Lions. The immediate decision by BFA follows what Zakhem had said and advised that it was wrong to chop clubs given the COVID-19 situation in the country.
Unbeknownst to BFA leadership, observers stress that Zakhem exerted public pressure and influenced them to change tone without asking. At the meeting, BFA president Maclean Letshwiti, his vices, Marshlow Motlogelwa and Masego Ntshingane, Aryl Ralebala, the Botswana Football League (BFL) chairman, together with Alec Fela, an ordinary member in the now stubborn NEC.
However, the reactive move by the association to reinstate the clubs is highly welcomed in certain quarters, but it also appears to have left a permanent scar, especially at BFL. As things stand, the general feeling on the ground is to oust chairman Ralebala for failing to defend these clubs before the eyes of President Letshwiti.
This publication has intercepted an ongoing petition to unseat Ralebala and his deputies from the BFL board. Strange enough, the signed petition has thus far attracted clubs with household influence in the league itself. GU, Township Rollers, Notwane, Extension Gunners, Police XI are some clubs that have already appended their signatures to have Ralebala removed.
The big clubs are believed to fighting for principle and demand fair governance at BFL. The reality is that these clubs command a large following, and sponsors can always have a say based on their presence.
When approached for clarity, Ralebala said he could not comment on allegations or issues that lack substance. He concedes that he has heard about the rolling petition but is yet to lay his eyes on it. “I have heard about the petition, but I don’t know where it is coming from. I think it is best you ask those who have signed it. My focus is to commence the league and make sure everything is on point,” said Ralebala.
Football observers state that Ralebala, together with Letshwiti, are now faced with a dilemma. Reports coming from Lekidi Football Centre, although yet to be fabricated, are that the big guns lead others to form a parallel structure where they will play on their league. The clubs are angry at their chairman for taking many of the instructions from the BFA boss, and already a general melee is gathering traction that the two must resign as football has lost direction.
Zakhem says, although he supported Letshwiti, he has a sense of duty to stand for the truth. “I knew I supported Letshwiti and his troops, but you see, these guys have lost direction. I have long advised them that chopping clubs like this will cause confusion and delay progress, but they cannot listen. Letshwiti gave BFL autonomy, but I do not know why he is still interfering,” Zakhem said.
You may, by now, have heard about the dark side of the high profile P100 billion case, but wait, there is also the brighter side. Staff Writer AUBREY LUTE explores the positives accruing from the fall of the country’s biggest financial ‘scam-dal’.
A chance to fix the country’s financial record
They have not publicly been saying it, but the state agencies and the President, Dr Mokgweetsi Masisi, have been at pains to explain and rationalise how an amount almost equal to the country’s GPD left the central bank.
Many insiders attributed the country‘s troubled financial status to the case, including the grey-listing, non-compliance and identified deficiencies, some of which were hitting citizens around the globe. Botswana was in 2018 taken aback by FATF news that the country has been listed alongside countries that do not comply with (AML/CFT). The European Union Commission later flagged Botswana in March 2019 for lacking strategic deficiencies in AML/CFT regulations.
A chance to restore the dignity of the law enforcement arms
The case, without a doubt, was a distraction object on the law enforcement agencies, which spent a chunk of their time bickering and finger-pointing. A leaked audio recording exposing the explosive meeting of the law enforcement arms of government, being the Intelligence Services, Corruption and Economic Crimes agency, and the Prosecutions division summed it all.
The case presented a monumental crisis threatening the core of their being. Following these developments, the Presidency, clearly under the influence of a tripartite member, took a spine-chilling decision to disband the DCEC, a move that was saved by the organisation’s founding director- Tymon Katlholo’s bold protest.
The DPP, the Police, and the DCEC staff were used in the process to carry out bizarre instructions, some of which left the state with an egg on its face. Mistrust and backstabbing were the order of the day within the law enforcement agencies, and the P100 billion case was to blame. “Some badly wanted the plot executed while the other side badly wanted it to end to restore sanity,” an insider says.
The source further adds that “if the case did not end soon, it was going to end a lot of people’s relationships and careers because those who refused to carry the insane instructions were seen as sympathisers to former President Ian Khama.” With the case having fallen, these agencies can reflect, reconcile and go back to work.
A chance to fix diplomatic relations…
It was not only South Africa that was accused of Sabotaging Botswana’s prosecutorial goal. The state also accused several countries of refusing or delaying to assist in the process. Of all the nations, only South Africa has decided to take Botswana to task, perhaps on its proximity to Botswana. Others long ignored Botswana’s requests for assistance to the frustration of former DPP deputy director who repeatedly told the courts that they were struggling to get responses from the international community. With the case having fallen, Botswana may get a chance to face her actions, apologise and rectify the promise that lessons have been learnt.
Pressure off the shoulders of those who have to account…
The case did not only affect the law enforcement agencies. All the stakeholders were put in the spotlight to provide answers. The first to bolt out of the circle was the central bank, Moses Pelaelo, who, like DCEC director-general, long declared the case a scam. He told the world that his books were in order and that no money was missing risking his high-paying job.
According to insiders, his superiors, the then Minister of Finance and Development Planning – Dr Matsheka and his subordinate, Dr Wildfred Mandlebe, were only whispering, without success, to the Gods that there is no money missing.
So concerned and under pressure was Dr Sethibe- then the head of the Financial Intelligence Agency- who, like his Ministry supervisors, was engaging in silent screams to warn the powers that be, all in vain. He later jumped the ship to his former employer, the University of Botswana, allegedly to protect his name and career.
At the time of the fall of the case, the DIS and the DPP were at advanced plans to higher American to come and probe the Bank of Botswana’s servers in a move that bankers feared could compromise them further.
The case was bleeding the country’s coffers…
Had it not ended, the case was likely to end up ‘genuinely’ costing the country P100 billion Pula duo to its complexity and challenges. Insiders say sources who had sold the law enforcement agencies some falsified documents were paid handsomely.
Moreover, investigations were costly as they involved the international community and frequent travelling. “We are told there was also motivation for some officers to act abysmally and out of their way,” an insider said.
Lessons leant for public officers…
Public officers are often duty-bound to obey superiors instructions, no matter how irrational. The case was an eye-opener to many public officers that principle pays in the discharge of one’s duty at all times. The professional careers of the P100 billion case conspirators are currently in shambles. And as expected, the influencers, if at all there any, are nowhere to be seen.
Botswana remains on the grey list of the Financial Action Task Force (FATF) and the “black list” of the European Union, a status quo that highlights the country as one of the high-risk jurisdictions to deal with money.
The far-reaching implications of these listings is a compromised Foreign Direct Investment drive for Botswana. In particular, these listings mean investors now have to exercise some caution and restrain when thinking about putting their money in Botswana. On Tuesday, Minister of Finance and Economic Development Peggy Serame said that Botswana could see itself out of the “undesirable listing” by October this year.
Serame called for united and concerted efforts towards liberating Botswana out of this financial noncompliance tag. She said the delisting could be archived by concerted efforts from all stakeholders: players in the financial services sector, non-financial services businesses, regulators, and every individual who deals with transactions.
Botswana is a founding member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG). This regional body subscribes to the Financial Action Task Force (FATF) to combat money laundering and financing of terrorism and proliferation.
One of the membership obligations to ESAAMLG is for Botswana to be peer-reviewed by the other Member States and other international bodies like the World Bank, IMF or FATF. The most recent assessment for Botswana to gauge compliance with the FATF standards was conducted by ESAAMLG in 2016 and culminated with publishing the Mutual Evaluation Report (MER) in 2017.
Following the discussion and adoption by the Task Force and approval of the MER by the Council of Ministers, the country was placed under enhanced follow-up. This led to a one (1) year observation period in which the country was expected to improve its technical compliance (legislative framework) by correcting the deficiencies identified in the MER.
After one year, in October 2018, the Task Force decided that the country was not taking sufficient steps to implement the recommendations made by the assessors in the MER. The Task Force recommended that Botswana be referred to the International Cooperation Review Group (ICRG) for monitoring and potential listing often referred to as the ‘FATF greylisting”.
Following the FATF greylisting, the EU placed Botswana on its list of high-risk third countries, often referred to as the ‘black list.’ In 2018, Botswana and FATF agreed to an Action Plan that had six items with several timelines. In terms of Risk and coordination, Botswana was told to develop and implement a risk-based comprehensive national AML/CFT strategy, assess the risks associated with legal persons, legal arrangements, and NPOs, and operationalize the modernized company registry to obtain and maintain essential information and Ultimate Beneficial Ownership information.
Botswana was further advised to enhance the capacity of the supervisory staff, including by developing risk-based supervision manuals and providing adequate training, implement risk-based AML/CFT supervision and impose sanctions against violations.
Furthermore, Botswana was instructed to improve analysis and dissemination of financial intelligence by the Financial Intelligence Unit, including operationalizing an online Suspicious Transactions Report filing platform and prioritizing high-risk predicate crimes, and enhancing the use of financial intelligence among the relevant law enforcement agencies.
Regarding terrorism financing investigation, Botswana was instructed to develop and implement a Counter Financing of Terrorism Strategy, operationalize the Counter-Terrorism Analysis and Fusion Centre, and ensure the Terrorism Financing investigation capacity of the law enforcement agencies.
In 2018, the 11th Parliament passed 25 pieces and, later, six others related to AML/CFT/CFP. At the just ended Parliamentary session of the 12th Parliament, lawmakers passed the Financial Intelligence (Amendment) Act to address the definition of beneficial ownership.
Cabinet approved the National AML/CFT/CFP Strategy of 2019-2024 in October 2019. At the June 2021 FATF Plenary meetings, the FATF made the initial determination that Botswana had substantially addressed the Action Plan and that this warranted an on-site assessment to verify that the implementation of Botswana’s AML/CFT/CFP reforms is in place and is being sustained. Furthermore, an assessment was to be instituted to check if the necessary political commitment remains to sustain implementation in the future.
Serame said in a televised press briefing that Botswana’s exit from the FATF grey list and the EU black list would be determined by the outcome of the on-site assessment, which will be discussed at the FATF Plenary in October 2021.
She revealed that the Botswana delegation attended the Eastern and Southern Africa Anti-Money Laundering Group 42nd Task Force of Senior Officials meeting from the 26th August to the 6th September 2021, followed by the Council of Ministers on the 7th September 2021.
She told the media that at these meetings, Botswana was commended for making progress in complying with the FATF standards by addressing deficiencies in her AML/CFT/CFP framework. “We are making all these efforts of complying with the FATF standards so that we guard against our financial system being used for money laundering, terrorism financing and proliferation financing,” she said.
“We are hopeful that at the October 2021 FATF Plenary meetings, the outcome of the on-site visit undertaken by the FATF in August 2021 will bear positive results, leading to Botswana being delisted from the FATF greylisting,” she said. However, Minister Serame called on all stakeholders to support the government to remove Botswana from the greylisting.
“As Government continues its efforts of putting in place the necessary legislative and institutional framework, due diligence must be exercised by all institutions, including the ordinary Motswana, so that no one is found dealing with financiers whose credibility is wanting,” she said.
The minister reiterated that all players in the financial services sector had a role to play: “It is important that where unsolicited funds are offered, the individual or entity so receiving the offer must ensure that the funds being offered are not associated with unlawful acts. If we are not diligent, criminals may use unsuspecting people and entities to launder proceeds of crime.”
She reiterated that the government is committed to doing all within its power to remove the country from the FATF “grey list” and the EU “black list”. However, she noted that to achieve that requires the cooperation and assistance of financial institutions, designated non-financial businesses and professions and individuals to ensure full compliance with AML/CFT/CFP rules and regulations.
“These efforts will not only assist us to be removed from these mentioned lists but are for the benefit of our country to maintain a high standard of financial prudence and an economy which genuine investors can have the confidence to invest in,” Serame explained.