The Botswana Power Corporation (BPC) has announced that they have entered into a joint venture for the establishment of a wholesale telecommunications service provider. The agreement will see Liquid Telecom tapping into BPC’s expansive infrastructure, creating a new telecoms network provider with extensive reach across Botswana. Liquid Telecom was selected as the preferred joint venture partner following a competitive bidding process, in which five local and international telecommunications companies submitted bids.
The agreement was signed by the outgoing BPC CEO Mr. Jacob Raleru, and Liquid Telecom Group CEO Mr. Nic Rudnick at a ceremony held in Gaborone on 18 October 2016. While details of the deal remain sketchy, it was announced however that the joint venture will operate under the name Liquid Telecom Botswana after the power utility company decided to take a stake in the newly created venture. The two partners say the structure of the deal will enable BPC to make more effective use of its existing assets, while allowing Liquid Telecom to better serve the network needs of its wholesale and enterprise customers in and outside the region.
“The use of BPC’s optic fibre network will be granted to Liquid Telecom Botswana under an Indefeasible Right of Use Agreement (IRUA). Rather than taking any rental payments, the capital value of the IRUA will be used to purchase BPC’s equity stake, which is 42.5%. Liquid Telecom will be the majority stakeholder and will, as the technology expert, be responsible for the day-to-day management of the company. The arrangement allows BPC to diversify its revenue base, while maintaining focus on its own core mandate of providing secure and reliable electricity services to the national economy,” read a joint statement from BPC and Liquid Telecom.
BPC is a state owned company responsible for the generation, transmission and distribution of electricity within Botswana. The company, as the only supplier of electricity in the country, has built an extensive network that covers almost the whole country, with particular emphasis on settlements. BPC owns and operates an optical fibre cable network that is embedded in some of its high voltage transmission lines. This fibre network will be commercialised for the first time in order to provide network services across the country.
A subsidiary of Econet Global, Liquid Telecom began life as the satellite and voice operator Econet Satellite Services, which was founded in 1997. Rebranding to Liquid Telecom in 2004, the company went on to launch the high-speed, cross-border fibre network linking southern Africa to the rest of the world in 2009. The company has since grown to provide services to more than 50 global wholesale carriers operating in eastern, central and southern Africa, Europe, North America and Asia Pacific, as well as the national and international enterprise market. Liquid Telecom supplies fibre optic, satellite and international carrier services to Africa’s largest mobile network operators, ISPs and businesses of all sizes. It also provides payment solutions to financial institutions and retailers, as well as data storage and communication solutions to businesses across Africa and beyond.
The latest venture, Liquid Telecom Botswana, joins the family of Liquid Telecom Group which operates through several African countries. Liquid Telecom Mauritius is the holding company for the Liquid Telecom Group, with wholesale, enterprise and retail operations in 15 locations across Africa and beyond. Over the last three years, LTM has invested heavily in developing and building Liquid's terrestrial fibre-optic backbone throughout eastern, central and southern Africa. The group operates Liquid Telecom DRC, Liquid Telecom Kenya, Liquid Telecom Rwanda, Liquid Telecom SA, Liquid Telecom Uganda, Liquid Telecom Zambia, Liquid Telecom Zimbabwe and Liquid Telecom UK.
Liquid telecom’s previous big deal this year involved buying the South African fixed-line operator Neotel in a deal that will create the continent’s biggest broadband network. “The shareholders of Neotel –Tata Communications of India and minority shareholders led by Nexus Connexion (Nexus) – have agreed for Liquid Telecom to acquire Neotel for ZAR 6.55bn. Liquid Telecom is partnering with Royal Bafokeng Holdings (RBH), a South African investment group, which has committed to take a 30% equity stake in Neotel. The transaction, which is subject to regulatory approvals, is transformative and will create the largest pan-African broadband network. Through a single access point, businesses across Africa will be able to access 40 000kms of cross-border, metro and access fibre networks. These currently span 12 countries from South Africa to Kenya, with further expansion planned,” the company had said in June when announcing the deal.
While Liquid Telecom, the leading independent data, voice and IP provider in eastern, central and southern Africa, is largely unknown in Botswana, the owner of the company is well known. The company an affiliate of Econet Group, a conglomerate founded by Dr Strive Masiyiwa, an enterprising Zimbabwean billionaire who first came to international prominence when he fought a five-year constitutional legal battle leading to the removal of the state monopoly in Zimbabwe’s telecommunications sector. The landmark ruling is regarded as one of the milestones in the opening up of African telecommunications to private capital. But in Botswana, Dr Masiyiwa is well known as the man who established Mascom, the leading network service provider. However Masiyiwa has over the years reduced his stake in Mascom and he now holds a minority stake through Econet Wireless.
The new venture, Liquid Telecom Botswana, will ply its trade in a field which has been dominated by BoFINet. The latter is owned by the government, and formerly a surrogate of Botswana Telecommunications Limited Company, is a wholesale provider of national and international telecommunication infrastructure. Core to BoFiNet’s mandate is to provide and operate a world class telecommunications backbone network infrastructure through it’s more than 9000km of fibre connectivity based on an SDH and DWDM network. Industry experts say the entrance of Liquid Telecom will provide new competition which might lower the price of connectivity, especially at a time when consumers are complaining of expensive yet slow data services.
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.
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.
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”