Ever since government announced provisional liquidation for BCL mine, the economic nucleus of Selebi Phikwe, parastatals, government investment arms as well as senior government officials have descended the copper nickel mine, all in attempt to put forth convincing resuscitation proposals.
However not all of the visitors from the big city were given the warm welcome- Investment, Trade and Industry Ministry’s permanent secretary, Peggy Serame’s task team was last week Monday told to go back to their “CBD lucrative offices” in Gaborone.
The team which comprised amongst others, BDC and BITC top brass and other senior government officials was rendered as a waste of time by the aggrieved Phikwe business persons. Vice President Masisi‘s stakeholder address was also a chaotic gathering as business owners demanded the truth about sudden closure of their biggest trading partner. Contrary to the latter, Business Botswana as the voice of private sector businesses in Botswana gathered Selebi Phikwe Business Community on Monday (October 17th) at Cresta Bosele Hotel to get their views on the way forward regarding the future of Phikwe. Lekwalo Mosienyane’s delegation, which was well received, had something worthy to take back to Gaborone at the end of their visit.
It was agreed that a regional task team which was to compromise of Phikwe business people from different sectors was to be set up to work with the national BCL shutdown response task team formed by Business Botswana. The Phikwe regional task team will liaise through Business Botswana Vice President (North), Palalani Moithobogi who is also a business magnet based in Selebi Phikwe. When addressing the business community, Business Botswana President, Mosienyane said there was light at the end of the tunnel for Selebi Phikwe, “from a business perspective, situations like this can uncover billions in hidden business ventures and value chain opportunities,” he said. He noted that Business Botswana as the mouth piece of the private sector in the country is in a position to offer any urgent assistance necessary to help address the situation which currently threatens to turn Phikwe into a ghost town.
For his part, Business Botswana Chief Executive Officer, Dr Racious Moatshe told WeekendPost that already there is a national task team that compromises of all stakeholders mandated to respond to the Phikwe situation in terms of cultivating other business ventures and economic alternatives to keep Selebi Phikwe alive. The purpose of the meeting, he revealed, was to get the mining town’s business community on board.
“We are here basically to prevent these business people from disinvesting from this town, we agreed that they form a task team which will work hand in hand with the national one into developing a position paper from the private sector point of view and present it to government enclave,” said Moatshe.
He added that the task team will comprise of representatives from various areas of business including retail and hotels. “Liaising with our Vice President ( North) the regional task force intends to develop short term, medium term and long term intervention strategies to rectify the situation here and prevent the worst regional economic crush in our history from hitting Selebi Phikwe.’’
Botswana Chamber of Mines Chief Executive Officer Charles Siwawa expressed hope for BCL itself. “The mine can still be operational under a restructured business model, BCL lifespan is not over yet,’’ said the soft spoken Mining expert.
Siwawa told WeekendPost that BCL Group as a whole sits under high grade ore deposits on some of its shaft as well as the Tati belt, in contradiction to Minister Sadique Kebonang’s sentiments that the ore value is very low.
”From the figures we have and last prospects reviews about BCL deposits, it’s not over yet for Bamangwato Concessions Limited, the mine needs capital injections to observe its sustainability until commodity prices realize growth and business feasibility, and we are talking about billions of pula. BCL is currently making losses because of high operation costs, which need to be stripped down, should the mining resume,’’ Siwawa asserted.
Furthermore, Siwawa believes that the mine can be sold to different investors in order to raise enough capital to keep the operations running for a period of two years or so, with the hope of commodity price improvement. “No one will probably inject 8 billion into a fragile business like this alone, thus we need to sell profitable shafts to different investors on share basis to gather the huge money needed to assume operation here.”
Mosienyane also chirped in, advising the Phikwe Business community to form a consortium in order to gather up finances they might have to ready themselves for possible purchase of some of the mine operations.
“The consortium can also be used to collectively venture into different business alternatives hence keeping Phikwe economy alive,’’ said Mosienyane.
Chaos over SPEDU erupted during meeting
Earlier on, during the same meeting, chaos erupted at the mention of Selebi Phikwe Economic Diversification Unit (SPEDU). Although media was ordered to leave the meeting when the chaos started, WeekendPost can reveal that the business people in that town want nothing to do with the diversification unit. SPEDU is accused of funds embezzlement and the business society squarely blames it for failed economic diversification over the past 8 years in the mining town. Further, the business community called on government to cease pumping money into SPEDU.
Meanwhile, Mosienyane said that as a former SPEDU board member, he has yet to get accountability from SPEDU about certain dealings, such as the multimillion Basil project. He added that the SPEDU board as the governing body of the parastatals needs to be reviewed.
“I want to put this on record that SPEDU cannot revive Phikwe without representation of Phikwe business community in its board, we want to seat in the SPEDU board as the private sector,’’ explained Mosianyane .
According to the soft spoken private sector mouth piece who is also a renowned architecture and business man ,SPEDU needs to affiliate with Business Botswana now that it’s a semi autonomous company that can invest and make money.
“SPEDU should have less of government representation in the board but more of regional business people. All it should do is return to government positive cash flow, investment returns, jobs and consequently total independence from government cash flow, not the current reckless spending we hear about.’’
The meeting generally concluded that a position paper will be presented to the decision makers in a month’s time, recommending possible diversion of ESP funds to Selibe Phikwe, and putting halt to some SPEDU projects like Platjan Bridge.
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”