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Sweeping changes proposed for mining sector

BPC should pay for infrastructure setup

The Botswana Institute of Development Policy Analysis (BIDPA) has proposed extensive Policy recommendations in a Study into the Consequences of and Responses to the Depletion of Botswana’s Diamonds, estimated to creep in after 2027.


The Botswana After Diamonds report hovers on major issues of Encouraging more mining and exploration activity; Diamond production rate; and Planned infrastructure projects.  BIDPA calls on government to be aggressive when dealing with these matters and to take real steps to mitigate the aftermath of 2027.


First among other issues, BIDPA sneaks into the legal and fiscal regime for mining in Botswana which is currently very competitive with the country being ranked in position 4 by resource Stocks magazine and 8th position by the Fraser Institute. Of the eleven exploration and mining companies in Botswana interviewed in the study, the majority find the mining laws in Botswana to be ‘fine and useful’ and the administrative process to be ‘fair and open’.


According to the BIDPA study, the issues relevant to mining laws are – future and current tax regime, and land claim and land issues. BIDPA recommends that Botswana’s level of mineral Royalties take into consideration the profitability of mining project and the latter, other things being equal, depends on the value of the mineral being mined. In this way, base metals and coal attract the lowest royalty rate of 3 % followed by precious metals, that is, gold, silver and platinum group metals at 5% and lastly diamonds at 10 %.


“We therefore do not believe there is additional incentive in lowering these rates as the level of prospecting activity is very high. We also would not recommend that these be raised as this may discourage the prospecting activity, which would do more harm than good. We however believe that there is always room to modernise the royalty formula, for instance, going to a sliding scale formula so that even some diamond mines that may have similar levels of profitability to other minerals such as base metals and coal are not overburdened by fixed royalty rate of 10 %,” reads part of the study report.  


According to the study, which was edited by Roman Grynberg, Margaret Sengwaketse and Masedi Motswapong, BIDPA is convinced that the fiscal regime is well defined for non-diamond minerals while for diamonds section 51 of the Act stipulates that there will be a negotiation. “We believe that it is the secrecy of the negotiated regime that may be creating uncertainty and government should find ways of addressing this.”  In response to this concern, BIDPA notes: 

“Regarding the taxation issues, we believe government should find means to publicise those mining regimes that, after negotiation, still end up with the standard tax regime for mining to provide comfort to the current junior mining companies exploring for diamonds.”


Government should continuously explain the benefits of overlapping prospecting licences. According to the BIDPA researchers, it seems that this has not been sufficiently explained to the mining industry. In addition they have recommended that government should consider an Act for the Coal Bed Methane (CBM) gas and its accompanying regulations to assist in guiding activity in this area.  


Meanwhile BIDPA notes that there is a lot of interest in exploration in Botswana, with the whole of the country taken up by exploration companies with only the swamps and some deep sand-covered areas of the Kalahari remaining open as they are inaccessible. “There is therefore need to ensure that only value-adding applications for exploration are approved to eliminate huge land holdings without the accompanying progress towards mine development.  


The study also highlights the issue of water and power. “While some projects may be located near existing water and power infrastructure, the challenge faced by the project developers is that there are no set mechanisms for them to obtain such water and power. We therefore recommend that government consider a mechanism whereby the water and power utility companies develop the infrastructure to support the mining project and then recover the cost of such development through higher charges until their cost have been recovered. This would facilitate project development as they would be spared the upfront costs, which also improve project economics,” observers the BIDPA analysts.  


The BIDPA study also touches on diamond production rate, stating that it seems Debswana is placing itself in the position of ‘swing producer’, adjusting its target production so as to leave the global supply/ demand balance in a position of shortage rather than surplus, and hence tending to push prices up, or at least maintain them if there are other negative forces at work.

In their view, the cushion of 10 million carats p.a between Debswana’s peak production and its recent production levels is certainly enough to influence the global supply/demand balance according to whether those 10 million carats p.a are being produced or not. “And the experience of the past three years does suggest that international market prices have responded to Debswana’s actual planned production rates,” they state.


BIDPA advises that in the short term Government should study the various production scenarios with the view to possibly revising the current long-term mining plans, which seem to be informed by the validity period of the mining leases for Debswana, which all run until 2029. Furthermore, BIDPA is of the view that Government should consider a policy of postponing possible projects at Debswana mines so that these are phased in at the end of the open-pit mining operations.

“These projects are profitable on their own (stand-alone- projects) and would not depend on the existing open-pit operations.”


Regarding rail and port infrastructure, future coal export projects and some copper and silver projects in the Ghanzi copper belt would rely on this, BIDPA says. “We therefore believe that government should be a joint venture partner in order to ensure that future projects benefit. We, however, caution that due to the scale and possible risks involved, government should conduct a thorough due diligence ahead of any participation in such infrastructure projects.”

The researchers indicate that the projected government mineral revenues from future coal mines are dependent on the existence of rail and port infrastructure to export the washed coal to the world steam coal markets in Asia and Western Europe. “Until concrete steps are seen on the development of the rail and port infrastructure upon which these projects depend, we believe they should be accorded a low probability of being realised by 2026.”


This BIDPA study was conceived about five years ago during the Global Economic Crisis and the impact this had on the economy of Botswana and on the private sector. At that time there was a dramatic decline in the demand for luxury commodities – diamonds and tourism services – which are two of Botswana’s most important export sectors.

These were hit disproportionately as a result of the economic crisis. Diamond mining, the principal source of revenue in the country, declined dramatically in 2009 as the mines at Jwaneng and Orapa were temporarily shut. In 2009 diamond production fell to 17.7 million carats from 32 million the previous year.


In conclusion, BIDPA observes that over the next 10-15 years, government mineral revenues are projected to rise on the back of a projected improvement in diamond prices that would be underlain by strong supply/demand fundamentals.

“While the decline in government mineral revenues from diamonds seems unlikely to occur within the period of projection for this study, we would like to caution that there would be a significant crunch when the open-pit mining operations cease, beginning in about 2027.”

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BONELA speaks on same-sex decriminalization case

18th October 2021
BONELA

In June 2019, a case involving the Attorney General was brought before the High Court, in which the applicant Letsweletse Motshidiemang challenged Sections 164 (a) and 167 of the Penal Code. The applicant contended that these sections are unconstitutional because they violate the fundamental rights of liberty and privacy. 

The applicant argued that these sections violated his right and freedom to liberty as he was subject to abject ignominy. These laws subjected the LGBTIQ community to brutal and debasing treatment through social control and public morality. On the 1st of November 2017, the Botswana High Court further allowed Lesbians, Gays and Bisexuals of Botswana (LEGABIBO) to join the case as amicus curiae.

However, in July 2019, the respondents, in this case, i.e. the Government, filed an appeal against this iconic High Court ruling seeking re-criminalization of homosexuality. Human Rights Group has criticized this move of the Government all over the world.  The appeal was heard before five judges at the Court of Appeal on Tuesday. The State was represented by Advocate Sidney Pilane, while LEGABIBO and Letsweletse Motshidiemang were represented by Tshiamo Rantao and Gosego Rockfall Lekgowe, respectively.

Non-Governmental Organizations advocating for the LGBTIQ+ community joined the two parties at the Court of Appeal during this case. They argue that the minority group should enjoy their rights, especially the right to privacy and health. Botswana Network on Ethics, Law and HIV/AIDS (BONELA) Chief Executive Officer, Cindy Kelemi says the issues being raised by LEGABIBO are that as individuals belonging to the LGBTIQ community, they have and must share equal rights, including the right to privacy, which also speaks to being able to involve in sexual activities, including anal sex.

“Those rights are framed within the constitution, and therefore a violation of any of those rights allow them to approach the courts and seek for redress. We do not need the law to be regulating what we do in the privacy of our homes. The law cannot determine how and when we can have sex and with who, so the law does not have any business in that context. What we are saying is that the law is violating the right to privacy,” she said on the sidelines of the decriminalization case in Gaborone on Tuesday.

The first case involving the homosexual act was the Utjiwa Kanane vs the State in 2003. Contrary to section 164(c) of the Penal Code, Kanane was charged with committing an unnatural offence and engaging in indecent practices between males, contrary to section 167. The conduct at issue involved Graham Norrie, a British tourist, and occurred in December 1994. (Norrie pleaded guilty, paid a fine, and left the country.)

Kanane pleaded not guilty, alleging that sections 164(c) and 167 both violated the constitution. The High Court ruled that these sections of the Penal Code did not violate the constitution. Kanane then appealed to the Court of Appeal. BONELA CEO recalls that in its judgment then, the High Court indicated, Batswana were not ready for homosexual acts. Twenty years later, the same courts are saying that Batswana are ready, she says.

“They gave the explicit example that shows that indeed Batswana are ready. There are policies and documents in place that accommodate people from marginalized communities and minority populations. The question now is that why is it hard now to recognize the full rights of an individual who is of the LGBTI community?” She further says intimacy is only an expression. The law that restricts homosexuality makes it hard for LGBTIQ members to express themselves in a way that affirms who they are.

“We want a situation where the law facilitates for the LGBTIQ community to be free and express themselves. The stigma that they face in communities is way too punitive. They are called names; some have been physically violated and raped at times. It shows that the law doesn’t not only prevent them from expressing themselves, it also exposes them to violence.” The law on its own, Kelemi submits, cannot change the status quo, adding that there is a need for more awareness and education on human rights and what it means for an individual to have rights.

“As it is now, it is very tough for some to do that because of a legal environment that is not enabling. We also want to see a situation where LGBTIQ+ people can access services and be confident that they are provided with non-discriminatory services. It is challenging now because health care providers, social workers and law enforcement officers believe that it is illegal to be homosexual. What we are saying is that if you have an enabling law, then that will facilitate for people to be able to express themselves, including accessing health services,” Kelemi said.

“As we are doing this advocacy work, one of the issues that we picked up is that there is lack of capacity, especially on the part of healthcare workers. We noted that when we provide services or mobilize Men who have sex with other men (MSM) to access health facilities, health care workers are not welcoming, forcing them to hideaway. We must put an end to this to allow these people the freedom that they equally deserve.”

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Masisi warns Gov’t officials

18th October 2021
President Masisi

The President, Dr Mokgweetsi Masisi, has declared as an act of corruption the attitude and practice by government officials and contractors to deliver projects outside time and budget, adding that such a practice should end as it eats away from the public coffers.

For a very long time, management problems and vast cost overruns have been the order of the day in Botswana, resulting in public frustrations. Speaking at the commissioning of the Masama/Mmamashia 100 Kilometres project this week, Masisi said: “There is a tendency in government to leave projects to drag outside their allocated completion time and budget. I want to stress that this will not be tolerated. It is an act of corruption, and I will be engaging offices on this issue,” Masisi said.

In an interview with this publication over the issue, the Director-General of the Directorate on Corruption and Economic Crime (DCEC), Tymon Katholo, says, “any project that goes beyond its scope and budget raises red flags.” He continued that: “Corruption on these issues can be administrative and criminal. It may be because government officials have been negligent or been paid to be negligent by ignoring certain obligations or procedures. “This, as you may be aware has serious implications on not only of the economy but even the citizens who use these facilities or projects,” Katlholo said, adding that his agency is equally concerned.

According to the DCEC director, the selection, planning and delivery of infrastructure or projects is critical. In most cases, this is where the corruption would have occurred, leading to a troubled project. A public finance expert at the University of Botswana (UB), Emmanuel Botlhale, attributes poor project implementation to declining public accountability, lack of commitment to reforming the public sector, a decline in the commitment by state authorities and lack of a culture of professional project management.

In his research paper titled, ‘Enhancing public project implementation in Botswana during the NDP 11 period,’ Botlhale stated that successful implementation is critical in development planning. If there is poor project implementation, economic development will be stalled.
Corruption is particularly relevant for large and uncommon projects where the public sector acts as a client, and experts say Megaprojects are very likely to be affected by corruption. Corruption worsens both cost and time performance and the benefits expected from such projects.

Speaking during this week’s Masama/Mmamashia pipeline commissioning, Khato Civils chairman said Africans deserve a chance because they are capable, further adding that the Africans do not have to think that only Whites and Chinese people can do mega projects.  During his rule, former president Ian Khama went public to attack Chinese contractors for costing the government a move that ended up fuelling tensions between China and Botswana after Khama dispatched the then Minister of Foreign Affairs, Pelonomi Venson Moitoi, to China to register Botswana’s complaints with Chinese government-owned construction companies.  Botswana had approached the Chinese government for help in its marathon battle with Chinese companies contracted to build, among others, the failed controversial Morupule B power plant and refurbishment of Sir Seretse Khama International Airport (SSIK).

 

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Guma’s battle for millions of Pula give Court headache

18th October 2021
Guma Moyo

A legal battle between former Botswana Democratic Party (BDP) legislator Samson Moyo Guma and First National Bank (FNB) over a multimillion oil refinery project intensified this week with Justice Zein Kebonang referring the matter to Court of Appeal for determination.  The project belongs to Moyo Guma’s company called United Refineries which he has since placed under judicial management.

The war of words between Moyo Guma and FNB escalated after the company’s property worth millions of Pula were put up for sale in execution by the bank and scheduled to take place on 8th October. It emerges from Court papers that the bank had secured an order from the High Court to place the company’s property under the hammer.

Moyo Guma then also approached the High Court seeking among others that the public auction scheduled for 8th October 2021 be stayed. He contended that the assets that were to be sold belonged in reality to United Refineries and that as the company had been under judicial management at the time of the attachment, the intended sale in execution was unlawful.

He also sought the Court to declare that the writs of execution against the properties of guarantors and sureties of United Refineries Botswana Holdings Propriety Limited (the company) are unlawful.  Moyo Guma also sought a stay of the execution against the property known as Plot 43556 in Francistown, that is, the land buildings, plant and machinery which make up the property and any all immovable or movable property belonging to the guarantors and sureties of the company pending finalization of the winding up of United Refineries.

But FNB disputed Moyo Guma’s assertions and submitted that the properties in question belonged to TEC (Pty) Ltd and not United Refiners. TEC Pty Ltd which is one of the shareholders in United Refineries is one of the sureties and co-principal debtors of a debt amounting to P24 million owed by United Refineries to FNB.  FNB argued in papers that the properties belonged to TEC because it was TEC which had passed a covering mortgage bond in its favour over the property it now sought to execute.

Moyo Guma submitted that the covering mortgage bond passed in favour of FNB did not tell the full story as the property in question was in truth and fact owned by United Refineries and not TEC Pty Ltd. He maintained that the shares had been had been passed by the company in exchange for the properties in question and that the parties had always been guided by the spirt of the share agreement in dealing with each other despite delays in the change or transfer of ownership of plots 43556 and plot 43557 in Francistown.

Kebonang said it was clear to him that the two plots (43556 and 435570 belonged to United Refineries notwithstanding that TEC (Pty) Ltd had passed a mortgage bond over them in favour of FNB.  “For this reason the properties were immune from attachment or sale in execution so long as the judicial management order was in place,” he said.

The background of the case is that Moyo Guma together with five other investors, namely Elffel Flats (Pty) Ltd; Mmoloki Tibe; TEC (Pty) Ltd; Profidensico (Pty) Ltd and Tiedze Bob Chapi, each bound themselves as sureties and co-principal debtors in respect of a debt owed by a company called United Refineries Botswana Holdings (Proprietary) Limited (the Company), to First National Bank Botswana (FNBB) (1st Respondent).

FNB had extended banking facilities to the company in the amount of P24 million which was then secured through the suretyship of Moyo Guma and other shareholders.  Court records show that Moyo had on the 11th February obtained a temporary order for the appointment of a provisional judicial manager in respect of United Refineries and it was confirmed by the High Court on 24th September 2019.

In terms of the final court order by the High Court issued by Justice Tshepho Motswagole all judicial proceedings against the company, execution of all writs, summons and process were stayed and could only proceed with leave of Court. Court documents also show that First National Bank had sued the company and the sureties for the recovery of the debt owed to it and through a consent order, the bank withdrew its lawsuit against the company.

But FNB later instituted fresh proceedings against Moyo Guma and did not cite the company in its proceedings.  “There is no explanation in the record as to why the Applicant was now reflected as the 1st Defendant and why the company had suddenly been removed as the 1st Defendant. There was no application either for amendment or substitution by the bank,” said Justice Kebonang.

FNB had also argued that it sought to proceed to execute against Moyo Guma and other sureties on the basis of the suretyship they signed and that by signing the suretyship agreement, Moyo and other sureties had renounced all defence available to them and could therefore be sued without first proceedings against the principal debtor (United Refineries).  The question, Kebonang said, was that can FNB proceed to execute against Moyo Guma and other sureties on the basis of the suretyship contracts they signed?

“The starting point is that the Applicant (Moyo Guma) and others by binding themselves as sureties became liable for debts of the principal debtor and such liability is joint and several. He said the consequences of placing the company under judicial management means that every benefit extended to it should also extend to sureties.

“If the company is afforded more time to pay or its debt is discharged, reduced or compromised or suspended the obligation of sureties is to be likewise treated. It follows in my view that where judicial proceedings are suspended or stayed against the company, then any recourse against the sureties is similarly stayed or suspended,’ said Kebonang.

He added that “In the circumstances of this case, it seems to me that so long as the company is under judicial management, the moratorium that applies to it must also apply to its sureties/guarantors and no execution of the writs should be permitted against them. Any execution would be invalid.”

“Mindful that there is judicial precedent on this point in Botswana, at least none that I am aware of, and given its significance, I consider it prudent that the Court of Appeal must provide a determinative answer to the question whether a creditor can proceed against sureties where a company is under judicial management,” said Kebonang.

Pending the determination of the Court of Appeal, he issued the following order; the execution of writs issued in favour of FNB against Moyo and other sureties/guarantors of United Refinery are hereby stayed pending the determination of the legal question referred to the Court of Appeal.

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