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BPC: It will take 3 years to Fix Morupule B

ENJOYING WATER AT THE TOP TABLE: Minister of Minerals, Energy and water Resources, Kitso Mokaila, BPC CEO, Jacob Raleru and MEWR permanent secretary briefed the nation on energy and water crisis in the country.

It is going to take a while before the future of embattled Botswana Power Corporation (BPC) multi-billion pula mega project Morupule B Power station is known.


The BPC Chief Executive Officer, Jacob Raleru revealed this week that it will take 2-3 years to “fix all what needs to be fixed” at Morupule B. The power plant has failed to produce to full capacity.


“We start procuring what is needed to fix the problems at the plant and it’s going to take two to three years to fix all the problems at the plant,” said Raleru.


This is despite the Minister Kitso Mokaila having gone on record several times stating that the project would be complete in previous years but the deadlines were delayed.


Raleru said that frequent breakdowns of boilers persist and currently the power station is running on 3 units with a power deficit. The units are only producing 310 megawatts (mw) while the whole station is expected to be generating a capacity of 600 mw with each unit churning out 150mw.


The Morupule B plant was initially constructed by China National Electric Equipment Corporation (CNEEC) whose contract was later terminated by government following a dispute of not meeting up contractual obligations, and it was replaced by a German company named STEAG Energy Services which was roped in to assist detect problems created by CNEEC and fix them an effort that is yet to be fully fulfilled.


However Raleru said to alleviate the current problems interim measures have been put in place. He dismissed ongoing rumors that the plant could explode at anytime saying Protection devices are working and periodic inspections of the plant are conducted.


“There is no likelihood of Morupule B exploding,” said Raleru.


He said BPC has regular interactions with African Development Bank (AFDB) and the World Bank (WB) on the way forward.


Of late the country has been experiencing serious power outages following power generation constraints at Eskom. BPC is now short of 150 MW of electricity, following the Morupule B capacity being greatly affected by the South African corporation.


Addressing the media during the same press conference minister Mokaila said Batswana need to understand that Power shortages are not only a Botswana problem but a regional problem.


“There is a general energy deficiency it’s not all about Morupule B,” said Mokaila.


He added that only a quarter of the plant has been affected, and not the whole plant, hence the government can’t do away with whole plant.


He dismissed reports that the P11 billion that was budgeted for the whole plant went to waste. Out of the P11 billion, P3 billion was used to put up the transmission line and water while less than the budgeted P8 billion was used for the construction of Morupule B.


Mokaila said they have strategies in place to deal with the situation. He said his ministry is planning to bring stability at the plant as well as replace and redesign the boilers, which is a long-term plan.


He said all things being equal they are expecting another unit on board by the end of the year.


Regarding the ongoing load shedding and the deal Botswana has with Eskom, Mokaila said Botswana has a non-firm agreement. The agreement allows South Africa to withdraw their power supply anytime if need arises.


Mokaila said plans are underway to ensure that next year Morupule A will be churning out 90 megawatts as well as the 35 megawatts expected to be generated by the Diesel plant by end of July 2016. He said they want the 90 megawatt plant from Orapa to use diesel.


He said plans are underway to change the business model to allow independent power producers to come on board.


Mokaila urged Batswana to be very cooperative by switching off geysers.

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P230 million Phikwe revival project kicks off

19th October 2020
industrial hub

Marcian Concepts have been contracted by Selibe Phikwe Economic Unit (SPEDU) in a P230 million project to raise the town from its ghost status.  The project is in the design and building phase of building an industrial hub for Phikwe; putting together an infrastructure in Bolelanoto and Senwelo industrial sites.

This project comes as a life-raft for Selibe Phikwe, a town which was turned into a ghost town when the area’s economic mainstay, BCL mine, closed four years ago.  In that catastrophe, 5000 people lost their livelihoods as the town’s life sunk into a gloomy horizon. Businesses were closed and some migrated to better places as industrial places and malls became almost empty.

However, SPEDU has now started plans to breathe life into the town. Information reaching this publication is that Marcian Concepts is now on the ground at Bolelanoto and Senwelo and works have commenced.  Marcian as a contractor already promises to hire Phikwe locals only, even subcontract only companies from the area as a way to empower the place’s economy.

The procurement method for the tender is Open Domestic bidding which means Joint Ventures with foreign companies is not allowed. According to Marcian Concepts General Manager, Andre Strydom, in an interview with this publication, the project will come with 150 to 200 jobs. The project is expected to take 15 months at a tune of P230 531 402. 76. Marcian will put together construction of roadworks, storm-water drains, water reticulation, street lighting and telecommunication infrastructure. This tender was flouted last year August, but was awarded in June this year. This project is seen as the beginning of Phikwe’s revival and investors will be targeted to the area after the town has worn the ghost city status for almost half a decade.

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IMF projects deeper recession for 2020, slow recovery for 2021

19th October 2020

The International Monetary Fund (IMF) has slashed its outlook the world economy projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.

On Wednesday when delivering its World Economic Outlook report titled “A long difficult Ascent” the Washington Based global lender said it now expects global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April.  For 2021, IMF experts have projected growth of 5.4%, down from 5.8%. “We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” said Gita Gopinath Economic Counsellor and Director of Research.

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Botswana partly closed economy a further blow of 4.2 fall in revenue

19th October 2020

The struggle of humanity is now how to dribble past the ‘Great Pandemic’ in order to salvage a lean economic score. Botswana is already working on dwindling fiscal accounts, budget deficit, threatened foreign reserves and the GDP data that is screaming recession.

Latest data by think tank and renowned rating agency, Moody’s Investor Service, is that Botswana’s fiscal status is on the red and it is mostly because of its mineral-dependency garment and tourism-related taxation. Botswana decided to close borders as one of the containment measures of Covid-19; trade and travellers have been locked out of the country. Moody’s also acknowledges that closing borders by countries like Botswana results in the collapse of tourism which will also indirectly weigh on revenue through lower import duties, VAT receipts and other taxes.

Latest economic data shows that Gross Domestic Product (GDP) for the second quarter of 2020 with a decrease of 27 percent. One of the factors that led to contraction of the local economy is the suspension of air travel occasioned by COVID-19 containment measures impacted on the number of tourists entering through the country’s borders and hence affecting the output of the hotels and restaurants industry. This will also be weighed down by, according to Moody’s, emerging markets which will see government losing average revenue worth 2.1 percentage points (pps) of GDP in 2020, exceeding the 1.0 pps loss in advanced economies (AEs).

“Fiscal revenue in emerging markets is particularly vulnerable to this current crisis because of concentrated revenue structures and less sophisticated tax administrations than those in AEs. Oil exporters will see the largest falls but revenue volatility is a common feature of their credit profiles historically,” says Moody’s. The domino effects of containment measures could be seen cracking all sectors of the local economy as taxes from outside were locked out by the closure of borders hence dwindling tax revenue.

Moody’s has placed Botswana among oil importers, small, tourism-reliant economies which will see the largest fall in revenue. Botswana is in the top 10 of that pecking order where Moody’s pointed out recently that other resource-rich countries like Botswana (A2 negative) will also face a large drop in fiscal revenue.

This situation of countries’ revenue on the red is going to stay stubborn for a long run. Moody’s predicts that the spending pressures faced by governments across the globe are unlikely to ease in the short term, particularly because this crisis has emphasized the social role governments perform in areas like healthcare and labour markets.

For countries like Botswana, these spending pressures are generally exacerbated by a range of other factors like a higher interest burden, infrastructure deficiencies, weaker broader public sector, higher subsidies, lower incomes and more precarious employment. As a result, most of the burden for any fiscal consolidation is likely to fall on the revenue side, says Moody’s.

Moody’s then moves to the revenue spin of taxation. The rating agency looked at the likelihood and probability of sovereigns to raise up revenue by increasing tax to offset what was lost in mineral revenue and tourism-related tax revenue. Moody’s said the capacity to raise tax revenue distinguishes governments from other debt issuers.  “In theory, governments can change a given tax system as they wish, subject to the relevant legislative process and within the constraints of international law. In practice, however, there are material constraints,” says Moody’s.

‘‘The coronavirus crisis will lead to long-lasting revenue losses for emerging market sovereigns because their ability to implement and enforce effective revenue-raising measures in response will be an important credit driver over the next few years because of their sizeable spending pressures and the subdued recovery in the global economy we expect next year.’’

According to Moody’s, together with a rise in stimulus and healthcare spending related to the crisis, the think tank expects this drop in revenue will trigger a sizeable fiscal deterioration across emerging market sovereigns. Most countries, including Botswana, are under pressure of widening their tax bases, Moody’s says that this will be challenging. “Even if governments reversed or do not extend tax-easing measures implemented in 2020 to support the economy through the coronavirus shock, which would be politically challenging, this would only provide a modest boost to revenue, especially as these measures were relatively modest in most emerging markets,” says Moody’s.

Botswana has been seen internationally as a ‘tax ease’ country and its taxes are seen as lower when compared to its regional counterparts. This country’s name has also been mentioned in various international investigative journalism tax evasion reports. In recent years there was a division of opinions over whether this country can stretch its tax base. But like other sovereigns who have tried but struggled to increase or even maintain their tax intake before the crisis, Botswana will face additional challenges, according to Moody’s.

“Additional measures to reduce tax evasion and cutting tax expenditure should support the recovery in government revenue, albeit from low levels,” advised Moody’s. Botswana’s tax revenue to the percentage of the GDP was 27 percent in 2008, dropped to 23 percent in 2010 to 23 percent before rising to 27 percent again in 2012. In years 2013 and 2014 the percentage went to 25 percent before it took a slip to decline in respective years of 2015 up to now where it is at 19.8 percent.

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