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Gov’t ordered to create Fund for Sinohydro claims

TROUBLED SSKA: Government has been ordered to deposit money into a fund that will be used to settle claims.

Judge Michael Leburu of the Lobatse High Court on Wednesday ordered the Government to deposit a sum of P43 319 326.29 into an Escrow account agreed by both parties that would be solely used to reimburse the government for any claims against Sinohydro in the construction of a new terminal building at Sir Seretse Khama International Airport in Gaborone.


The Chinese contractor was employed to render services for the expansion and refurbishment of Sir Seretse Khama International Airport but the contractor and the Government of Botswana agreement of contract fell off the rails unceremoniously last year over shoddy workmanship and delay in the project.


When passing the judgment, Judge Leburu relied mostly on the Dispute Adjudication Board (DAB) Sub – Clauses agreement that were mutually created by the Ministry of Infrastructure, Science and Technology (MIST) and Sinohydro to settle disputes between the parties that the government did not abide by as per the applicants’ filing.


“In terms of clause 20.4, if a dispute arises between the parties in connection with, or arising out of the contract or the execution of the works, including any dispute as to any certificate, determination, instruction, opinion or valuation of the engineer, either party may refer the dispute in writing to the DAB for its decision with copies to the other party and the engineer,” said Judge Leburu.


The Judge also observed that if any party was dissatisfied with the decision of the DAB, such a party was entitled to provide a notice of dissatisfaction within 28 days of the decision, failing which the decision would be final and binding.


“It is common cause that the respondent (MIST) did not issue a notice of dissatisfaction with the DAB’s decision with regard to the opening of and depositing of the funds into an escrow account with a financial institution,” Judge Leburu clarified.


The Ministry of Infrastructure Science and Technology (MIST) through its attorney, Mr. C. Gulubane in their response to the application indicated that Sinohydro had failed to exhaust the contractual dispute resolution mechanism available to it before going to court, and that there was a dispute pending before the ICC that incorporates performance bond that was brought before the Lobatse High Court.


On dismissing these submissions, Judge Leburu said, “On the basis of the aforegoing, it was therefore open for the applicant to invoke other rights it had by approaching this court to seek redress and enforce an arbitral award.”


It was also brought before court that Sinohydro was dissatisfied with certain portions of the DAB’s decision that the termination of contract by MIST was valid, thus giving such notice of dissatisfaction to DAB. The matter was referred for international arbitration at the International Chamber of Commerce (ICC) and the said arbitration is still pending.

 
P527 MILLION WAS PAID TO SINOHYDRO

The Chinese construction company-Sinohydro was contracted to build a state of the art terminal and expand the airport’s runway in compliance with IATA standards. At the time, the government’s plan was for the airport to accommodate more passengers especially towards the World Cup in 2010.


The tender was fast tracked and Sinohydro was given from June 10, 2008 to May 11, 2010 to complete the expansion of the P433-million project. But the completion of the project was halted as the Ministry led by Minister Johnnie Swartz terminated Sinohydro’s contract in July 2011 as there had been major faults identified in the project and failure to meet the targeted deadline despite several extensions.


At the time of termination of the contract, Sinohydro had completed approximately 90 percent of the project and had been paid about P527 million. MIST Permanent Secretary, Dikagiso Mokotedi had told the Public Accounts Committee that Government’s rushed tendering process for the expansion of the Sir Seretse Khama International Airport (SSKI) was the major factor that led to poor management of the project and its subsequent delays. 


He revealed that the project was started even before the design was complete in a rush to finish it before the 2010 Soccer World Cup.


BOTSWANA/CHINA BILATERAL RELATIONS
According to a report authored in 2009 on China’s Role in Infrastructure Development in Botswana, bilateral trade between the two countries surged from nearly zero 30 years ago to $52.4 million in 2004, $69 million in 2006 and $149 million in 2007.

With China becoming the second largest luxury diamond consumer in the world, importing $1.66 billion worth of diamonds in 2004, trade volumes between the two countries would surely increase should China be allowed to import diamonds directly from Botswana.

China’s total imports from Botswana surged from $8.1 million in 2006 to $26 million in 2007, while China’s export to Botswana increased from $61 million in 2006 to $118 million in 2007. Although no detailed trade breakdowns can be sourced, the upward import trend and the surging figures correspond with Chinese construction companies’ footprint in Botswana.

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Mowana Mine to open, pay employees millions

18th January 2022
Mowana Mine

Mowana Copper Mine in Dukwi will finally pay its former employees a total amount of P23, 789, 984.00 end of this month. For over three years Mowana Copper Mine has been under judicial management. Updating members, Botswana Mine Workers Union (BMWU) Executive Secretary Kitso Phiri this week said the High Court issued an order for the implementation of the compromise scheme of December 9, 2021 and this was to be done within 30 days after court order.

“Therefore payment of benefits under the scheme including those owed to Messina Copper Botswana employees should be effected sometime in January latest end of January 2022,” Kitso said. Kitso also explained that cash settlement will be 30 percent of the total Messina Copper Botswana estate and negotiated estate is $3,233,000 (about P35, 563,000).

Messina Copper was placed under liquidation and was thereafter acquired by Leboam Holdings to operate Mowana Mine. Leboam Holdings struck a deal with the Messina Copper’s liquidator who became a shareholder of Leboam Holdings. Leboam Holdings could not service its debts and its creditors placed it under provisional judicial management on December 18, 2018 and in judicial management on February 28, 2019.

A new company Max Power expressed interest to acquire the mining operations. It offered to take over the Mowana Mine from Leboam Holdings, however, the company had to pay the debts of Leboam including monies owed to Messina Copper, being employees benefits and other debts owed to other creditors.

The monies, were agreed to be paid through a scheme of compromise proposed by Max Power, being a negotiated payment schedule, which was subject to the financial ability of the new owners. “On December 9, 2021, Messina Copper liquidator, called a meeting of creditors, which the BMWU on behalf of its members (former Messina Copper employees) attended, to seek mandate from creditors to proceed with a proposed settlement for Messina Copper on the scheme of compromise. It is important to note that employee benefits are regarded as preferential credit, meaning once a scheme is approved they are paid first.”

Negotiated estate is P35, 563,000

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Councilors’ benefits debacle-savingram reveals detail

18th January 2022

A savingram the Ministry of Local Government and Rural Development sent to Town Clerks and Council Secretaries explaining why councilors across the country should not have access to their terminal benefits before end of their term has been revealed.

The contents of the savingram came out in the wake of a war of words between counselors and the Ministry of Local Government and Rural Development. The councilors through the Botswana Association of Local Authorities (BALA) accuse the Ministry of refusing to allow them to have access to their terminal benefits before end of their term.

This has since been denied by the Ministry.  In the savingram to town councils and council secretaries across the country, Permanent Secretary in the Ministry of Local Government and Rural Development Molefi Keaja states that, “Kindly be advised that the terminal benefits budget is made during the final year of term of office for Honorable Councilors.”  Keaja reminded town clerks and council secretaries that, “The nominal budget Councils make each and every financial year is to cater for events where a Councilor’s term of office ends before the statutory time due to death, resignation or any other reason.”

The savingram also goes into detail about why the government had in the past allowed councilors to have access to their terminal benefits before the end of their term.  “Regarding the special dispensation made in the 2014-2019, it should be noted that the advance was granted because at that time there was an approved budget for terminal benefits during the financial year,” explained Keaja.  He added that, “Town Clerks/Council Secretaries made discretions depending on the liquidity position of Councils which attracted a lot of audit queries.”

Keaja also revealed that councils across the country were struggling financially and therefore if they were to grant councilors access to their terminal benefits, this could leave their in a dire financial situation.  Given the fact that Local Authorities currently have cash flow problems and budgetary constraints, it is not advisable to grant terminal benefits advance as it would only serve to compound the liquidity problems of councils.

It is understood that the Ministry was inundated with calls from some Councils as they sought clarification regarding access to their terminal benefits. The Ministry fears that should councils pay out the terminal benefits this would affect their coffers as the government spends a lot on councilors salaries.

Reports show that apart from elected councilors, the government spends at least P6, 577, 746, 00 on nominated councilors across the country as their monthly salaries. Former Assistant Minister of Local Government and Rural Development, Botlogile Tshireletso once told Parliament that in total there are 113 nominated councilors and their salaries per a year add up to P78, 933,16.00. She added that their projected gratuity is P9, 866,646.00.

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Households spending to drive economic recovery

17th January 2022

A surge in consumer spending is expected to be a key driver of Botswana’s economic recovery, according to recent projections by Fitch Solutions. Fitch Solutions said it forecasts household spending in Botswana to grow by a real rate of 5.9% in 2022.

The bullish Fitch Solutions noted that “This is a considerable deceleration from 9.4% growth estimated in 2021, it comes mainly from the base effects of the contraction of 2.5% recorded in 2020,” adding that, “We project total household spending (in real terms) to reach BWP59.9bn (USD8.8bn) in 2022, increasing from BWP56.5bn (USD8.3bn) in 2021.”  According to Fitch Solutions, this is higher than the pre-Covid-19 total household spending (in real terms) of P53.0 billion (USD7.8bn) in 2019 and it indicates a full recovery in consumer spending.

“We forecast real household spending to grow by 5.9% in 2022, decelerating from the estimated growth of 9.4% in 2021. We note that the Covid-19 pandemic and the related restrictions on economic activity resulted in real household spending contracting by 2.5% in 2020, creating a lower base for spending to grow from in 2021 and 2022,” Fitch Solutions says.

Total household spending (in real terms), the agency says, will increase in 2022 when compared to 2021. In 2021 and 2022, total household spending (in real terms) will be above the pre-Covid-19 levels in 2019, indicating a full recovery in consumer spending, says Fitch Solutions.  It says as of December 6 2021 (latest data available), 38.4% of people in Botswana have received at least one vaccine dose, while this is relatively low it is higher than Africa average of 11.3%.

“The emergence of new Covid-19 variants such as Omicron, which was first detected in the country in November 2021, poses a downside risk to our outlook for consumer spending, particularly as a large proportion of the country’s population is unvaccinated and this could result in stricter measures being implemented once again,” says Fitch Solutions.

Growth will ease in 2022, Fitch Solution says. “Our forecast for an improvement in consumer spending in Botswana in 2022 is in line with our Country Risk team’s forecast that the economy will grow by a real rate of 5.3% over 2022, from an estimated 12.5% growth in 2021 as the low base effects from 2020 dissipate,” it says.

Fitch Solutions notes that “Our Country Risk team expects private consumption to be the main driver of Botswana’s economic growth in 2022, as disposable incomes and the labour market continue to recover from the impacts of the Covid-19 pandemic.”
It says Botswana’s tourism sector has been negatively impacted by the Covid-19 pandemic and the related travel restrictions.

According to Fitch Solutions, “The emergence of the Omicron variant, which was first detected in November 2021, has resulted in travel bans being implemented on Southern African countries such as South Africa, Botswana, Lesotho, Namibia, Zimbabwe and Eswatini. This will further delay the recovery of Botswana’s tourism sector in 2021 and early 2022.”  Fitch Solutions, therefore, forecasts Botswana’s tourist arrivals to grow by 81.2% in 2022, from an estimated contraction of 40.3% in 2021.

It notes that the 72.4% contraction in 2020 has created a low base for tourist arrivals to grow from.  “The rollout of vaccines in South Africa and its key source markets will aid the recovery of the tourism sector over the coming months and this bodes well for the employment and incomes of people employed in the hospitality industry, particularly restaurants and hotels as well as recreation and culture businesses,” the report says.

Fitch Solutions further notes that with economies reopening, consumers are demanding products that they had little access to over the previous year. However, manufacturers are facing several problems.  It says supply chain issues and bottlenecks are resulting in consumer goods shortages, feeding through into supply-side inflation.  Fitch Solutions believes the global semiconductor shortage will continue into 2022, putting the pressure on the supply of several consumer goods.

It says the spread of the Delta variant is upending factory production in Asia, disrupting shipping and posing more shocks to the world economy. Similarly, manufacturers are facing shortages of key components and higher raw materials costs, the report says adding that while this is somewhat restricted to consumer goods, there is a high risk that this feeds through into more consumer services over the 2022 year.

“Our global view for a notable recovery in consumer spending relies on the ability of authorities to vaccinate a large enough proportion of their populations and thereby experience a notable drop in Covid-19 infections and a decline in hospitalisation rates,” says Fitch Solutions.
Both these factors, it says, will lead to governments gradually lifting restrictions, which will boost consumer confidence and retail sales.

“As of December 6 2021, 38.4% of people in Botswana have received at least one vaccine dose. While this is low, it is higher than the Africa average of 11.3%. The vaccines being administered in Botswana include Pfizer-BioNTech, Sinovac and Johnson & Johnson. We believe that a successful vaccine rollout will aid the country’s consumer spending recovery,” says Fitch Solutions.  Therefore, the agency says, “Our forecasts account for risks that are highly likely to play out in 2022, including the easing of government support. However, if other risks start to play out, this may lead to forecast revisions.”

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