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CBD rentals added P142 million on Gov’t bill

An additional rental amount of over P142 Million has been piled on the government bill after two Ministries, Youth,  Sports and Culture and that of Trade and Industry moved to the Gaborone Central Business District (CBD) and signed lease agreements with landlords without the authority of the Procurement and Asset Disposal Board (PPADB), the Auditor General, Pulane Letebele has discovered.

In June 2013, the Ministry of Youth, Sports and Culture signed a rental contract amounting to P81 228 890 for a period of five years, while the Trade Ministry signed its contract of P60 784 200 which runs for the same period in December 2012. Both contracts are far beyond the authority level of the MTC of P25 000 000 and according to the AG, the matters should have been referred to PPADB.

“This is yet another instance where Public officers flagrantly disregard clearly laid down rules, resulting in Public Funds being spent without proper authorities even where large sums of money, calling for extreme care and diligence are involved. This state of affairs continues to be a matter for concern by the PAC,” The AG expressed his concern.

In his latest report on the government accounts, the AG penned down his frustrations and that of the Public Accounts committee at officers who continue wasting the tax payers’ money unnecessarily.

In the instance of the Youth Ministry, a lease mentioned earlier was agreed following negotiations and the AG does not understand how the amount was reached when originally the Landlord tendered a lesser amount of P77 523 264.

“The enhanced rental payment from negotiations comparative to the bid amount is a clear indication of the laxity with which public officers handle their financial duties which in this case has resulted in loss of considerable sums of money. Unless and until officers advert themselves diligently, the public revenue will suffer losses through wasteful expenditure and this is a matter for concern of this office and of the Public Accounts Committee,” the AG further noted.

As a result of what appeared to have been improper lease of the office block occupied by the Ministry of Youth, Sports and Culture in the CBD , the PPADB instituted a tender audit to establish the circumstances of that tender, in terms of section 52 (2) of the PPADB Act.

The audit according to Letebele, established that having reached the decision to house all its five departments under one roof to achieve a smooth coordination of its functions, the Ministry had in August 2012, proceeded to issue an invitation to tender for the lease of an office block for a period of five years. The response to that invitation was only one bidder who had offered three rental options, ranging from P1 579 177 per Month at the top which included the cost of partitioning to P1 076 712 at the lowest for an open plan flooring all inclusive of value added tax (VAT).

Upon evaluation the Ministerial team had recommended the first option of P1 578 177 to the MTC. The committee had, however varied this recommendation in favour of the second option of P1 292 054 on the basis that the cost of partitioning was a one-off event which should not be spread over the entire lease period. Thus the approval of the tender by the committee was in the amount of P1 292 054 per month, translating to P77 523 264 over the entire lease period.

Subsequent to the tender approval by the MTC, the Ministry requested the Ministry of Lands and Housing to engage the landlord in price negotiations and finalisation of the lease agreement. Resulting from that, the lease was finally signed at a Monthly rental of P1 208 763, translating to P81 228 890.

Meanwhile another study of documentation relating to the lease of an office block by the Ministry of Trade and Industry in the CBD indicated that such lease was not with the approval of the PPADB in terms of the predetermined expenditure authority level.

As far back as 2011, the Ministry had determined that it was essential for the Ministry Headquarters and all its five departments to be housed in one office block to reduce administrative costs, enhance operational efficiency and service delivery to customers.

The Ministry officers then set on a search for suitable accommodation and identified an office block in the CBD which was recommended to the Ministry of lands and Housing on the advice of the Ministerial Tender Committee for rental and lease negotiations in March 2011. However in August of the same year, before the response of the Lands Ministry, the Ministry withdrew its earlier recommendations in favour of another office block, still in the CBD on the basis that the rental of the first block was too high.

The lease was finally procured with the developers of the second block office and lease agreement signed in December 2012 for a five year period ending November 2017 at a monthly rental of P 1 013 070, on the authority of approval of the MTC. However the total rental for the 5 year period amounted to P60 784 200, was far beyond the expenditure threshold of P25 000 000 appropriate to the committee.

When the matter came to the notice of the PPADB, the board instituted an audit to determine the circumstances of this award. The board audit found that in adjudicating over this tender, the MTC had failed in its duty to adhere to its expenditure limits and to advise the Ministry as the procuring entity to refer the matter to PPADB as the appropriate level of approval for the expenditure involved.

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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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