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Khama sets the BOL rolling


ENSURING PETROL SUPPLY: Botswana Oil Limited, the national oil company created to ensure the safe supply of petrol across the country, and to encourage citizen participation in the petroleum sector. President Lt Gen Ian Khama said having a secure energy supply is critical for national development, and the creation of Botswana Oil will lead to greater energy security, jobs and improved living standards across Botswana.

Botswana forms national oil company

Botswana can now be counted among countries that have crossed the economic Rubicon and gone the extra mile to ensure a constant supply of petroleum products by forming a national oil company called Botswana Oil Limited (BOL).

It is envisaged that BOL, a 100 percent Government-owned entity that was formed to play a critical role in the provision of petroleum products, will go a long way in helping the country reduce its dependence on neighbouring South Africa.

“Without a continual and secure supply of petroleum products, our economy could be compromised,” said President Lt Gen Ian Khama Seretse Khama, when officially opening the new parastatal company at the Gaborone International Convention Centre (GICC) on Tuesday this week.

Also in attendance was Vice President Dr Ponatshego Kedikilwe and major stakeholders in the energy sector.

The country has been adversely affected by fuel supply challenges in South Africa over the past five years. The crisis arose from unplanned shutdowns of refineries in the neighbouring country, causing fuel retailers in the country to scramble for the limited supplies, while shipments from oil producing countries in the Persian Gulf also delayed in arriving.

 Frequent industrial action by drivers of long-haul vehicles that transport fuel products from South Africa to Botswana also caused panic as the country’s fuel pumps went dry.

As a result, BOL will be in the forefront of coordinating the oil energy sector and bring more independence and leverage for the country in terms of adequate fuel supply.

The company will construct a 149 million-litre storage facility in Tshele Hills as way of ensuring a seamless supply of fuel and other oil products.

“Provision of adequate energy is a prerequisite for socio-economic and industrial development of any nation. Petroleum products today play a critical role in turning the wheels of industrial development and in turn improving the economic well-being of nations,” said President Khama.

“Orapa and Jwaneng consume about 1.3 million litres of diesel per month. I am also made to understand that the emergency power supplies in Orapa comprising of two 45 MW of open cycle gas turbines consume an average of 22,000 litres of diesel per hour at full capacity. It is, therefore, abundantly clear that petroleum products are important inputs for our mineral production and power generation,” he said.

This decision to set up BOL by Government was prompted by events in past years when external forces disrupted the smooth flow of oil energy products to drive the wheels of commerce and industry.

“Multinationals are in their very nature there to ensure that they make a reasonable return on their investment for their shareholders. It is against this background that their investment decisions are commercially-focused and as such they may decide to invest or divest as they see fit based on commercial reasons or interests. For example, in 2010 BP divested its operations in Botswana. Shell also sold a significant portion of their investment,” said Khama.

Government, through Cabinet, approved the establishment of Botswana Oil Limited and the company was formed in 2013 and serves as an agent in the transformation of the oil industry, mandated to, among other things:

  • Ensure security and efficiency of supply and primary distribution of petroleum products in Botswana;
  • Manage state-owned strategic fuel reserve facilities, strategic stocks as well as bulk storage and distribution; and
  • Facilitate meaningful citizen participation in the petroleum sector.

At the helm of the new parastatal is Chief Executive Officer (CEO) Willie Mokgatle, who has also headed the national airliner, Air Botswana, in the past, among many top positions he has held.

Dr Joel Sentsho will be the chairperson of the BOL board of directors. The company will in future privatise and sell its securities to citizens.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020

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.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

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.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

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”

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