Corruption, spending leakages threaten economic recovery
Corruption, leakage in government spending, and poor implementation of national projects have been listed as some of the salient impediments that will stand in the way of Botswana’s road to economic recovery.
An Economic recovery plan pegged to the reviewed priority areas of the 2020/21 budget is projected to resuscitate Botswana’s economy following the adverse impact of the COVID-19 pandemic. But these concerns about Botswana‘s porous government spending and delayed delivery of national projects has been voiced by various Members of Parliament as glaring pitfalls.
Legislators were deliberating on the National Development Plan (NDP) 11 midterm review this week. Parliament was debating a motion seeking approval of Midterm Review put before Parliament by Minister of Finance & Economic Development, Dr Thapelo Matsheka.
Member of Parliament for Sefhare –Ramokgoname, Dr Kesitegile Gobotswang said Botswana was already facing slow paced economic growth rates even before COVID-19 pandemic, characterized by huge income inequality gaps, youth unemployment, increasing household debt and social ills. According to Gobotswang COVID-19 has just amplified already existing problems engulfing Botswana’s economy.
“We were already experiencing poor implementation of projects, porous and wasteful government spending and institutionalized corruption before COVID-19, our recovery plan is walking right into this crisis. I don’t see any return on investment being realized from this multi- billion pula projects under this wasteful government,” he said.
Dr Gobotswang who is also Botswana Congress Party (BCP) Vice President cast doubt on Botswana’s oversight bodies citing the Directorate on Corruption and Economic Crime (DCEC) and the Ombudsman as toothless organizations remote controlled by the Office of the President.
“We need strong oversight bodies that can institute serious check and balances, autonomously, without fear or favor, so that we can detect corruption and embezzlement of government funds at an early stage before crimpling this economy.” Dr Gobotswang’s views are consistent with concerns expressed by various experts who crafted the Economic Recovery & Transformation Plan (ERTP).
The Economic Recovery & Transformation Plan which is pegged to the Midterm Review plan underscores the need to invest in massive infrastructure projects that would cultivate significant stimuli for the economy. The experts, including amongst others Economists and Finance think tanks from BIDPA and the University of Botswana underlined that for public policy goals to be realized, implementation, monitoring and evaluation needs to be optimized.
“Botswana’s achievements in these aspects have been modest for several years now,” reads an extract from the ERTP. Some of the challenges that have been identified as strong bottlenecks to optimal policy implementation in Botswana include lack of accountability and commitment to reform. For the ERTP to create the intended stimuli to the economy, Ministry of Finance also noted that effective implementation is key.
The paper underscored that effective implementation requires a high level of accountability, project evaluation and monitoring noting that it is necessary to ensure that projects are of high quality and are delivered within budget.
“For that, corruption must be dealt with decisively, for it is partly due to corruption that highly-priced products are either not delivered on time or not delivered at all or if delivered, they are of poor-quality. This is a cost to the nation that should not be tolerated.” Furthermore the ERP paper rubber stamped that honest and serious-minded foreign investors do not invest in corrupt jurisdictions, noting that only the corrupt do.
“Appropriate mechanisms for the oversight of the projects in the ERTP need to be introduced, which may include existing institutions such as the NSO or GICO, along with an appropriate Monitoring and Evaluation Framework,” reads a recommendation in the economic recovery plan.
The plan intends develop a strong Monitoring & Evaluation fragment that would include assessment of progress against agreed implementation timelines and budget, during implementation.
Some of the major indicators to be used for evaluation post-implementation would be output and market impact , incomes and employment impact , environmental, social and governance impact , financial returns and ex-post commercial and economic viability.
Ministry of Finance says all of the post-implementation impact analysis metrics should be compared with the original project projections to determine whether the project has out-performed or under-performed its targets, and whether the pre-implementation analysis was accurate.
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ICT sector contributed P1.6 billion in Q4 2022
The latest figures by the government owned statistics entity, Statistics Botswana show that the Information and Communications Technology (ICT) sector in this country registered significant growth during the fourth quarter of 2022 (Q4 2022).
According to the figures the ICT sector made a contribution of 2.5 percent to the total Gross Domestic Product (GDP) at current prices, in Q4 2022.
The figures show that at constant prices, the ICT sector realized an annual growth rate of 4.6 percent and the sector contributed around P1.6 billion to the economy during the fourth quarter of 2022. â€śIn Q4 2022, the contribution of ICT sector to the economy stood at 2.5 percent of total GDP at both current and constant prices. The ICT sectorâ€™s value added at current prices amounted to P1, 633.6 million while at constant prices it amounted to P1, 242.2 million. The sector registered an annual growth rate of 4.6 percent in constant prices,â€ť according to the Botswana Information and Communication Technology recent update by Statistics Botswana. The statistics entity noted that the Postal and Courier Services sectorâ€™s value added amounted to P67.2 million in current prices, which constituted 0.1 percent of total GDP in Q4 2022.
Giving an update regarding the performance of other ICT sub sectors Statistics Botswana stated that fixed telephone line subscriptions decreased by 2.3 percent in Q4 2022, from 93,925 subscriptions recorded in Q3 2022 to 91,725. Mobile cellular telephone subscriptions however increased by 0.8 percent in Q4 2022, from 4,315,368 registered in Q3 2022 to 4,348,010. Comparing Q4 2022 to the same quarter of 2021, fixed telephone lines decreased by 30.8 percent while mobile cellular telephone subscriptions went up by 4.5 percent. Both pre-paid and post-paid mobile cellular telephone subscriptions increased in Q4 2022. Pre-paid mobile cellular telephone subscriptions rose by 0.8 percent from 4,149,143 in Q3 2022 to 4,181,783 while post-paid mobile cellular telephone subscriptions increased slightly in Q4 2022 from 166,225 registered in Q3 2022 to 166,227, according to Statistics Botswana.
Total internet subscriptions both mobile internet plus fixed internet subscriptions increased by 3.6 percent in Q4 2022, from 2,875,153 registered in Q3 2022 to 2,977,845. Mobile internet subscriptions went up, registering an increase of 4.5 percent from 2,721,946 subscriptions in Q3 2022 to 2,844,958 in Q4 2022. Meanwhile fixed internet subscriptions decreased by 13.3 percent (from 153,207 registered in Q3 2022 to 132,887 in Q4 2022).
Statistics Botswana stated that mobile money subscriptions have been increasing over the years. In Q4 2022, mobile money subscriptions went up by 1.3 percent, from 1,788.551 registered in Q3 2022 to 1,811,036. Mobile money is a technology that allows customers to receive, store and spend money using a mobile phone. To enjoy the benefits of mobile money, a customer has to register and open an account with a mobile money service provider. Existing mobile money services in Botswana include Smega by BTC, Orange Money by Orange Botswana, Myzaka by Mascom and Poso Money by Botswana Post.
The statistics entity stated that on-net fixed telephone domestic calls (Fixed to fixed telephone calls) traffic went down by 8.0 percent in Q4 2022, from 15.4 million minutes registered in Q3 2022 to 14.1 million and added that off net fixed telephone domestic calls (Fixed to mobile telephone calls) traffic decreased as well in Q4 2022. It went down by 0.6 percent from 23.9 million minutes in Q3 2022 to 23.7 million minutes.
With regard to mobile telephone domestic calls traffic, on-net mobile telephone traffic decreased by
0.8 percent in Q4 2022 while off-net mobile telephone traffic increased by 1.6 percent. While mobile to fixed telephone traffic decreased by 1.1 percent in Q4 2022. International outgoing fixed telephone calls traffic declined by 8.2 percent in Q4 2022, from 1.1 million minutes in Q3 2022 to 1.0 million.
The entity noted that outgoing international mobile telephone calls traffic increased slightly by 0.8 percent in Q4 2022, from 4.1 million minutes recorded in Q3 2022. On-net short message services (SMS) declined by 1.5 percent and off-net SMS traffic also went down by 0.5 percent in Q4 2022, according to figures from the statistics entity.
State owned MDCB comes to Minergyâ€™s rescue
Government owned mining investment firm Mineral Development Company Botswana(MDCB) has agreed to bail out embattled Minergy Coal, and clear its arrears with mining contractor – Jarcon, the Botswana Stock Exchange coal miner said in a circular to the market this week.
In the statement Minergy which operates Masama Coal Mine in Media, near Lentsweletau said it has signed a term sheet for funding offered by its main funder, the Minerals Development Company Botswana (Pty) Ltd.
The facility terms are subject to normal legal counsel review, satisfactory due diligence, final documentation, and the review, acceptance, and execution of the relevant financing agreements by the MDCB and the fulfilment of suspensive conditions.
The funding will be utilised to significantly repay the arrears of the Jarcon trade account as required by the Term Sheet. The statement said Minergy and Mineral Development Corporation intends to finalise and allow the disbursement of funds by no later than 30 June 2023.
The funding will allow Minergy to initially continue operations in a reduced sales environment with the associated reduced-cost initiatives implemented to stabilise the business ahead of ramping up to pre-shutdown levels.
In mid- March Minergy announced the halt of Mining operations at Masama due to what it termed a drastic decline in coal prices which resulted in a cash flow crisis.
It emerged that the infant coal miner owed it’s mining contractor, Jarcon over P80 million in arrears. Jarcon had reached a decision to tool down and let go of some of its employees citing cash flow shortfalls as it sought to demand clarity on outstanding payments from Minergy.
Minergy has previously received funding in hundreds of millions from Mineral Development Company (MDC), another Botswana Government 100 percent owned entity.
MDCB, which is housed under the Ministry of Minerals & Energy, is the wholly owner of Morupule Coal Mine. The relatively new minerals investment company also owns 15 percent of De Beers Group on behalf of Government.
Minergy â€™s other state funders are Botswana Development Corporation (BDC), the state owned investment entity, 100 percent owned by Government of Botswana, housed under the Ministry of Trade & Industry.
Combined, BDC and MDC have previously pumped over P300 million debt funding to Minergy to bring Masama coal mine to production and later for expansion.
Minergy incurred a net loss during the year ended 30 June 2022 of P131 151 034 (2021: P106 903 609). As at 30 June 2022 the Group had accumulated losses of P376 420 873 (2021: P245 269 838) and its net liabilities exceeded its net assets by P180 279 583 (2021: net liabilities exceeded its net assets by P56 030 697).
This gave rise to a material uncertainty that casted significant doubt on the Groupâ€™s ability to continue as a going concern, and therefore, that it may be unable to realise its assets and discharge the normal course of business.
Significant progress towards stabilizing the business was made during the financial year in mitigating the going concern which included receipt of the final tranche of debt funding, completion of debt restructuring to stabilise the business and successful commissioning of Stage 4 of the Processing Plant (Rigid Screening and Stock Handling section) which allows it to now operate at nameplate capacity.
In addition to this, the ongoing war in Ukraine stimulated high coal prices from the end of the third quarter of FY22, as the energy market and the security of supply came under severe pressure. This led to extraordinary demand, allowing access to previously uncompetitive and uneconomical exports into the seaborne market during the fourth quarter.
Minergy successfully exported coal via Walvis Bay, with two 30 000-tonne vessels dispatched in May and June 2022 on a FOB basis. The Group also exported coal through Maputo via rail to the port, with two trains dispatched in June 2022 on a Free-On-Rail (â€śFORâ€ť) basis. These events increased sales volume for the financial year by 40%, with record sales achieved in May 2022. These increased sales levels have been maintained post year end.
G4S Botswana gross profit down P12 million
G4S Botswana Limited gross profit for the year ended 31 December 2022 declined by around P12 million, according to the companyâ€™s consolidated financial statements released by Botswana Stock Exchange (BSE) this week.
G4S Botswana gross profit declined by P12, 373 000.00 from P51, 289 000.00 recorded for the year ended December 2021 to P38, 916 000.00 for the year ended 31 December 2022.
G4s Botswana provides security services to among others, financial services industry and the services include cash transportation, counting and reconciling cash, sorting of notes for use in ATMs, counterfeit detection and removal, redistribution of cash to bank branches, ATMs and retail customers. The company also collects and processes cash notes within the retail environment.
In the recent financial statements, the BSE listed security services provider noted its revenues and profits were negatively affected by increase in fuel prices and cost of proving security services. â€śThe significant decline in gross profit for the year was as a result of the abnormal price increases on fuel, as fuel expenses increased by 88% for the full year, compared to prior year adding significantly to total cost. Additionally due to the heightened security risk environment, the business invested in enhanced security upgrades to its infrastructure specifically in the cash service line. Investment in live monitoring of all cash vehicles further added to the cost of providing service putting further pressure to total costs.â€ť
The company recently indicated that following the increased national security risks characterized by attacks on cash in transit vehicles, the company was forced to improve security of its vehicles, by adopting the latest technology.
According to the companyâ€™s management the significant miss in Gross Profit (GP) largely drives the decline in the profit before tax (PBT) year on year. â€śAdded to the PBT decline is the increase in administrative expenses owing to the normalization of the alarm monitoring and response (AMR) teams wherein from September 2021 Management added back the full crew complement to the AMR response crew structure which had been reduced during 2020 â€“ effectively experiencing the full cost of this change in the whole of 2022.
G4S Botswana management meanwhile noted that its revenue for the period increased by 6.45% driven primarily by good growth in the manned guarding service line and added that the top line growth was despite the contract losses experienced during the period under review primarily because of the new Citizen Economic Empowerment (CEE) legislation. â€śThe Cash service line grew marginally by 4% while the Electronic Security Systems (ESS) remained largely unchanged as it continues to experience intense competition from new entrants particularly in the Alarm monitoring and response (AMR) space.â€ť
G4S Botswana management noted that the company will continue to focus on growing revenue following encouraging increases in revenue quarter on quarter for both the third quarter and fourth quarter of 2022, indicating that revenue lost during the first half of 2022 is systematically being recovered. â€śWe will continue driving the sale of integrated security solutions to ensure that we remain at the forefront of security capability in Botswana. The trading conditions remain challenging with significantly fewer opportunities than in prior years primarily due to CEE legislation. As a response, Management continues to drive its commercial strategy of focusing on industry-specific growth such as the retail growth strategy that has driven revenue growth. The infusion of technology into our service offering has also been successful as a revenue driver. Specific focus for the year is on cost management with driving efficiencies across the business and continued fuel management aimed at managing profitability.â€ť
G4S management noted that the company will continue to focus on improving profitability. â€śDespite the reduced performance of the company, in lieu of stated reasons, the Board of Directors and Management are confident of the companyâ€™s going concern status and will continue to work hard towards improved profitability in the foreseeable future.â€ť