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Gov’t embarks on cost-cutting 

Minister of Finance and Economic Development Peggy Serame

The 2022/23 Financial year will be underpinned by massive cost-cutting and contain exercise across all government operations, Minister of Finance and Economic Development Peggy Serame has announced. 

Delivering the budget speech for the financial year 2022/23, which begins on April 1, 2022, the Minister, said various initiatives have already been introduced to contain costs, and a further set of measures will be introduced in the coming financial year.

These will target expenditure that can be reduced without compromising on service delivery, and require the beneficiaries of some public services to share in the costs of provision where they can afford to do so. Particular attention is being paid to the amount of money spent on scarce skills allowances in the public service, much of which may no longer be justified in terms of the need to recruit and retain employees.

Further, the Finance Minister announced that the amount spent on overtime allowances will be cut back as it appears to be excessive. “Government also spends large amounts on tuition fees and maintenance allowances for students in tertiary education. This is an area of possible cost-sharing with parents, where they have the ability to pay” she said. Minister Serame however said in line with the practice and commitments of the Botswana Democratic Party (BDP) Government, extensive consultations will take place before any major changes are introduced.

REDUCING THE WAGE BILL

In an effort to restore fiscal stability government intends to reduce and effectively manage the Government wage bill. This according to Minister Serame will be implemented through the Workforce Planning System which is being developed by the Directorate of Public Service Management  (DPSM), through the Botswana Public Service Workforce Strategy and  Workforce Plans Project that started in July 2021.

The key objectives of this project are to manage the Government wage bill, promote workforce flexibility and improve productivity in the public sector. The Minister said this helps to identify where public sector employment can be restructured, and hence identify possible savings in the wage and salary bill.” This will directly address the problem of the ever-growing wage bill, which was estimated at over 16 percent of GDP in 2020/2021, compared to the acceptable 10 percent recorded by comparator nations,” the Minister said.

She explained that the benefits of this initiative will start to be realized in the coming financial year. “However, since the DPSM is taking a long-term approach to this initiative, and given the transitions required, the project is envisaged to run over a period of three years for effective implementation.”

Over 143 000 men and women are in the employ of the Government, cutting across ministries and state agencies, with 125, 203 employed by the Central government and 17, 847 employed under local authorities and councils.

To remunerate this workforce government has to part ways with over P28 billion from state coffers annually. Think tanks, authorities, and decision-makers at the Ministry of Finance & Economic Development have long raised red flags against this status quo, labeling it “unsustainable and too draining to state coffers”.

In pre-budget consultations, late last year the Finance Ministry technocrats led by Permanent Secretary Dr Wilfred Mandlebe said the restructuring of the public service is inevitable.

“In terms of the wage bill expenditure, we are around 38.9 percent of our total budget, which is almost 40 percent, this is huge, and this is one of the elephants in the room, for us as Finance, this is not sustainable, rationalization of government is long overdue,” Dr Mandlebe said in September last year.

The Permanent Secretary however observed the paradox that comes with the rationalization exercise. “I  know that when this conversation comes to the surface we will have divergent views about it, even in Parliament, there will be questions as to why do we have to retrench people when there is already a rise in unemployment.”

Mr. Mandlebe said the bottom line however is affordability: “At the end of the day its affordability because governments do go broke, I have seen governments going broke, we don’t want to come to a stage where come month-end people are not paid, and I don’t think employed Batswana can afford to go for a day without a salary, the way we survive on hand to mouth and indebts.”

The Finance PS further told members of Parliament that the conversation about reducing the public service is however coming and there are no 2 ways about it.

“Let’s engage Batswana and put this conversation on the table, to even the public servants themselves, because it will come and it shouldn’t come like someone is holding a gun to our head , like we have seen it in other  African countries, where they go out to borrow on somebody else ‘s terms, at that point in time the degree of maneuver is very little, we should do this as a self-reform undertaking when we still have time and space to look and consider all the sensitivities around this matter,” said Dr. Mandlebe.

The government spends over P2.3 billion on public servants’ salaries monthly, which totals almost P28 billion on an annual basis, almost 40 percent of Botswana’s national budget.

In a post-budget interview with WeekendPost on Wednesday Minister of Finance & Economic Development Peggy Serame said retrenchments are the purview of the Directorate of Public Service Management (DPSM) The Minister however said she does not anticipate retrenchments because there is a lot that can be done without necessarily retrenching.

“For the next coming financial years we will freeze recruitment save for special cases like Education, We use existing vacancies to provide for critical needs, also some officers are not replaced when they exit or retire,” she said.

REDUCING SUBVENTIONS TO STATE-OWNED ENTERPRISES 

Another space that Government seeks to explore to contain costs is reducing subventions to commercial SOEs Minister Serame explained that in addition to the ongoing process of rationalization and restructuring of SOEs, Government will reduce the size of subventions to commercial SOEs.

The approved subventions to SOEs from the Recurrent Budget for the current 2021/2022 financial year amount to P4.08 billion, or 2.05 percent of projected GDP. The proposed provision for the next financial year is marginally lower at P4.02 billion, which amounts to 1.85 percent of GDP. “Subventions will be further reduced in the coming years, through a combination of requiring commercial SOEs to cover their own costs, improved efficiencies across the SOE sector, and SOE rationalization,” she said.

Business

Mining production Q4 2021 report card 

10th May 2022
Mining Production

Botswana mining production picked up significantly in the last quarter of 2021 when compared to the same quarter in 2020 albeit a decline when mirrored against the preceding quarter; Q3 2022, Statistics Botswana revealed in the latest Index of Mining production report released this week.

The Index of Mining Production stood at 82.0 during the fourth quarter of 2021, showing a year-on-year increase of 28.1 percent from 64.0 recorded during the fourth quarter of 2020. Comparison on a quarter on-quarter basis shows a decrease of 19.6 percent from the index of 101.9 realised during the third quarter of 2021.

The main contributor to the year-on-year increase in mining production came from Diamonds, the country‘s flagship export commodity contributed 23.1 percentage points. Gold and Soda Ash were the only negative contributors to mining production, at negative 0.8 and negative 0.1 of a percentage point respectively.

On annual basis, the total index of mining production stood at 86.0, showing an increase of 37.0 percent in 2021 when compared to 62.8 registered in 2020. The 37.0 percent increase in annual mining production followed a decrease of 28.1 percent in 2020 and a decrease of 3.9 in 2019.

Although the total index of mining production increased in some parts of the period 2011 to 2021, experts at Statistics Botswana have observed and noted that it has been decreasing at an average annual rate of 0.7 percent during the last ten (10) years.

The increase in the total mining production in 2021 was mainly due to the growth realized in diamond production which contributed 33.1 percentage points to the total mining production growth. Diamond production increased by 24.2 percent (1, 038 thousand carats) from 4, 290 thousand carats during the fourth quarter of 2020 to 5, 329 thousand carats during the same quarter of 2021.

The increase was a result of intensified production strategy aligned with stronger trading conditions. The quarter-on-quarter analysis shows that production registered a decrease of 18.0 percent (1,172 thousand carats) during the fourth quarter of 2021 compared with 6, 500 thousand carats during the third quarter of 2021.

Copper in Concentrates production commenced during the third quarter of 2021 following 6 years of non-production since closure of BCL, Mowana and Boseto Mine in Toteng. The Toteng Mine has since returned to production under new ownership Khoemacau Copper Mining and is currently the only copper producing operation.

Mowana Mine has also been reborn under new ownership and it bears the nomenclature Kopano Copper Mine, production is expected to start soon. Some assets of BCL have been taken up Premium Nickel Resources, a subsidiary of Canadian North America Nickel.

During the fourth quarter of 2021, an amount of 4, 225 tonnes of Copper in Concentrates was produced. The quarter-on-quarter analysis shows that production decreased by 43.8 percent (3,292 tonnes) during the fourth quarter of 2021 compared with 7, 517 tonnes produced during the third quarter of 2021.

Gold production decreased by 49.1 percent (109 kilograms) during the fourth quarter of 2021, from 222 kilograms during the same quarter of the previous year to 113 kilograms during the period under review. Similarly, the quarter-on-quarter analysis reflects a decrease of 35.9 percent (63 kilograms) from 176 kilograms in the preceding quarter to 113 kilograms during the fourth quarter of 2021. The decrease was a result of the deteriorating lifespan of the mine arising from resource depletion.

Soda Ash production decreased by 4.4 percent (3, 116 tonnes) from 70, 159 tonnes during the fourth quarter of 2020 to 67, 043 tonnes produced during the period under review. On the other hand, quarter-on-quarter analysis shows that production went up by 2.8 percent (1, 848 tonnes) during the period under review, from 65, 195 tonnes during the previous quarter.

Salt production went up by 27.9 percent (31, 385 tonnes) to 143, 751 tonnes during the fourth quarter of 2021, from 112, 366 tonnes during the same quarter of the previous year. On the other hand, quarter-on-quarter analysis shows that salt production registered a decrease of 15.4 percent (26, 075 tonnes) compared with 169, 826 tonnes during the third quarter of 2021.

Silver production commenced during the third quarter of 2021 following 6 years of non-production as the associated mine was undergoing liquidation. During the fourth quarter of 2021, 3, 626 tonnes of silver were produced.

The quarter-on-quarter analysis shows that production decreased by 46.3 percent (3,131 tonnes) during the fourth quarter of 2021 compared with 6, 757 kg produced during the third quarter of 2021. Although the production is still at infancy, it is worthy to note that the mine is under new management following liquidation in 2015.

Coal production increased by 9.3 percent (40, 099 tonnes), from 429, 382 tonnes during the fourth quarter of 2020, to 469, 481 tonnes in the current quarter. The increase came as a result of the efforts made to meet increased demand from both domestic and international markets, particularly that new markets have been identified.

On the other hand, quarter-on-quarter comparison shows that coal production decreased by 14.5 percent (79, 746 tonnes) compared with 549, 227 tonnes during the third quarter of the current year. Copper-Nickel-Cobalt Matte recorded zero production during the period under review. The affected mines are still under liquidation.

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Electricity generation: One step forward, two steps backward

10th May 2022
Electricity Generation

Nearly 10 years and over P10 billion later, Morupule B – a 600 Megawatt coal fired power plant that was envisaged to end Botswana ‘s national power crises still can’t deliver to full capacity, forcing the country  to pay over P2 billion annually in importation of power from surrounding producer nations. 

The latest quarterly report from Statistics Botswana, reviewing the country’s power generation for the fourth quarter of 2021 has written off the progress made during the third quarter, reporting a quarter-on-quarter decrease of 18.9 percent, from an Index of Electricity Generation (IEG) of 137.7 during the third quarter of 2021 to 111.7, giving a clear reflection that the country takes 2 steps forward and 3 steps backward as far as local power generation is concerned.

In the third quarter of 2021, electricity generation had picked up, with a 14.6 percent points jump on IEG, from the Index of 120.2 during the second quarter of 2021. In physical terms, local electricity generation had increased by 14.6 percent (73,723 MWH), from 505,313 MWH during the second quarter of 2021.Statistics Botswana had credited the increase to improved performance of Morupule A and B power stations.

However in a setback during the last quarter of 2021 production of electricity locally took a downturn, both on quarterly and year-on-year basis, mainly due operational challenges at Morupule B. A year-on-year analysis shows a decrease of 9.3 percent in IEG, compared to 123.1 recorded during the corresponding quarter in 2020.

The physical volume of electricity generated decreased by 9.3 percent (48,278 MWH), from 517,627 MWH during the fourth quarter of 2020 to 469,349 MWH during the current quarter.

The quarter-on-quarter perspective shows that local electricity generation decreased by 18.9 percent (109,686 MWH), from 579,036 MWH during the third quarter of 2021 to 469,349 MWH during the period under review. “This decrease was largely due to operational challenges at Morupule B power plant.” Said Statistics Botswana

A decrease in local generation means increase in importation, during the fourth quarter of 2021, the physical volume of imported electricity increased by 16.7 percent (77,716 MWH), from 465,701 MWH during the fourth quarter of 2020 to 543,417 MWH during the quarter under review.

Compared to the previous quarter, electricity imported during the fourth quarter of 2021 increased by 28.0 percent (118,714 MWH), from 424,703 MWH during the third quarter of 2021 to 543,417 MWH.

Botswana imported 53.7 percent of total electricity distributed during the fourth quarter of 2021. Eskom, South Africa’s state-owned power generation outfit was as usual the main source of imported electricity at 40.6 percent of total electricity imports.

The Zambia Electricity Supply Corporation Limited (ZESCO) accounted for 22.0 percent, while the remaining 17.0, 15.0, 4.0 and 1.4 percent were sourced from Electricidade De Mozambique (EDM), Southern African Power Pool (SAPP), Cross-border electricity markets and Nampower, respectively.

Cross-border electricity markets is a Statistics Botswana nomenclature referring to towns and villages along the border which are supplied with electricity directly from neighbouring countries such as Namibia and Zambia.

In terms of distribution year-on-year analysis shows that the amount of distributed electricity increased by 3.0 percent (29,438 MHW), from 983,328 MWH during the fourth quarter of 2020 to 1,012,766 MWH during the current quarter.

The quarter-on-quarter comparison of distributed electricity shows an increase of 0.9 percent (9,028 MWH), from 1,003,738 MWH during the third quarter of 2021 to 1,012,766 MWH during the review quarter.

Electricity generated locally contributed 46.3 percent to electricity distributed during the fourth quarter of 2021, compared to a contribution of 52.6 percent during the same quarter in 2020, a decrease of 6.3 percentage points.

The quarter-on-quarter comparison shows that the contribution of electricity generated to electricity distributed decreased by 11.4 percentage points compared to the 57.7 percent.

MORUPULE B CHALLENGES 

The Morupule B project was adopted as the least cost solution to guarantee electricity supply, self-sufficiency and address the challenges in the energy sector of Botswana. The plant comprises of 4 units with capacity of 150 megawatt each, totalling 600 megawatt, all coal fired, together with associated transmission infrastructure.

Located adjacent to the existing 132 megawatt Morupule A plant, Morupule B was constructed at over P10 billion, funded by debt finance from the African Development Bank, and was supposed to have been completed and fully commissioned in 2013, however almost 10 years later the multibillion-pula plant is still not fully operational, instead cost overruns are reported at over P4 billion still counting.

In a media briefing early this year Minister of Minerals & Energy Lefoko Moagi said construction of the plant was budgeted for P9 billion, but the total cost of construction ended up ballooning to over P12 billion. He explained that out of 4 units only 2 were working being Unit 2 and Unit 3, producing 80 megawatt and 150 megawatt respectively.

He said Unit 1 was currently at forced outage because of total failure while Unit 4 was under commissioning following completion of remedial works. “What we are doing in Morupule B is that we are changing the heat exchangers, and we have requested from the initial designers to furnish us with a new design of heat exchangers, technologically advanced with proper output configurations”.

Minister Moagi explained that the units will be restarted gradually until the plant is fully operational at 100 percent output levels. Remedial works were delayed by COVID -19 travel restrictions, and the plant will now be fully operational in 2024.

According to Minister Moagi, Botswana will not incure any cost, remedial cost will be fully taken care of by contractor. “As for us, we had budgeted for P45 million, as incidental costs, because our Engineers will be travelling to Morupule, we will be engaging experts to assess the work for us etc.”

In terms of efforts toward clean energy Minister Moagi said Morupule A wad already implementing clean coal technologies, fuel gas desulphurisation technique in place. “At Morupule B the new heat exchangers that we are installing will have reduced gas emissions,” he said.

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De Beers Group introduces world’s first blockchain-backed diamond source platform at scale

10th May 2022
De Beers

 De Beers Group is deploying the Tracr™ blockchain platform at scale for its diamond production. Tracr™ is the world’s only distributed diamond blockchain that starts at the source and provides tamper-proof source assurance at scale, enabling Sightholders to provide an immutable record of a diamond’s provenance, and empowering jewellery retailers to have confidence in the origin of the diamonds they purchase.

With more end clients wanting to know the source of the products they buy, the deep meaning associated with a diamond purchase requires a technological step-change to meet their expectations. The introduction of Tracr™ at scale delivers immutable information on the source of De Beers’ diamonds across the value chain and makes source assurance for 100% of De Beers’ production possible.

The Tracr™ platform combines distributed ledger technology with advanced data security and privacy, ensuring that participants control the use of and access to their own data. Each participant on Tracr™ has their own distributed version of the platform, meaning that their data can only be shared with their permission, and only they choose who can access their information.

The advanced privacy technologies used by Tracr™ reinforce data security on the platform.  The immutable nature of each transaction on the platform ensures that the data cannot be tampered with when the diamond progresses through the value chain.

The decentralised nature of the platform ensures its speed and scalability, with the ability to register one million diamonds a week onto the platform. With centralised platforms, dealing with large volumes of data can cause bottlenecks, but the decentralised model used by Tracr™ avoids such issues and enables rapid scaling.

The scalability, speed and security of Tracr™ are combined into an intuitive user experience to support ease of use for platform participants. First launched in an R&D phase in 2018 and named by Forbes as one of the world’s 50 leading blockchain solutions in both 2020 and in 2022, De Beers has already registered one quarter of its production by value on Tracr™ in the first three Sights of the year in preparation for this first scale release.

Bruce Cleaver, CEO, De Beers Group, said: “De Beers discovers diamonds with our partners in Botswana, Canada, Namibia and South Africa and, with our long-term investment in Tracr™, we are proud to join with our Sightholders to provide the industry with immutable diamond source assurance at scale.

Tracr™, which will enable the provision of provenance information from source to Sightholder to store on a secure blockchain, will underpin confidence in natural diamonds and represents the first step in a technological transformation that will enhance standards and raise expectations of what we are capable of providing to our end clients.”

Lefoko Moagi, Minister of Minerals and Energy, Government of Botswana said: “The introduction of this advanced provenance technology is extremely exciting and we are very pleased as a large diamond producing country, and shareholder in De Beers, to be a part of this development. Confidence in diamond origin is extremely important and we look forward to seeing the roll out of this new programme delivering new benefits to the diamond industry and giving more assurance to consumers.”

The Tracr™ platform brings together a range of leading technologies – including blockchain, artificial intelligence, the Internet of Things and advanced security and privacy technologies – to support the identification of a diamond’s journey through the value chain.

De Beers’ provenance claims have been certified by the Responsible Jewellery Council and trust in the De Beers source of diamonds is also assured by the business’s Pipeline Integrity programme which involves annual third-party verification visits of participants by independent auditors.

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