Govt sets aside P600Mfor BPC consumer tariff subsidy
Business
Government continues to support Botswana Power Corporation (BPC) with a revenue grant meant to cushion consumers against what would otherwise be exorbitantly high electricity tariffs, this yearly cash injection through the Ministry of Mineral Resources, Green Technology and Energy Security, goes a long way in keeping the corporation afloat. For the 2022/23 Financial year BPC will receive P600 million, Parliament recently approved.
BPC, the country’s sole power utility is faced with a challenge of unbearable operational expenses against low revenue from its services rendered, resulting in operational losses year in and year out.
Without this revenue grant from Government, BPC would have to significantly hike electricity tariffs in order to recover its operational expenses and stay afloat, tariffs that are already unbearably high according to consumers.
OPERATIONAL LOSSES
A look at Botswana Power Corporation financials for the past 10 years reveals that the over 50 year old organisation has been swimming in billions of losses.
Before taking into account revenue grant from Government, the corporation registered an operational loss of over 1.3 billion in 2020, after a P3.398 billion revenue against whopping operational expenses of P4.7 billion.
BPC ‘s operational losses ( before Government grant) were hovering at over a billion pula and for some years almost clocking P2 billion ; P1.3 billion in 2020, P72 million in 2019, P299 million in 2018, P1.4 billion, P1.99 billion,P1.98 billion, P1.32 billion, P1. 62 billion, in 2017, 2016, 2015, 2014, and 2013 respectively, with P819 million in 2012 and P607 million in 2011.
BPC biggest cost drivers are power purchases which hovers around P2.5 billion every year in addition to already existing costs of local power generation, transmission, electricity distribution to consumers and personal emoluments to workers, BPC is one of the highest paying organisations in the country because of its highly technical staff that makes a significant percentage of the corporations employ.
Botswana imports most of its power from South Africas state owned power behemoth Eskom, with other purchases made from the Southern African power pool.
According to 2020 Annual report available on BPC website the corporation spent a whopping P2.2 billion on power purchases, over 100 percent increase from the P861 million spent in the previous year 2019.
The P600 million Government grant to Botswana Power Corporation for 2022/23 Financial year reflects a continued move by government to slash BPC subsidy in response to ailing revenue on the part of national fiscals, albeit a P100 million increase from P500 million in 2021.
In 2020 Government pumped P600 million into BPC, a decrease from P800 million in 2019. TheGovernment has been slashing the subsidy in a bid to drive the corporation into self-reliance, from a peak of P2.326 billion in 2015 declining gradually to P2. 321 billion in 2016, P1.667 billion in 2017, and P1.457 billion in 2018.
ELECTRICITY TARRIFS
In response to shrinking of government grant, BPC has been increasing its electricity tariffs to try recover costs; 10 percent increase in 2018 for domestic consumers, 22 percent hike in the middle of COVID-19 pandemic in 2020, 3 percent against an initial request of 5 percent last year.
For the 2022 /23 financial year beginning 1st of April the corporation has bagged for a 5 percent increase which if not granted “the organisation would plunge into financial crisis ”
Botswana Energy Regulatory Authority (BERA) the organisation approving these increases is currently reviewing the request and is expected to announce the outcome anytime from now.
LOCAL POWER GENERATION
According to latest electricity figures by Statistics Botswana, during the third quarter of 2021, the physical volume ofelectricity imported by Botswana was 424,703 MWH.
Compared to the 2021 second quarter, imported electricity during the third quarter of 2021 shows a decrease of 8.3 percent (38,468 MWH), from 463,171 MWH during the second quarter of 2021 to 424,703 MWH.
Even though there are fluctuations in the physical volume of imported electricity,Statistics Botswana saidgenerally importation of electricity shows a downward trend.
This according to authorities indicates the countrys “continued effort to generate adequate electricity to meet demand, hence the decreased reliance on electricity imports.”Botswana imported 42.3 percent of total electricity distributed during the third quarter of 2021.
Eskom was the main source of imported electricity at 53.7 percent of total electricity imports. ZESCO accounted for 26.7 percent, while the remaining 13.1, 4.8 and 1.7 percent were sourced from the Southern African Power Pool (SAPP), Cross-border electricity markets and Nampower.
Cross-border electricity markets is an arrangement whereby towns and villages along the border are supplied with electricity directly from neighbouring countries such as Namibia and Zambia.
In an effort towards energy security Botswanas biggest power plant that hasnt been fully operational since commissioning, the 600 MW Morupule B Power Station is still under remedial works.
Minister of Mineral Resources Green Technology and Energy Security Honorable Lefoko Maxwell told parliament that Morupule B continues to generate less power than its design capacity due to a perpetuation of defects.
He noted that remedial works on the plant are on-going and currently, the power plant is generating 380MWfrom three of its four units, [unit 1 (150MW), units 2 (80MW) and 3 (150MW)].
Lawmakers were briefed that boiler heat exchangers arethe major components that require replacement on all the four units with a new design. “These pieces of equipment have exhibited perennial failures since the 1st commissioning of the plant,” Moagi revealed.
The remedial works on Unit 4 which commenced in June 2019 were delayed due to the Covid-19 Global Pandemic which prevented service providers based in China from mobilizing and providing the required services at site. However, the Unit is now undergoing re-commissioning of the boiler and turbine where major remedial works were undertaken, Parliament was told.
Remedial works on all the four units are expected to be completed by end of 2024 after which the plant will be generating at its design capacity of 600MW on firm basis.
In the meantime, the diesel based power generators at Matshelagabedi and Orapa power peaking plants continue to be deployed in cases of power supply shortfalls experienced intermittently.
Of the Ministrys 2022/23 financial year budget of P893, 776,080 (Eight Hundred and Ninety Three Million, Seven Hundred and Seventy Six Thousand and Eighty Pula), approved the largest share of P600, 000,000 representing 67% of the budget for Botswana Power Corporation Support Programme. The provision is to cushion BPC against non-cost reflective tariffs.
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Business
Grit divests from Letlole La Rona
Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.
The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.
Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.
This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.
In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.
Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.
The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.
“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said
In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.
The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.
Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.
Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.
Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.
Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.
“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.
LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.
The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.
An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.
Business
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices. Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.