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.
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 corporation’s employ.
Botswana imports most of its power from South Africa’s 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. The Government 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.
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 of electricity 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 said generally importation of electricity shows a downward trend.
This according to authorities indicates the country’s “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 Botswana’s biggest power plant that hasn’t 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 380MW from three of its four units, [unit 1 (150MW), units 2 (80MW) and 3 (150MW)].
Lawmakers were briefed that boiler heat exchangers are the 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 Ministry’s 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.
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.
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.
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.