Gov’t sets aside P600M for 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 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.
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 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.
The P300 million Selebi Phikwe Citrus project in Botswana has reached its first harvest milestone, with the first export dispatched to the UAE and Saudi Arabia last week. This project, aimed at diversifying the country’s export earnings from diamond mining, is a significant step towards achieving this goal.
The project, which has successfully planted 840,000 seedlings in Phase 1 and completed a 17,000 square meter pack house, is set to employ 1,000 people and create business opportunities across various value chains. These opportunities include manufacturing of juice and packaging materials, transport and logistics, and honey production.
The first export from the Selebi Phikwe Citrus project marks a major achievement for Botswana, as it opens up lucrative export markets in the Middle East and beyond. The project has met market access requirements for countries such as the EU, Canada, China, The Philippines, UAE, and Saudi Arabia, paving the way for future exports to these regions.
The economic impact of the project on the SPEDU region, where it is located, is already being felt. The construction of a 12 km water pipeline and the installation of a power line have driven infrastructure development in the area, benefiting businesses in the vicinity at minimal cost.
The project’s success is the result of collaborative efforts between various government departments and agencies, including the Botswana Investment & Trade Centre (BITC) and SPEDU. Through the BITC’s One Stop Services Centre (BOSSC), the project was able to access red-carpet investor facilitation services and unlock necessary business enablers.
The Ministry of Trade & Industry and the Ministry of Agriculture have played crucial roles in facilitating market access for the project. The Department of Plant Health has opened up protocol and permit markets for citrus exports, ensuring that the project can access international markets with ease.
Botswana has met the European Union (EU), Canada, China, The Philippines, United Arab Emirates and Saudi Arabia market access requirements. “I am happy to report that our desire to export has been actualised as the first consignment was dispatched last week to the United Arab Emirates and Saudi Arabia” Minister Kgafela revealed.
The Selebi Phikwe Citrus project is not only beneficial for the project sponsors but also for other citrus growers in Botswana. With 172 citrus growers in the country, over 90% of whom are small-scale farmers, the project presents opportunities for growth and expansion in the citrus industry.
Massive value chain opportunities are presented by the project, including fertilizer and agrochemical supplies, agro-processing opportunities, and more. The project’s spending on imports presents an opportunity for local production, further boosting the country’s economy.
On 21s March 2024, His Excellency Dr Mokgweetsi EK Masisi will officiate at a ceremony to mark the first harvest of the Selebi Phikwe Citrus project and officially open the pack house. Harvest from this multimillion pula project is expected to reach the United States, Europe and other lucrative export markets.
The project was first launched on the 11th December 2020 with a ground breaking by President Masisi. This multimillion pula private sector funded agricultural enterprise, the likes of which this country has never seen before, is widely touted as a major catalyst to revitalising and catapulting the SPEDU region back to economic glory following the closure of BCL mine in 2016.
The project promoters leased 1500 hectors of land from Mmadinare Multi- Purpose Cooperative Society which will benefit directly through proceeds.
Highlighting the ripple economic impact of the project to the SPEDU region, Assistant Minister of Trade & Industry Honourable Beauty Manake said the Selebi Phikwe Citrus project has been able to drive the development of infrastructure in the area, with the construction of a 12 km water pipeline and ensured the installation of a power line.
She said during a briefing in Gaborone on Thursday that businesses within the vicinity have tapped into these infrastructural developments at minimal cost.
The Selebi Phikwe Citrus project came into being through collective efforts of various government departments and agencies. The Botswana Investment & Trade Centre (BITC) in collaboration with SPEDU courted the investors from South Africa to venture into the project.
Through the Botswana One Stop Services Centre (BOSSC) under the BITC, the project was able to establish and take off by enjoying red-carpet investor facilitation services to unlock required business enablers.
BITC has also through its export promotion arm, facilitated the project by identifying potential export markets in the European Union (EU) and lend crucial support to the Citrus Project to access the identified markets.
About 70 percent of the produce from the Selebi Phikwe Citrus will be exported, while 30% will remain in the country. Assistant Minister Manake revealed that the Ministry of Trade of Industry has been working closely with the project sponsors to explore export markets and facilitate entry into those markets.
The Selebi Phikwe Citrus project’s first harvest and export mark a significant milestone in Botswana’s efforts to diversify its export earnings. With the potential for growth and expansion in the citrus industry, this project is set to have a lasting impact on the country’s economy and agricultural sector.
Business
Botswana’s first coal-gas fired power station to start commercial production
Botswana is set to achieve a significant milestone with the upcoming commencement of commercial production at the country’s first coal-gas fired power station. Tlou Energy Limited, an Independent Power Producer listed on multiple stock exchanges, has been at the forefront of developing this groundbreaking project, which is expected to start generating electricity for both the local and export markets later this year.
Situated in the Central District, just 100 km west of Serowe, the coal-gas fired power station represents a major step towards reducing Botswana’s reliance on expensive power imports. Tlou Energy has confirmed the presence of abundant coal-gas resources in the area, making it suitable for commercial power production. The company has obtained all the necessary approvals, including environmental assessments, production licenses, power generation licenses, and a Power Purchase Agreement, to move forward with the project.
One of the key achievements for Tlou Energy has been the completion of a 100km 66kV transmission line, connecting the power station directly to Botswana’s power grid and the Southern African Power Pool. This connection opens up a vast market for the project, allowing for the sale of electricity both domestically and regionally. The company’s Managing Director, Tony Gilby, expressed optimism about the project’s progress, stating that they are on track to start generating revenue soon.
In terms of the project’s timeline, Tlou Energy is currently focused on completing the construction of the power station, installing generators, and finalizing the gas gathering line. The initial target is to generate around 2MW of power, with plans for rapid expansion to 10MW, generating approximately $10 million in revenue per annum. The company is also in discussions with investors to secure the necessary funds for project completion.
The key remaining items to be completed prior to first power sales, according Tlou Energy, include completing the construction of the power station, installation of generators, completing the short gas gathering line (from the gas wells to the generators) and energizing the power line. “Minor finishing works on the transmission line and the addition of switchgear at Serowe will also be completed prior to first power. The initial target is ~2MW of power, followed by rapid expansion to 10MW, generating approximately $10m in revenue per annum.” The company has confirmed that it’s in discussions with some investors to secure funds required for project completion.
Tlou’s power is expected to help reduce Botswana’s reliance on expensive power imports. In addition to supplying power in Botswana, the company may sell electricity to the regional market via the Southern African Power Pool, a development which could open up a bigger market for the project.
The successful operation of Botswana’s first coal-gas fired power station will not only contribute to the country’s energy security but also have a positive impact on the regional market. By potentially selling electricity through the Southern African Power Pool, Tlou Energy could tap into a larger market, further solidifying its position as a key player in the energy sector.
Overall, the progress made by Tlou Energy in developing Botswana’s first coal-gas fired power station is a testament to the company’s dedication and vision. With the project nearing completion and commercial production on the horizon, Botswana is poised to enter a new era of energy independence and sustainability.
Food prices could potentially go up in 2024/2025 due to the current El Niño conditions in Southern Africa, as reported by the Food and Agriculture Organization (FAO) of the United Nations. The update released by FAO indicates that countries in the region, including Botswana, may experience a decrease in food production, leading to higher food inflation.
The update highlights that Southern Africa has been experiencing below-average rainfall, with key cropping zones in countries such as Malawi, Mozambique, Zambia, Zimbabwe, and Namibia receiving only up to 80 percent of average rainfall quantities between November 2023 and February 2024. This has resulted in significant rainfall deficits, particularly in February, which is a critical period for crop development. The warmer than average temperatures and erratic distribution of rains have further exacerbated the situation, leading to stressed vegetation conditions and potentially lower crop yields in 2024.
In South Africa, the leading cereal producer in the region, a dry spell between late January and February 2024 has negatively impacted crop production prospects. Maize production is expected to fall this year, further contributing to the potential decrease in cereal production in the region.
As a result of the anticipated decline in cereal production in Southern Africa, import needs are projected to increase in the 2024/25 year. This could lead to the importation of cereals from outside of the region, such as the United States of America, Mexico, Brazil, Australia, and Argentina. However, importing food from global markets comes with higher transport costs and import tariffs, which may put upward pressure on food prices in Botswana.
FAO projects that based on the likely scenario of a fall in cereal production in Southern Africa, import needs are set to increase in the 2024/25 year. “Furthermore, if production declines in South Africa and Zambia materialize in 2024, cereal export availabilities in the region would be low and this could necessitate the importation of cereals from outside of Southern Africa.” According to analysts from the organization cereal prices were at higher levels in December 2023 and January 2024 in Southern Africa, reflecting the cumulative impacts of weather shocks on 2023 domestic production, elevated international commodity prices and weak currencies that intensified exchange rate pass-through effects to domestic prices. “Farther ahead, a key risk to the price growth is represented by the impact of El Niño-related rainfall deficits on cereal production in 2024.”
Some local analysts believes that Botswana could import sorghum, maize and wheat from as far as United States of America, Mexico, Brazil, Australia and Argentina as South Africa and Southern African countries which are potential suppliers of cereals, are highly likely to record decline in crop production as a result of the impact of El Niño-related rainfall deficits on cereal production in 2024. The analysts added that food imports from the global markets come with higher transport costs and import tariffs which may have an upward pressure on food prices in Botswana.
Overall, the impact of El Niño-related rainfall deficits on cereal production in 2024 poses a significant risk to food prices in the region. It is important for policymakers and stakeholders to closely monitor the situation and take necessary measures to mitigate the potential increase in food prices in 2024/2025.