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Botswana Oil fingers BERA in failing citizen companies

Botswana-Oil-fingers

Botswana Oil Limited (BOL) has laid bare its consistent failures to adhere to its mandate to ensure security of fuel supply and facilitating active citizen involvement in the petroleum sector.

BOL was established to among others, manage and maintain Government owned strategic storages facilities as well as ensuring meaningful participation of citizen owned oil companies in the petroleum industry.

This is contained in the company’s recently released 2020/21 annual report according to which the organisation is unable to “effect its mandate which is to ensure the security and efficiency of fuel supply to Botswana and promote active citizen involvement in the petroleum industry.”

Responding to BOL’s application, BERA took a decision to award the company only a 25 percent license instead of the original 50 percent that it had applied for. BERA explained that the decision was influenced by a new financial, technical and economic assessment in which Botswana Oil met the financial and technical aspect of the assessment.

Said the company’s Board Chairman Dr. Joel Sentsho, commenting on the report: “The challenges for BOL to effectively implement the mandate during the year remained, in the absence of any legislative instrument that would empower BOL to have captive import volumes.”

He said the main restriction continued to be the lack of an import licence that would see BOL consolidate national volumes resulting in captive business for the Company. “In the absence of the import licence the Company continued operating in a willing buyer-willing-seller environment,: he said.

Sentsho notes that: “There was, however, progress towards BOL’s efforts to get an import licence as Cabinet confirmed BOL’s import mandate business model and approved that BOL can apply for 50% of the country’s consumption.”

He said the year covered a period when the company focussed on securing an import licence which would facilitate its implementation of its mandate through the consolidation of national volumes. “This season of the preparation and application for the import licence called for careful analysis, mapping, and extensive engagement of all stakeholders, which the Company achieved fully,” the Board Chairman said.

Touching on the company’s business model, the report says at establishment, the Deloitte Strategy that operationalised Botswana Oil Limited recommended that the Company consolidates supply volumes and does 100% importation of petroleum products into the country, in a quest to ensure national security of supply and guard the economy against supply shocks due to the lack of a limited strategic fuel storage capacity and infrastructure.

“In August of 2020 Cabinet endorsed the recommendation. Due to the absence of enabling legislation for BOL to consolidate imports, the Company continues to operate on a willing-buyer-willing -seller basis. BOL currently procures approximately 10% of the market volumes,” the report says.

The report adds that these volumes are, however, too low to achieve the requisite economies of scale to enhance security of supply and facilitate citizen owned companies which is the primary mandate of BOL. 90% of imports are handled by International Oil Companies (IOCs) and other Oil Marketing Companies (OMCs).

It notes that the Company has applied to BERA for an initial 50% import licence. “In view of the anticipated 100% procurement mandate, BOL will not participate in the retail and commercial space, enabling the IOCs and COOCs to compete whilst BOL competes in the open market for product sourcing,” says the report.

According to the report, “following its unsuccessful application for an import licence, Botswana Oil’s business model remained the same and the Company continued to operate on a willing seller willing buyer model, “ adding that “ Sales performance for the year stood at 9% below budget.”

The company said in November of 2020, it applied for a licence with the Botswana Energy Regulatory Authority (BERA) to import and supply up to 50% of the volume of petroleum products consumed in the Country in line with the Presidential Directive CAB 26 (A) / 2020.

“The import licence will afford BOL the opportunity to effect its mandate which is to ensure the security and efficiency of fuel supply to Botswana and promote active citizen involvement in the petroleum industry,” the report says.

The company says as a wholesale importer, the opportunity exists for it to increase volumes and percentage imports into the country by the supply and distribution of fuel to major consumers.

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