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Friday, 19 April 2024

Botswana loses P10 billion to tax evasion annually

Business

Botswana could be losing P9.5 billion to tax evasion, Botswana Unified Revenue Service (BURS) Commissioner in charge of operations, Mr Phodiso Valashia hinted the sad scenario during a media briefing on Wednesday.

Mr Valashia said the revenue service does not have an exact value yet on how much Botswana is losing to individuals and businesses deliberately dodging their tax obligations, however preliminary results from tax gap survey  conducted in the previous financial year has revealed that about 40-60 percent of eligible taxpayers are invading tax.

“This translates to about 4- 5 percent of GDP, ” he said. From the latest annual GDP figure of around P190 billion (pre-COVID in 2019), 5 percent of GDP translates to P9.5 billion. The BURS Commissioner Operations said detailed figures will be communicated once the analysis of the findings of the tax gap survey is completed, with a scientific report released.

” It is a difficult exercise to determine how much the country is losing to tax invasion, because these are individuals and businesses who are hiding from us and don’t want to be seen, that’s why they are not paying tax,” Mr Valashia said.

2021/22 TAX REVENUE 

Meanwhile the Botswana Unified Revenue Service has collected more than the target it had set for itself during the financial year 2021/22, ended 31st March 2022. BURS Commissioner General Ms Jeanette Makgolo said according to preliminary accounts for the financial year ended 31st March 2022, the revenue service has raked in total tax revenue of P45.3 billion for the year, surpassing a target of P44.4 billion on the back of a stronger income tax and VAT collection.

“During these period where macroeconomic conditions are not favourable to realise optimal revenue collection, this collection is not a windfall, but the results of deliberate efforts and hard work of visionary men and women of BURS, and our key stakeholders,” Makgolo said. For the financial year 2022/23 which commenced 1st of April 2022, the Botswana Unified Revenue Service has been assigned to collect 46.433 billion.

However Minister of Finance and Economic Development Ms Peggy Serame who was the guest speaker, as the parent Minister and cabinet custodian of revenue collection in Botswana said BURS can do more.

“I am happy they surpassed the target, but a lot can still be done, we want the revenue service to collect more because taxes are the anchor of our economy, for government to spend money, money has to come from somewhere, and every eligible individual, business must pay tax,” she said.

Minister Serame said BURS still needs to improve revenue collection, efficiency, upgrade its ICT Infrastructure, to leverage on digital and technological advancements. “I still want BURS to close those loopholes and leakages, so that we collect as much as we can as a country to be able to finance our developmental expenditure, this economy needs us to collect more efficiently, um not saying we should increase taxes, with the existing tax rates we can collect more,” the Minister said.

TAX AMNESTY 

In terms of the tax amnesty that has been running since 1st of July 2021, extended in December to end 30 June 2022, a massive improvement has been realised from the poor uptake of less than 10 percent as at 31st December 2021 to 52 percent as at 31st March 2022, the program still has 2 and half months to run before coming to an end; April, May and June.

The objective of the Tax Amnesty Scheme was to ease the burden on taxpayers with outstanding tax liabilities, by granting them an opportunity to clear the total principal tax owed in exchange for write-off of interest and penalties charged during tax periods prior to 1st July, 2021.

Minister Serame said Tax Amnesty is effective in recovering outstanding taxes because of the reduced penalties and interest charges. Typically, such a scheme is characterised by a blanket waiver of interest and penalties, subject to the taxpayer paying the outstanding principal tax amount during the period of the amnesty.” Tax Amnesty schemes are common globally and even in our region” she said.

The Scheme was extended to 30th June, 2022 to allow for more taxpayers to benefit from the dispensation. In 2021, Cabinet approved the introduction of a Tax Amnesty Scheme for Income Tax under the Income Tax Act and Value Added Tax (VAT) under the Value Added Tax (VAT) Act during the period 1st July, 2021 to 31st December, 2021; and that subject to the taxpayer paying off hundred percent (100%) of their outstanding principal tax amount, hundred percent (100%) of the outstanding interest and penalties be written off.

To date 52 percent of the taxpayers in arrears have applied for the Tax Amnesty, bringing in over P394 million (P146 million income tax, VAT P248 million) to the revenue service, compared to just P64 million collected during the initial 6 months of the scheme. Mr Makgolo explained that this 52 percent was made up by 11 884 taxpayers who came forth out of 22 839 eligible taxpayers in arrears.

“We still have taxpayers who have come forth to make payment plans, from those we are expecting about P52 million,” revealed the Commissioner General. However Minister Serame said more has to be collected. “I am still concerned by the 48% taxpayers in arrears who have not come forth to take advantage of the Scheme; considering that we are left with less than two (2) months” said Minister Seretse

The Minster however noted that BURS is continuously working on initiatives to improve the uptake of the Tax Amnesty and has currently engaged Business Botswana and Botswana Institute of Chartered Accountants (BICA) to encourage their members to apply for the Amnesty. “These initiatives include having a dedicated desk for assisting taxpayers to apply for Tax Amnesty and making telephone calls to taxpayers who have applied,” she said.

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Business

LLR transforms from Company to Group reporting

9th April 2024

Botswana Stock Exchange listed diversified real estate company, Letlole La Rona Limited (“LLR” or “the Company” or “the Group”), posted its first set of group financial statements which comprise the Company and Group consolidated accounts, which show strong financial performance for the six months ended 31 December 2023, with improvements across all key metrics.

The Company commenced the financial year with the appointment of a Deputy Chairperson, Mr Mooketsi Maphane, in order to bolster its governance and enhance leadership continuity through the development of a Board and Executive Management Succession Plan.

At operational level, LLR increased its shareholding in Railpark Mall from 32.79% to 57.79% and proudly took over the management of this prime asset.

The CEO of LLR, Ms Kamogelo Mowaneng commented “During the period under review, our portfolio continued to perform strongly, with improvements across all key metrics as a result of our ongoing focus on portfolio growth and optimisation.

“We are pleased to report a successful first half of the 2024 financial year, where we managed to not only grow the portfolio through strategic acquisitions and value accretive refurbishments but also recycled capital through the disposal of Moedi House as well as the ongoing sale of section titles at Red Square Apartments. The acquisition of an additional 25% stake in JTTM Properties significantly uplifted the value of our investment portfolio to P2.0 billion at a Group level. Our investment portfolio was further differentiated by the quality of our tenant base, as demonstrated by above market occupancy levels of 99.15% and strong collections of above 100% for the period”.

The growth in contractual revenue of 9% from the prior year’s P48.0 million to the current year P52.2 million, increased income from Railpark Mall, coupled with high collection rates, has enabled the company to declare a distribution of 9.11 thebe per linked unit, which is in line with the prior year.

 

In line with its strategic pillars of ‘Streamlined and Expanded Botswana Portfolio’ as well as ‘Quality African Assets’, the Group continuously monitors the performance of its investments to ensure that they meet the targeted returns.

“The Group continues to explore yield accretive opportunities for balance sheet growth and funding options that can be deployed to finance that growth” further commented the CEO of LLR Ms Kamogelo Mowaneng.

Ms Mowaneng further thanked the Group’s stakeholders for their continued support and stated that they look forward to unlocking further value in the Group.

 

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Business

Botswana’s Electricity Generation Dips 26.4%

9th April 2024

The Botswana Power Corporation (BPC) has reported a significant decrease in electricity generation for the fourth quarter of 2023, with output plummeting by 26.4%. This decline is primarily attributed to operational difficulties at the Morupule B power plant, as per the latest Botswana Index of Electricity Generation (IEG) released recently.

Local electricity production saw a drastic reduction, falling from 889,535 MWH in the third quarter of 2023 to 654,312 MWH in the period under review. This substantial decrease is largely due to the operational challenges at the Morupule B power plant. Consequently, the need for imported electricity surged by 35.6% (136,243 MWH) from 382,426 MWH in the third quarter to 518,669 MWH in the fourth quarter. This increase was necessitated by the need to compensate for the shortfall in locally generated electricity.

Zambia Electricity Supply Corporation Limited (ZESCO) was the principal supplier of imported electricity, accounting for 43.1% of total electricity imports during the fourth quarter of 2023. Eskom followed with 21.8%, while the remaining 12.1, 10.3, 8.6, and 4.2% were sourced from Electricidade de Mozambique (EDM), Southern African Power Pool (SAPP), Nampower, and Cross-border electricity markets, respectively. Cross-border electricity markets involve the supply of electricity to towns and villages along the border from neighboring countries such as Namibia and Zambia.

Distributed electricity exhibited a decrease of 7.8% (98,980 MWH), dropping from 1,271,961 MWH in the third quarter of 2023 to 1,172,981 MWH in the review quarter.

Electricity generated locally contributed 55.8% to the electricity distributed during the fourth quarter of 2023, a decrease from the 74.5% contribution in the same quarter of the previous year. This signifies a decrease of 18.7 percentage points. The quarter-on-quarter comparison shows that the contribution of locally generated electricity to the distributed electricity fell by 14.2 percentage points, from 69.9% in the third quarter of 2023 to 55.8% in the fourth quarter. The Morupule A and B power stations accounted for 90.4% of the electricity generated during the fourth quarter of 2023, while Matshelagabedi and Orapa emergency power plants contributed the remaining 5.9 and 3.7% respectively.

The year-on-year analysis reveals some improvement in local electricity generation. The year-on-year perspective shows that the amount of distributed electricity increased by 8.2% (88,781 MWH), from 1,084,200 MWH in the fourth quarter of 2022 to 1,172,981 MWH in the current quarter. The trend of the Index of Electricity Generation from the first quarter of 2013 to the fourth quarter of 2023 indicates an improvement in local electricity generation, despite fluctuations.

The year-on-year analysis also reveals a downward trend in the physical volume of imported electricity. The trend in the physical volume of imported electricity from the first quarter of 2013 to the fourth quarter of 2023 shows a downward trend, indicating the country’s continued effort to generate adequate electricity to meet domestic demand, has led to the decreased reliance on electricity imports.

In response to the need to increase local generation and reduce power imports, the government has initiated a new National Energy Policy. This policy is aimed at guiding the management and development of Botswana’s energy sector and encouraging investment in new and renewable energy. In the policy document, Minister of Mineral Resources, Green Technology and Energy Security Lefoko Moagi stated that the policy aims to transform Botswana from being a net energy importer to a self-sufficient nation with surplus energy for export into the region. Moagi expressed confidence that Botswana has the potential to achieve self-sufficiency in electric power supply, given the country’s readily available energy resources such as coal and renewable sources.

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Business

MMG acquires Khoemacau in a transaction valued at P23Bn

9th April 2024

MMG Limited, the Hong Kong-based mining company specializing in base metals, has successfully concluded the acquisition of Khoemacau Copper Mine, a state-of-the-art, world-class copper asset nestled in the northwest of Botswana.

On Monday, MMG announced that the acquisition of Khoemacau Mine in Botswana was finalized on 22nd March 2024. “This acquisition enriches the company’s portfolio with a top-tier, transformative growth project and signifies a monumental milestone in the Company’s journey,” MMG communicated in an official statement published on the Hong Kong Stock Exchange.

Upon completion of the acquisition, MMG remitted to the Sellers an Aggregate Consideration of approximately US$1,734,657,000 (over P23 billion), a sum subject to potential adjustments post-Completion.

In addition to the Aggregate Consideration, MMG, in accordance with the Agreement, advanced an aggregate amount of approximately US$348,580,000 (over P4.5 billion) as the Aggregate Debt Settlement Amount, to settle certain debt balances of the Target Group (Cuprous Capital/Khoemacau).

On November 21, 2023, Khoemacau announced that the shareholders of its parent company [Cuprous Capital] had agreed to sell 100% of their interests to MMG Limited.

MMG is a global resources company that mines, explores, and develops copper and other base metals projects on four continents. The company is headquartered in Melbourne, Australia, and has a significant shareholder, China Minmetals Corporation, which is China’s largest metals and minerals group owned by the Government of the People’s Republic of China.

On December 22, 2023, Khoemacau Copper Mining (Pty) Ltd received the approval from the Minister of Minerals and Energy of Botswana regarding the transfer of a controlling interest in the Project Licenses and Prospecting Licenses associated with the Khoemacau Copper Mine, a result of the Acquisition.

 

The Botswana Competition & Consumer Authority (CCA) on January 29, 2024, notified the market that it had given its approval for the takeover of Khoemacau Copper Mining by MMG Limited.

On January 29, 2024, the CCA issued a merger decision to the market, stating that after conducting all necessary assessments, it was ready to proceed.

The Competition Authority affirmed that the structure of the relevant market would not significantly change upon implementation of the proposed merger as the proposed transaction is not likely to result in a substantial lessening of competition, nor endanger the continuity of service in the market of mining of copper and silver ores and the production, and sale or supply of copper concentrate in Botswana.

Furthermore, the CCA stated that the proposed merger would not have any negative impact on public interest matters in Botswana as per the provisions of section 52(2) of the Competition Act 2018.

Earlier this month, Minister of Minerals & Energy, Lefoko Maxwell Moagi, informed parliament that his Ministry was endorsing the Khoemacau acquisition by MMG Limited. He noted that not only was the company acquiring the existing operation but also committing to an expansion program that would cost over $700 million to double production, create more jobs for Batswana, and increase taxes and royalties paid to the Government.

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