BPC secures an additional P1.2bn subsidy

Mbongeni Mguni | Monday February 24, 2025 11:40

In the original Transitional National Development Plan (TNDP) which was due to run from April 2023 to March 31, 2025, the BPC was due for a subsidy of P1 billion. However, the Corporation in August 2023 secured an extra P1.18 billion through Parliament.

The latest estimates show that the BPC will get another boost in the financial year that starts on April 1.

In total, over the TNDP – whose duration is being increased to July 31 – the BPC will have received P3.38 billion, instead of the original budget of P1 billion.

Part of the additional funds have been channelled to helping the BPC repay the major loans it took for the construction of Morupule B and rehabilitation of Morupule A power stations. Funds have also been directed to helping the BPC meet the rising costs of electricity imports and to support its operations, as the gap between its tariffs and the costs of generation, has persisted over the years.

In the financial year ended March 2023, the BPC was selling its electricity for 32 thebe less than the cost of generating and importing it, despite tariff increases of 10%, 22% and three percent in April 2018, April 2020, and April 2021 respectively.

For the 2023–2024 and 2024–2025 financial years, the BPC had asked the Botswana Energy Regulatory Authority (BERA) for tariff increases of five percent for each year.

The non-cost reflective tariffs contributed to a loss of P498.3 million for the year ended March 2023, from a loss of P650.4 million in the year to March 2022.

The corporation has been piling on the subsidies over the years, receiving P3 billion in the five financial years to March 2023.

Alongside its tariff requests for the 2023–2024 and 2024–2025 financial year, the BPC had asked for subsidies totalling P500 million over the two years. Instead, the Finance Ministry’s records indicate that it was allocated P3.38 billion.

Experts, including those at the World Bank have long advised government to better target its subsidies, particularly those in electricity, water and health. Last year, the Electricity Control Board of Namibia, advised the BPC and BERA how it had been able to achieve cost-reflective tariffs, in the process boosting generation and promoting the growth of independent power producers.

Officials from the Board said besides encouraging investment and boosting utilities’ self-reliance, cost-reflective tariffs carry other key advantages.

“If we are not sending the correct tariff signal to consumers, then the product tends to be misused and efficiencies are not considered,” he said.

Meanwhile, the draft estimates show that government will pay an additional P2.2 billion for electricity transmission works in the upcoming financial year.

“The total estimated costs for the programme needs to be increased by P2.2 billion from P812.5 million to P3 billion to cater for Cross Border Electricity Supply Project and the North West Transmission Grid Phase II amongst others,” the estimates indicate.