The year Air Botswana stayed on terra firma

Staff Writer
2008 was an eventful year that was characterised by events and failures that altered the economy of this country. New words such as load shedding, credit crunch and sightholders dominated business pages. Mmegi Staff Writer WANETSHA MOSINYI looks at some of these

* BPC plunges the country into darkness
The Botswana Power Corporation (BPC) this year plunged the country into darkness with their now infamous 'load shedding'.

The power shortages had a ripple effect on the economy as production at mines, factories and business came to a halt. Botswana imports 75 percent of its power needs from the Southern Africa Power Pool (SAPP), most of it from Eskom.

If it were according to South Africa's largest trade union, COSATU, and other pressure groups, Eskom would have stopped supplying Botswana long ago. We agree with you PHK, "we were caught napping" on this one.

*Russians 'steal' Activox?
"The Ministry of Minerals, Energy and Water Resources regrets the suspension of the Botswana Metals Refinery (BMR) plant. However, the decision to suspend the construction of the Activox plant was not an easy one, and after intensive scrutiny, both BMR's shareholders, Norilsk Nickel and Government, reached a painful decision to suspend the project," a statement from the ministry said. 

But was it really a collective decision? Government again fails to see what the real reason behind the project being 'postponed'.Russian giants Norilsk Nickel claimed the suspension came after it was realised that the project was not commercially viable mainly because of escalating prices.  If it was just a temporary suspension, why is the company closing BMR at the end of December?

The Russian company from the onset fed off interest from Xstrata to buy out LionOre because it wanted the Activox technology, not Tati Nickel Mine. They got the technology, and impeccable sources have told Mmegi that the Activox refinery was closed down so that it could be moved to Russia. South Africa is also said to be lobbying for the project to be relocated to its soil.

The project did not only promise to change Botswana's nickel industry but also the country's economy, especially in Francistown. Minister Ponatshego Kedikilwe said at Paste 08 conference in Kasane, in front of hundreds of mining investors, that he would not allow imposters who come to Botswana as investors but end up exploiting its people and natural resources. Well, PHK, be true to your words and do something about this one.  

* Lobtrans saga cost banks
The collapse of haulage company Lobtans cost the banking sector close to P200 million. Barclays, Standard Chartered and African Bank lost close to P160 million in impairment charges mainly to cover for losses in the Lobtrans saga, which dragged down the banks' profits.

If one adds the loss in market capitalisation of the banks' counters as share prices plummeted due to risk aversion as investors pulled out due to poor profit margins at the two banks, the damage becomes worse. This can only be blamed on lapses of oversight by the banks.

Barclays and NDB later took another knock after the collapse of African Express.  The perpetrators of the purported crimes in both companies skipped the country, leaving workers stranded.

According to a local newspaper, African Express MD Nab Graorac sent a number of text messages to friends and staff members. In one message he states: "You may call me a coward, but let me be a coward for once in my life. I have to go."

In another, he told staff that "Gud nyte my friends, sisters and brothers, I wil mis u all, i am crying and I miss u all of you and rem I love u all, I care u all and Mr. Chaminda. I can't sms anymore I love u people."

How convenient! Graorac, who had a reputation for bonhomie, is said to have dined and wined some of the banks' executives and board members. Little did they know he was spending money he did not have. Hope they have learnt a lesson.

*Of De Beers, Debswana, DTC and the credit crunch
The De Beers Group began this year on a celebratory mood when the Diamond Trading Company (DTC) Botswana was officially opened amid pomp and fanfare, a development hailed as a major milestone for the downstream diamond industry in Botswana.

Subsequently, DTC held its first sale of rough diamonds. Such sales are exclusive to DTC Botswana clients, the 16 licensed sightholders made up of some of the world's leading diamond cutters and polishers registered in Botswana.

DTC Botswana committed to supplying $375 million worth of aggregated rough diamonds to the 16 sightholders this year. The establishment of DTC in Botswana created close to 3 000 jobs. However, as the year drew to a close, excitement gave way to gloom as the global economic turmoil took its toll on diamond sales.

At the last DTC Botswana Sight, many sightholders did not take the goods, leaving the company with unwanted diamonds. The drop in rough sales has also hit Debswana hard. Production at its Jwaneng, Orapa and Letlhakane mines has been scaled down and staff given an early Christmas vacation, some never to return.

* De Beers at it again, this time with aggregation
From 2009, the aggregation of rough diamonds from producer countries around the world was to be relocated to Gaborone from London. This has since been postponed by De Beers owing to "on-going negotiations with government" according to De Beers.

However, Government has played ignorance to the postponement. Who is fooling who? We hope De Beers is not up to its confidence

tricks again after changing its long-held position that diamond sorting, cutting and polishing was impossible in Botswana.

High noon for De Beers?
The dispute between African Diamonds and De Beers over the proposed AK6 Mine ended up in an expensive legal feud that resulted in huge implications. The situation got ugly with accusations and counter accusations between the two until Government brokered a workable deal.

According to a diamond industry analyst, De Beers' management "should not have allowed this dispute to become public". De Beers was seen as bullying a junior but African Diamonds fought back. No junior has ever declared war on De Beers like this before.

The underlying driver was probably the tight rough diamond supply situation. African Diamonds came out tops, indicating perhaps the diminishing supremacy of De Beers in the industry.

* BoB mum on the impact of credit crunch on forex
Bank of Botswana's silence on the impact of the credit crisis on Botswana's foreign reserves and the economy has been deafening. This is a global phenomenon, for goodness sake. The central bank has not made a public statement and does not even answer questionnaires from newspapers.

Global financial crisis to hit Botswana economy
The global economic crisis has started to affect Botswana's output and will hit the mining sector hardest, which accounts for the bulk of export earnings, Finance Minister Baledzi Gaolathe said recently.

"The lack of available credit and long-term investment funds has slowed down growth in consumer spending, reduced employment and incomes, as well as causing capital losses in personal savings and other assets," Gaolathe told Parliament.

Mineral exports, in particular diamond sales, had started to fall significantly in November and there had been a sharp decline in commodity prices for other minerals like copper, nickel and gold in the past three months.

The expected substantial reduction in mineral revenue due to the global financial crisis is a cause for serious concern, given that such revenues have accounted for about 35 percent to 50 percent of the total government revenues over the past five years.
This was the first acknowledgement by the government, thanks to a Parliamentary question. Initially, the government was in denial about the effects of the economic turmoil on Botswana.

The rise and rise of fuel and food prices
This year began with high food and fuel prices, which aggravated the rise in inflation currently standing at 15 percent, way above the Bank of Botswana's 3 to 6 percent target.

Fuel prices nearly reached P10 a litter for the first time in Botswana and were in tandem with the rise in international oil prices, which reached US$147 per barrel in July. Thankfully, the fuel prices and food prices began to drop towards this year-end. But unfortunately, retail outlets appear reluctant to pass the benefit to the consumer, and there is no law to compel them to do so. Government and transport operators are still at loggerheads over the reduction of commuter fares. 

* Why does Air Botswana keep on failing to take off?
After the privatisation of Air Botswana failed, Government said a management contract was a better alternative in the meantime. Sticking points on restructuring are said to have led to the collapse of negotiations between the government and Comair for such a management contract with the national flag carrier.

It is understood that Comair had problems with the ageing Air Botswana fleet and had provided alternatives which the government turned down.
When negotiations began in June, it was expected that the management contract would be concluded by July.

However, during the negotiations, several major issues could not be resolved. Some of the contentious issues revolved around the services that Comair planned to offer and the extent of responsibility it would bear as the management contractor.
Government is now negotiating with International Development Ireland (IDI). The second-ranked bidder, IDI, in association with Aer Araan, an Irish regional airline, was retained as reserve bidder to be considered in the event that negotiations with Comair were unsuccessful.

Air Botswana remains one entity where government should just accept that they don't have any clue whether they are flying, landing or just plain grounded.  Between Government and its advisors in such matters, PEEPA, someone is sleeping on the job. Maybe 'Discipline' could help. 

*When will FNB, Stanchart and others localise?
Stanbic Bank this year surpassed other commercial banks that have been operational in Botswana for donkeys years by the appointment of Leina Gabaraane as the first Motswana Managing Director of the bank.

In the next year, Bank of Botswana governor Linah Mohohlo should not just verbally castigate the banks but make sure they do not continue with their 'make-believe' localisation programmes. Why do commercial banks, which have a longer presence in Botswana than other financial institutions, fail to localise whereas young Batswana executives head asset management companies who handle billions worth of assets under their management?

This question is directed to you Standard Chartered, FNB, and new kids on the block Bank Gaborone and Capital Bank. The arrival of Capital Bank raised hopes of improved services at banks, but long queues and ATM breakdowns remain a daily nightmare for consumers.

The credit crunch has shown that no company (Lehman Brothers, AIG etcetera) is indispensable, so it is up to you banks to improve your service delivery, especially in these difficult times.



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