- BPC debt at 3.8 % of GDP
- Governance questioned at BPC
- Parliament questions illegal tendering at BPC
- BPC given P4.7 billion in subsidies in the past three years
Troubled Botswana Power Corporation (BPC) has around P7 billion in outstanding borrowing, which if not urgently addressed could affect Botswana’s fiscal risk, according to Credit Rating Agency, Moody’s.
In a report named “Government of Botswana — A2 stable, annual credit analysis”, Moody’s caution that without reforms to governance, fiscal risks from state-owned enterprises, especially BPC will rise.
While the government has limited contingent liabilities toward state-owned enterprises (SOEs), the latter account for an estimated 5 percent – 6 percent share of government expenditure in the form of subsidies. Guarantees were broadly constant, estimated at about 6 percent of GDP in fiscal year 2017. The Botswana Power Corporation (BPC) is the country’s largest SOE in terms of the size of its balance sheet. Moody’s wrote in its report released last week that in its 2017 annual statement, BPC reported US$700 million of outstanding long-term borrowing, which corresponds to around 3.8 percent of GDP.
The loan is said to have been contracted with Industrial and Commercial Bank of China in US dollars at a variable interest rate. The government in recent years has sought to reduce the amount of subsidies it provides to SOEs.
“In the latest budget, it earmarked $100 million of subsidies for BPC in 2018-19, down from around $160 million the previous year and $213 million the year before,” revealed Moody’s. It means in the past three years, BPC gobbled up almost P5 billion in subsidies.
Government has an ambitious plan to return BPC to profit by 2019-20 by increasing tariffs by 10 percent annually. Earlier in 2018, the utility said that it would increase its tariffs by 10 percent for the 2018-19 fiscal year following a 12 percent increase last year. The operating margin before government subsidies increased by around 10 percentage points between 2015 and 2017. BPC however is a controversial parastatal.
Recently, BPC appeared before the Public Accounts Committee where Chief Executive Officer (CEO) Dr. Stefan Schwarzfischer was answering for allegations that tendering within BPC was dominated by foreign nationals. The North West transition power line which is at a cost of P2.5 billion is in the hands of Indians. BPC further lost P5.6 billion paying a consultancy they engaged in the selling of Morupule.
Further, BPC CEO was warned of concentrating much of the work on expatriates overlooking locals as it could prove as a recipe for disaster in triggering Xenophobic sentiments. BPC was further is accused of mercilessly axing over 400 staff members in the past few months. In his response Dr. Schwarzfischer said the removed staff in instances were not effective but rather noted that positions have since been re-advertised both externally and internally. BPC also informed the legislators that a further 20 people will soon be retrenched.