BONGANI MALUNGA
The Botswana Power Corporation (BPC) has appealed to the government for urgent tariff adjustments, warning that persistent net losses, tightening liquidity and mounting cash flow constraints have left the utility with a creditor’s balance of P3.5 billion.
Appearing before the Parliamentary Standing Committee on Statutory Bodies and State Enterprises on Tuesday, BPC Chief Executive Officer David Kgoboko said the corporation’s financial position remains under severe pressure despite notable progress in local electricity generation capacity over the past five years.
INCREASED DOMESTIC OUTPUT
Kgoboko noted that domestic generation has increased significantly from 30 percent to 60 percent, a development that was expected to ease import dependence and improve financial performance. However, he said the benefits have been offset by tariff structures that have failed to keep pace with rising operational and procurement costs, particularly electricity imports.
Kgoboko highlighted that the cost of imported power has escalated sharply, rising from 85 thebe per kilowatt five years ago to P2.68 per kilowatt at present, placing additional strain on the utility’s cost recovery model.
According to the CEO, BPC has consistently engaged the Botswana Energy Regulatory Authority (BERA) through annual tariff adjustment submissions aimed at introducing gradual increases to avoid sharp price shocks to consumers and inflationary pressure on the economy.
TARIFF UNCHANGED
However, progress has been limited, Kgoboko stated: “Despite those efforts, only a three (3) percent tariff increase was approved in 2021 after which the selling tariff remained unchanged for three consecutive years. The lack of timely tariff adjustment has resulted in a build up of unrecovered cost.”
He argued that the challenges facing the corporation are no longer purely operational in nature, but structural, requiring broader policy reform and regulatory intervention. In particular, BPC is advocating for a more market-responsive tariff framework that reflects the true cost of supply.
A further complication, according to the utility, lies in the National Electrification Fund (NEF) arrangements, under which BPC collects and remits levies on behalf of government to support rural electrification under the National Electrification Scheme Connection (NESC).
TIMING MISMATCH
“The levy is recognized on sales irrespective of actual cash collections, creating a timing mismatch between revenue recognition and cash inflows. The requirement for the BPC to fund customer connections upfront and recover costs at a later stage further complicates internal cash flow constraints,” Kgoboko added.
He further revealed that electricity imports currently account for 50 percent of BPC’s liabilities. Kgoboko stressed the depth of the financial imbalance, saying: “Electricity tariffs covered only 55-60 percent of the cost of supply of electricity, resulting in a structural deficit where each unit of electricity sold generated a loss. Every unit that we sell generates a loss.”
While the corporation has previously benefited from external financial support amounting to P1.72 billion to reduce accumulated liabilities, Kgoboko cautioned that the relief was temporary. He said recurring expenditure pressures and unresolved structural inefficiencies have led to a renewed accumulation of debt, pushing total creditor obligations back up to P3.5 billion.