P656 million spent from npf may trigger fuel crisis

  • Diversion of npf funds a national security risk
  • Oil price escalates
  • Fuel storage facilities inadequate

A Security Risk Assessment Report authored by Petrocoms Botswana on behalf of the Directorate of Intelligence and Security Services (DISS) and the Office of the President (OP) reveals the continued risk Botswana faces over fuel security.
Unlike the fuel shortages of 2010 -2011 that caused government to subsidise petrol pump prices due to the unexpected rise in the cost of global oil commodity, the current risk was foreseen and contingency plans were made only to be derailed by corruption, mismanagement and maladministration at the NPF, as first revealed by the media.
Efforts by government to lessen the burden of fuel increases and the adverse economic impact that they have on the cost of living were derailed by the DIS under the directorship of Isaac Kgosi and the DIS oversight bodies. Tasked with preventing threats to national security, the DIS under Kgosi was complicit in undermining the security it is mandated to provide to the nation by orchestrating the unlawful diversion of funds from the NPF to Israel company Dignia Systems for the purchase of military equipment.
New documents in the possession of the Botswana Gazette reveal that the OP under former President Khama, had allocated land for the construction of 5 fuel storage depots at a cost of P656 000 000 (six hundred and fifty-six million Pula). The 5 storage facilities, located at Gaborone, Lobatse, Lone Tree, Maun and Mahalapye were aimed at providing bulk fuel facilities to ward off against fluctuating global commodity prices in fuel and prevent a reoccurrence of the 2010 depletion of the National Petroleum Fund.
According to Petrocom’s report of June 2017, the 5 storage facilities would have taken a total of 39 months to complete, from site inspection stage to handing over and would have increased Botswana’s total fuel storage capacity by 13 000 cubic metres. Developments regarding fuel storage were necessary, according to the report, to ward off to the impact of global fuel prices, such as those that arose in 2010 which caused the depletion of the National Petroleum Fund, according to economic analysis by Keith Jefferies on behalf of BIFM in 2012.
As previously reported in the media Kgosi acknowledged the national security concerns created by inadequate fuel storage facilities in a confidential saving-gram to the then Director of Energy Department Kenneth Kerekang in August 2017 requesting a total of P250 million: “The objective of constructing and maintaining the facilities, is to ensure that there is continuous supply of petroleum products for the essential Services of the Government.” The P250 million requested by Kgosi falls far short of the figures quoted by the Petrocoms Report. Information reaching The Botswana Gazette indicates that the P250 million was earmarked for the Lone Tree Storage Fuel Facility at the DIS training camp.
Documents reveal that the Lone Tree storage facilities were only of benefit to the DIS despite being a less than suitable location due to soil conditions, lack of water and electricity. According to the Petrocoms Report the Lone Tree site had unfavourable soil conditions, necessitating the construction of “Above Ground vertical tanks”.   Only the Lobatse facility had a similar configuration due to its proximity to existing road infrastructures. Its benefit to the DIS would be that it would provide easy access to fuel to run its training camp.
Subsidised by government funding from the NPF, between November 2011 and May 2012, local fuel prices had remained constant despite Oil reaching US$108 per barrel. The government induced fuel price freeze caused the fund to become depleted over a 2 year period as the fund was used to buffer the impact of global fuel price changes. Reporting in the 2012 Bifm Economic Review Q2, Jefferies had raised concern that despite the subsequent drop in international oil prices that led to local fuel prices being above international prices, a lengthy “over-recovery” period was required to enable the NPF to fully discharge its arrears to fuel importers and regain its sustainability.
Documents reveal that in order to increase the pace of the recovery for the NPF, bulk fuel storage facilities were recommended to enable government to buy fuel at periods of low international pricing and prevent the increase in arrears in the payments due to fuel suppliers that characterised the 2010 -2011 fuel shortage. The fuel depots further sought to address international criticism of government expenditure at the time, which viewed the use of the NPF funds as an unauthorised government borrowing from the fuel industry, which in turn had to finance shortfalls through commercial bank overdrafts.
Following US President Donald Trump’s withdrawal from The Joint Comprehensive Plan of Action (JCPOA) or the Iran Nuclear Deal last month, the price of Brent crude rose by 20 percent. The global benchmark on Thursday last week broke through the $80 per barrel for the first time since November 2014, and markets are expecting a steady increase in the cost of oil due to supply concerns, over the short-term to medium term. The sudden escalation of cost of oil, reminiscent of 2010 will, according to experts, place considerable strain on the NPF that buttresses the consumers from worst effects of the international market by stabilising local fuel prices.
Embroiled in scandal and maladministration the NPF has failed, since identifying the national security threat posed by inadequate fuel storage facilities, to develop any of the designated sites.
The Public Accounts Committee, investigating the unlawful use of the NPF and documents in possession of The Botswana Gazette reveal that the allocation of P250 million (two hundred and fifty million Pula) to Khulaco (Pty) Ltd for the development of petroleum storage facilities was insufficient to meet the costs construction, as quoted for by Petrocoms and would have failed to address the concerns raised by the DIS.
The NPF was established in 1986 with the purpose of meeting the engineering, construction and operational cost of the strategic storage facilities of government fuel. Critically the NPF was to assist in the purchase petroleum products for the government strategic oil stocks and to stabilise prices charged by the oil industry.