The Tortuous Route of BMC Privatization

A spat that resulted in government cancelling its contracts with consultants is a sticking point that may have to be overcome before the process is concluded. Staff Writer KEABETSWE NEWEL reports

According to the Minister of Agriculture Development and Food Security, Dr. Edwin Dikoloti, privatization of the BMC is proceeding as planned. However, The Botswana Gazette has established a fallout between the government and the privatisation consultants – who were jointly contracted for P12.5 million – somewhat disrupted progress.

As a result, only half of that amount was paid. Consequently, one of the consultants, Minchin & Kelly, which alone was contracted for P8.3 million, has slapped the Public Enterprises Evaluation and Privatisation Agency (PEEPA) with a letter of demand for the balance of an unpaid invoice.

In Parliament last week, Minister Dikoloti was probed by the MP for Nata/Gweta Polson Majaga on progress in BMC privatisation and what the ministry is doing to increase efficiency at the Lobatse-headquartered meat factory. Regarding the privatisation part, Dr Dikoloti explained that privatization of the BMC began in 2019 and was led by the Public Enterprise Evaluation Privatisation Agency (PEEPA).

“The privatisation is a phased process that involves the establishment of a livestock and meat industry regulator, as well as the commercialising and/or corporatization of the BMC,” he said and did not elaborate.

The Botswana Gazette can confirm that in May 2019 PEEPA engaged Minchin & Kelly and Deloitte as BMC privatisation consultants tasked with carrying out a business, financial and human resource assessment of the BMC, valuing it as well as developing a privatisation strategy. The process at that time was expected to be completed by September of the same year.
The Botswana Gazette has now asked PEEPA if that process was completed. “The process has not been completed as yet,” responded Mosikare Mogegeh, Corporate Communications Manager at PEEPA.

Mogegeh added that PEEPA has only completed the Assessment of the BMC, which was done by the Minchin & Kelly Consortium and which looked at the all business facets. He noted that the next deliverable would be a draft Final Report with proposed options for privatisation and recommending the most preferred one. “As for BMC Maun Separation, the BMC Maun Business Case Report (Deloitte Consulting) has been completed and is to be presented to government for approval of the preferred option,” Mogegeh revealed but declined sharing contents of the report. “The findings in the reports will only be shared after government approval,” he said.

An investigation by this publication has found that the government and the privatisation consultants have had a fallout so serious that the government took a decision to terminate the contracts of the consultants, Minchin & Kelly as well as Delloite. Mogegeh has confirmed the termination but said the decision to halt the contracts was taken in July 2020 due to budgetary constraints.

While PEEPA (representing the government) terminated the contracts, money owed to the consultants for the remainder of the contract and for work done is yet to be paid. Minchin & Kelly has as a result slapped PEEPA with a letter of demand for all money that it believes is owed while Deloitte, which is also yet to be paid, has not(yet) taken the legal route.
According to Mogegeh, PEEPA is not in a position to say whether or not Minchin & Kelly has served it with a letter of demand for an unpaid invoice because he is bound by contractual obligations not to speak about the matter. He also did not want to speak about the money purportedly owed to Delloite. Asked to quantify the debt, Mogegeh responded: “PEEPA is not at liberty to discuss contractual matters but you may recall that during a media briefing held at its offices to announce the engagement of the two consultants, it was shared with the media that Minchin & Kelly won the open bid tender to Develop a Privatisation Strategy for BMC which amounted to P8,323,364 while Deloitte was awarded a contract of P4,204,184 to advise on the separation of the Maun abattoir, also in an open bid tender.”

While the total contracts for the two consultants totalled P12.527 548, it emerges that only 50 percent of that money was paid, leaving the consultants with a balance of 50 percent of their contract value each. The money exceeds P6 million.

In an interview, Country Manager of Deloitte Botswana, Cecilia Ramatlapeng, said as a professional services firm, Deloitte is bound by client confidentiality and is not at liberty to divulge details of their client’s business operations and its engagements with them. “For any further clarifications, please direct your enquiries to PEEPA,” Ramatlapeng said in an emailed response.

Similarly, at Minchin & Kelly, Terrence Dambe, the Managing Partner, said: “We are bound by the rules relating to attorney/client confidentiality and therefore cannot comment on issues you have raised relating to this matter.”

The Botswana Gazette asked PEEPA how the BMC privatisation will be affected by the termination of privatisation consultants’ contracts and Mogegeh answered that the government took the decision to engage a management contract company to turn the BMC around. “This process should place BMC in a more attractive position for privatisation,” he said.
The government’s decision to privatize Botswana Meat Commission was made in February 2018. In privatizing the BMC, the government decided to retain the Maun Abattoir for strategic purposes. The Maun Abattoir will not be privatized along with the Lobatse and Francistown abattoirs. The Maun Abattoir serves farmers in the Red Zone for foot and mouth disease (FMD) that is the North West District that is home to the Okavango Delta. It is strategically placed to deter farmers from smuggling cattle from these FMD-infested areas into the Green Zone that is much of the rest of Botswana as that would endanger Botswana’s beef industry.

Deloitte Consulting has been selected as the preferred transaction advisors for the concession of the Maun Abattoir. The separation of the Maun Abattoir is just one part of the privatisation of the whole BMC. The next step will involve registering the BMC as a limited liability company under the Companies Act, developing a privatisation strategy that provides various options of how the BMC can be privatized, as well as recommending and implementing the optimal privatisation method after approval by cabinet. Minchin & Kelly was selected as the preferred consultants for privatisation of the BMC