Botswana's privatization on a tailspin
by sunday Standard Reporter
Botswana's privatization process will be lost and won in the privatization of Air Botswana which will pave the way for the privatization of other state owned enterprises, but so far things are not looking up.
Air Botswana General Manager, Lance Brogden, seems weary of phone calls, especially when they come from journalists. Three phone calls later, the Sunday Standard still doesn't have a comment from the man the media has branded “the turnaround specialist.”
With Air Botswana down P7,9 million in the first quarter of 2006 - the worst loss recorded in a long time- and the airline crew jumping ship in droves, the media attention and the idea of turning Air Botswana around doesn't do it for him anymore.
Four Air Botswana pilots recently handed in their resignation letters, the airline had to ground some of its BAe 146 jets and change the flight timetable because of shortage of spares. Its financial results for the first quarter of 2006 show a loss of P7, 9 million, which is 25% below the ambitious target Brogden had set himself.
Whilst Air Botswana packed more airline seats this year, compared to the same period last year, Brogden did not cash in on the passenger traffic windfall because he failed to reign in costs, which ballooned to 19% more than last year.
The airline continues to lease aircrafts to operate loss making routes like the Gaborone/Lanseria route. In fact, figures show that the airline spent P4.2 million in wet lease costs, overshooting its conservative P1 million budget by more than 300%.
With Air Botswana pleading poverty, its senior managers are, however, shopping up a storm using the airline's credit card. Their shopping spree paper trail shows that one of the cards has turned up a grocery bill of P1200 from Pick and Pay Supermarket. The same card also turned in an unauthorized payment in excess of P374 000 far beyond the authorized credit limit. The money was, however, later returned following queries from staff members.
Those close to the feted “turnaround specialist” say his heart is no longer in it. The man who, a few months ago, told the media that “there is nothing that can not be fixed, the situation is not hands up” these days allegedly says things like “no one would be stupid enough to buy this airline.”
In December, Brogden told the Midweek Sun, “We are laying a platform so that the company could be attractive for privatization.” He has since joined the chorus pushing for the accelerated privatization of Air Botswana, arguing that the airline can not achieve operational reliability without a new aircraft.
The privatize -Air Botswana-now bandwagon is brandishing the airline's balance sheet to support their position that Air Botswana can not afford to buy a new aircraft without government's subvention and so it is necessary to privatize sooner rather than later to, among other things, secure the new aircraft.
Investigations by the Sunday Standard reveal that when the recent decision to accelerate the privatization of Air Botswana was made, there was nothing to suggest that a new aircraft could only be bought through government's subvention. In fact several financial institutions made proposals to finance the purchase of three ATR 42-500s without seeking any guarantee, other than a Deed of Hypothecation over the aircraft purchased.
The position against accelerated privatization was further supported by a subsequent report by Ernst and Young who said although the airline could not sustain the purchase of a new airline, it would not be wise for government to privatize Air Botswana in its current operational and financial difficulties.
Sunday Standard can further reveal that by December 2005, the General Manager was poring over a draft agreement from a Chinese company which he had apparently approached to buy MA 60 aircrafts.
This was in spite of an earlier consultancy report detailing that the ATR 42-500 was more suitable for Air Botswana routes and that the MA 60 aircraft could never be profitable on the airline's operations.
As it turned out, the actual price of the MA 60 aircraft, which was presented to the board and cabinet, was understated, apparently to make the proposed deal more attractive.
Information that the Chinese aircrafts are not used anywhere in the world except in Zimbabwe where Mugabe has a strong relationship with the Chinese government was also withheld from the board and Cabinet.
With the scare story that Air Botswana is on its last legs being fed to the media, newspapers are currently on a feeding frenzy, zeroing on the airlines red balance sheet. The loss making parastatal was P16 million in the red last year and is expected to continue making losses.
The media has been sold on to the notion that the parastatal needs at least P300 million in recapitalization funds. One newspaper even went as far as to conclude that “Government, which recently ordered a multi million pula presidential jet, is in no mood to bail out the airline and is in a rush to sell. AB's poor balance sheet makes it easy pickings for competition, some of whom may wish to buy and close it down.
If things were to go according to plan, AB will be sold within the next two months.”
Those who are opposed to the accelerated privatization of Air Botswana are, however, simply joining the dots, and a sinister outline is emerging: That the privatize-Air Botswana-now camp is creating a burning platform from which they are building a case for speedy privatization.
With the airline collapsing under its weight of cumulative losses, the camp is whipping up panic to justify speedy privatization before the airline looses all its value.
It is understood that those who are voicing objection to the airline's speedy privatization are being systematically purged. Air Botswana's board chairman and Permanent Secretary in the Ministry of Works and Transport, Mr. Thipe, was recently dropped under mysterious circumstances. Sunday Standard has not been able to verify if his ouster had anything to do with his position on accelerated privatization.
The Airline Secretary and general Counsel, a Mr. Moipolai, who has allegedly raised concern about the goings on at the airline, has also been closed out of board meetings and is being accused of sabotaging the privatization process.
The situation is further complicated by a proposal that was presented to Cabinet by head of the Business and Economic Advisory Council (BEAC), Nico Czypionka, a few weeks before government announced the accelerated privatization of Air Botswana.
A source close to Cabinet told the Sunday Standard that Czypionka, an astute right wing economist, who commands a lot of respect among his peers, advised Cabinet to sell Air Botswana to South African Air Link, a closely held Johannesburg airline. Under the proposed deal, Air Botswana would sell all its aircrafts then use the money to buy into a partnership with SA Air Link who would provide the aircrafts.
A few weeks later the Ministry of Works and Transport announced the accelerated privatization of Air Botswana and a number of potential buyers showed interest.
However, when the time to submit bids came only SA Air Link, Lobtrans Ltd, a Botswana fuel transporter and African World Airways LTD stepped up to the plate. Other airlines which had shown interest : Eithopian Airlines, Comair Ltd, a South Africa courier, Tourism Empowerment Group, A South African Tourism Company, ExecuJet Aviation Group, A Zurich based air charter company and Interair South Africa, a closely held carrier pulled out of the deal.
It is not clear if their decision to pull out had anything to do with Czypionka's proposal to cabinet. What is, however, clear is that SA Air Link is the most favoured to win the bid as the two other competitors have limited or no airline experience.
Czypionka, backed by Vice President Ian Khama, has also been at odds with the PEEPA board over their slow pace in driving the country's privatization process. Botswana's privatization process will be lost and won in the privatization of Air Botswana which will pave the way for the privatization of other state owned enterprises, but so far things are not looking up.