Sunday, June 16, 2024

Ageing BPC infrastructure poses real and ongoing economic risk

Botswana Power Corporation is unlikely to weather the coming storm coming its way.

It is only a matter of time before BPC hits a nadir.

In short, the organization is not fit for purpose.

BPC is undercapitalized and underinvested.

The power utility has a new Chief Executive Officer.

But there is no easy fix.

His brief is not much different from being asked to wake up a dead person.

That will not happen.

At the press conference this week the CEO  made reference to ongoing changes to the Act on which BPC runs.

There are talks of unbundling BPC into at least three separate companies.

That could include generation, transmission and distribution.

That is well and good.

But as things stand the patient needs much more than just that medicine.

The problem with BPC is its ageing infrastructure.

The situation is so bad that the economy of the country is sitting on a time bomb.

BPC needs a lot of money to get it functional again.

Even if BPC was to raise tariffs to what it calls market price, it will still not be enough for it to get itself out of the morass it is in.

Just to be clear on what is at stake, BPC and its shareholders should look at what is happening to its counterpart, ESKOM  in South Africa.

Eskom cannot even go to the market to borrow money because it is not creditworthy.

Yet the company is badly undercapitalized and underinvested.

Years of corruption and mismanagement have robbed Eskom the much needed capital for investment.

Not very long BPC will not be able to attract competent workforce.

As things stand the corporation relies solely on goodwill accrued over the years.

That cannot go on forever.

BPC was established as a natural monopoly.

That stature by itself used to be a boon for BPC.

It is now an albatross not only on the neck of BPC, but also of the nation.

The situation for BPC is so bad that if the energy sector was to be fully liberalized tomorrow, BPC would not be able compete with new entrants.

In fact if the veil of protection is to be lifted, BPC  would easily collapse after a year or two.

If things were working properly, BPC’s biggest strength would be its vast network.

Yet that too has now become its Archilles Heel.

Much of the BPC problems are not of its making.

There is no denying that many years of mismanagement and corruption have contributed to BPC chaos.

But BPC is also a victim of unbridled political interference.

There has never been a time when BPC was run like a proper business.

Because government has often subsidized it, they have also felt the temptation to also use it as a honey-pot.

BPC has connected farms of the country’s political big shorts at a cost at no cost to those politicians. The corporation was happy to do that even as it lost the money it never regained.

That culture continues to this day.

The shareholder has to take the blame.

At the instance of the shareholder. tariffs have remained too low.

The final straw came a few years ago when the shareholder took money from BPC.

With elections coming next year, tariffs are unlikely to go up significantly.

In fact faced with an uproar tariff have once been decreased – a result of political expedient that has now led to BPC facing existential crisis.

The trouble is while BPC used to get a government subvention of a billion or so, it now gets hardly P500 million from government.

This week the whole country experienced a blackout.

BPC executives told the media that they were investigating what the problems were.

Quite conveniently, they made no reference to their ageing infrastructure.

That is the elephant in the room.

We might unbundle BPC, we might remedy Morupule B, but without overhauling the entire network as a nation we are only sleepwalking into a dead end.

RELATED STORIES

Read this week's paper