Sunday, July 25, 2021

Air Botswana unrepentant over sidelining Minister on route tariffs

The management of Air Botswana (AB) has expressed no regret for sidelining the Minister of Transport and Communications (MTC) when developing route tariffs regardless of the law providing that the Minister remains the ultimate authority over such matters.

Auditor General, Pulane Letebele, disclosed in her recent report, that,“…Air Botswana had not obtained approval from the Minister for tariff changes made during the year under review, indicating non-compliance to section 18 of the AB Act which requires approval of tariffs for air transport services by the Minister.”

In a response letter to Letebele, AB management was blunt and defiant,

“…Such consultation with the Minister regarding tariffs would seriously impact on the decision making and the ability to take advantage of prevailing conditions at any given time.”

Additionally, management argued that fares are influenced by competition, demand and seasonal promotions. Therefore, adjustments of fares to prevailing conditions, which could be as frequently as daily, weekly etc, make such a consultative process futile.

Asked if their attitude to the Minister stunk of disrespect, the Airliner’s General Manager, Agnes Khunwane, was not definitive in her response.

In that context, Kefilwe Kebafetotse, Public Relations and Communications Manager posited that the Airline’s business operations were indeed conducted in accordance with the law as guided by the Act, which stipulates that AB should consult the Minister prior to prescribing tariffs for air transport services.  “Given the foregoing, the current Airline fares were approved and have always been approved by the Ministry. As such, the Airline is consistently regulation compliant,” said Kebafetotse.

Kebafetotse further ruled out any plans by AB management to make a formal proposal to government, to amend the AB Act so that it is adequately instructive regarding the Minister’s role in approving route tariffs as the Act is already categorical. “I must hasten to point out however, that the Act is being phased out in light of ongoing processes and discussions to privatize the Airline,” said Kebafetotse.

Another salient observation made in the same report was that the National Airliner has recorded a loss of P42.10 million, viewed as a significant decline in performance from the prior year loss of P12.35 million. Traffic revenue on the other hand decreased by 7 percent which translated into P23.30 million mainly due to reduction in passenger numbers by 6 percent.

Yet again, AB has been accused by the State auditors of contravening the International Accounting Standards No. 16(IAS 16) which required that items such as spare parts, stand-by equipment and servicing equipment be recognized accordingly when they meet the definition of property, plant and equipment (PPE).

“…Management has not performed a formal evaluation in order to determine whether any spare parts of such nature classified as inventory were reclassified as PPE. Consequently, there were a total of P1.2 million assets as inventory which should have been classified as PPE,” queried Auditor General.

Whilst AB Management acknowledged the findings in a letter responding to the auditors, and that they would review their policies to ensure compliance with IAS 16, they opted to evade Sunday Standard’s question as to when exactly they noticed that their systems needed to be IAS 16 compliant.

Contradicting their earlier reply to the auditors’ observation regarding Classification of Strategic Spares in line with International Best Practice, AB Management gave this publication a rather filtered version.

“Strategic Spares are not categorized under IAS 16 as opposed to Rotable parts. The Corporation has capitalized Rotable parts as per requirement of IAS 16, thereby being IAS 16 compliant,” explained Kebafetotse.

Whilst the audit of the national airliner was conceived in the context of a routine annual evaluative process covering all state bodies, this particular assessment followed a long standing brouhaha regarding delayed privatization of AB, including its aborted sale to a company owned by the family of Former President Lieutenant General Seretse Khama Ian Khama.

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