Monday, June 1, 2020

Botswana’s economy too weak to withstand new bouts of power outages

As we speak South Africa’s economy is being ravaged by extreme power outages.

That country’s power utility Eskom is battered by a burden of debt and growing doubts by both the markets and the public over its long term sustainability.

And when there are power outages in South Africa, Batswana get jittery, not only because of past experience, but also because they know how crucial that country is to Botswana’s energy security.

Botswana Power Corporation, which imports substantially high amounts of energy from Eskom has recently renegotiated a very good deal with Eskom the salient part of which is that Eskom will not cut supply to Botswana.

This is a result of the fact that Botswana is a very good payer. BPC has not missed an opportunity to tell the nation that under those terms there shall never be power outages.

We take BPC at their word.

But then we go on to add that the deal with Eskom only tells half the story.

That deal can only remain of any value to Botswana if as is the case now Eskom has power to sell.

As it is, Eskom is fighting for its very survival.

It is a life and death struggle.

Just how that struggle will end we do not as yet know.

Increasing tariffs alone cannot save Eskom.

In the same way borrowing will not save the juggernaut.

Eskom is over borrowed and the South African Government is unwilling to further commit the necessary lifeline to keep the utility afloat.

Eskom is over-borrowed. And its creditworthiness, without the guarantee of Government has been pretty much depleted.

There are those inside Eskom who are saying that Eskom should be unbundled into several parts; generation, transmission and distribution; or something to that effect.

Thus notwithstanding BPC assurances, Batswana are right to be worried about long term sustainability of their power supply.

BPC should be more transparent, more sensible and more pragmatic in its overall approach.

We are aware of the immensely irrational political pressure that BPC management is working under.

This pressure is mainly a variable of political corruption, poor governance and often excessive micro-management at ministry level.

But we are still worried that BPC leadership seems to be obsessed with a sense of triumphantilism over what great deal they have been able to negotiate.

At the very best, this achievement  also seems to blind them of reality and at worst makes their vision rose-tinted with excessive optimism.

The perennial power outages that hit Botswana in 2013/14 proved too acute.

If any good thing can be adduced from that terrible it is that the outages found Botswana’s economy much stronger, agile and indeed dynamic.

Of course many businesses, especially SMEs that could not afford power backups could not make it, but still existing depth accorded the economy some level of resistance to emerge in a pretty recognizable shape.

Today the economy is much weaker. And it is impossible to imagine any inbuilt defence walls that would be necessary to absorb unexpected shocks. 

And we doubt if as a country we could withstand protracted outages such as was the case about five years ago.

Those outages greatly killed Botswana’s competitiveness. And it will be a long time before the economy fully recovers, if ever at all.

BPC and indeed Government should be upfront with the nation about the state of our energy security as a country.

That might involve making public honest but painful truths, including on Morupule B and indeed other investments coming on line.

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