Contrary to a statement made by the immediate past CEO of the Botswana Railways, Andrew Lunga, some two years ago, there is nothing definite on the construction of the Mmamabula-Ellisrus railway line.
In November 2006 Andrew Lunga announced through the press that that the organisation was planning to invest up to US$200 million to construct a railway line from Mmamabula to Ellisrus, South Africa and that a feasibility study was being undertaken at the time. Lunga, whose contract expired two months ago, made the statement at a time when the organisation he headed was in deep financial trouble.
After revelations in Sunday Standard that BR was facing financial ruin, there naturally arose the question of whether the project was viable at all. Subsequent enquiries made at the Ministry of Works and Transport have turned up information that does not tally with what Lunga said in 2006.
Samuel Mbaiwa, the ministry’s spokesperson says that the government has yet to commission studies on the viability of constructing a railway line between Mmamabula and Ellisrus in South Africa as well as those for two other railway lines ÔÇô the Trans-Kalahari and Mosetse-Kazungula. Excepting the latter, the other rail links would be to transport coal from the Mmamabula coal fields.
“The government will decide on the nature and source of funding for it.┬á It is expected that these projects will enhance the financial viability of Botswana Railways.┬á Currently, the government is looking into the proposed turnaround strategy for BR, which will also improve the organisation’s financial standing,” Mbaiwa says.
An audit report whose findings were recently leaked to and published in Sunday Standard shows that BR’s finances are in bad shape and that the board has had to approach cabinet for recapitalization bailout to the tune of P3 billion. The auditors found that “even some of the basic financial controls are either not adhered to or inconsistently applied.” The report also says that finance and procurement controls are generally ineffective; the supplier database contains incomplete and inaccurate information; authorization levels to this database are not properly restricted and maintained thereby making it difficult to distinguish between valid and invalid transactions. As a result of what the auditors uncovered, BR’s finance director was suspended indefinitely last month for alleged conflict-of-interest complicity in the organisation’s financial affairs.
The turnaround strategy that Mbaiwa referred to proposes a new business model, recapitalisation, assets renewal, upgrading of information technology and rebranding. It also entails the establishment of new rail links, notably the 1500-kilometre TransKalahari route that would connect Mmamabula to the west coast of Southern Africa. CIC Energy, the company developing the Mmamabula project, has commissioned a mine, rail, coal terminal and port pre-feasibility study which is currently underway and is expected to be completed by the end of the third quarter of 2008.
CIC Energy’s plan is to build a coal terminal and loading facility at the Namibian coast to be able to load large ocean-going vessels at a high rate to minimise demurrage cost. The company has indicated that initial talks with the Governments of Botswana and Namibia have been well received.
At this stage it is unclear how BR’s woes may complicate the Mmamabula project. The current time line for Mmamabula indicates that the Export Coal Project could be operational by 2014.