Monday, October 19, 2020

Gov’t guarantee USS 100 million loan for BCL

Government through the Ministry of Finance and Development Planning has made a guarantee in favour of Barclays Bank of Botswana and ABSA Bank Limited for a USS 100 million loan to be extended to BCL Limited and Tati Nickel Mining Company, collectively referred to as the BCL Group.

The BCL Group is currently plagued by liquidity problem a result of poor trading conditions from the prevailing depressed commodity prices which are expected to continue until 2018.

BCL financial performance has deteriorated over time due to low commodity prices. The USSD 100 million loan facility is intended to serve as a stop gap measure to avoid disruption to the business. The facility maturity period is 15 months and the guarantee will cover the same period.

The request for a Government guarantee was made pursuant to section 22 of the Public Finance Management Act; which provides that the Minister  may issue a guarantee on account of an entity in which government is a shareholder subject to prior authorisation or ratification by the National Assembly.

The loan was authorised by the National Assembly on Friday. Gaborone Bonnington South Member of Parliament Ndaba Gaolatlhe pointed out that there was a way of valuing any form of guarantee based on risks and probabilities which is not reflected in this Government guarantee.

“I would have expected that a guarantee of an amount this magnitude should have substantially more background information. There is a way of valuing any form of a guarantee based on risks and probabilities; with the amount in question one would have been interested to know what the value of this guarantee is. It is very important as members of parliament to get a clear indication of what value of this guarantee is,” said Gaolatlhe.

Given the world economic climate and the challenges that the BCL is currently facing, Gaolatlhe said one would like to see the Minster demonstrating what the eagle view strategies are for BCL and what the strategic objectives of the BCL are.

“The Minister of Finance must also state what his feelings are in terms of whether he thinks some of these strategic options are feasible, possible and whether he has confidence or not that the strategies would actually be achieved,” said Gaolatlhe

Gaolathe further said there must be some form of conditions around what the money will be used for specifically and what the Minister has put in place to make sure that this process is monitored from Government perspective.

The Member of Parliament also questioned why the Loan was sourced from Barclays Bank of Botswana.

“I would also want to know whether the Minister is comfortable with the decision to award Barclays a tender to offer loan. It is always a good thing to syndicate some of these loans to ensure that other participants in the financial markets also have an opportunity to participate,” said Gaolatlhe.

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