Tuesday, March 5, 2024

Questions over Air Botswana solvency

Air Botswana has recorded a P7.9 million loss in the first quarter of 2006 – the biggest loss so far, plunging government into a mad rush to privatize the airline before it collapses.

With the airline losses piling, Sunday Standard has raised the airline’s internal documents revealing that managers and external auditors have started expressing concern that “section 17 of the Air Botswana Act, requires among other things. that the airline must have appropriate allowance for its working capital. Failure to comply with the section could mean the airline is insolvent.”

The documents further reveal that Air Botswana has been defaulting on its financial obligations. The Airline defaulted on its USD 42 000 to USD 45 000 payment as part of the BAe 146 Lease Agreement from April 2006 to July 2006. It is understood that the money was recently paid following warnings by the Airline Secretary and corporate Counsel, Tebogo Moipolai, that such non compliance could lead to termination of the BAe 146 lease and expose the corporation to a claim for damages and adversely affect its image on the eve of privatization.

The airline’s current quarterly results loss of P7, 9 million indicate the airline missed the target by about 25%. The airline’s operating costs are 19% above last year and it spent P4, 2 million in wet lease costs compared to a budget of P 1 million, overshooting the budget by 328%.

Sunday Standard can further reveal that, although the airline carried more passengers this year compared to the same period last year, it incurred heavy losses because operational costs were not reigned in. Among the greatest areas of concern are the senior management’s company credit card free spending. The Air Botswana credit card spendfest paper trail has turned up information that the company credit card is being used to buy grocery and recently turned up a bill of more than P300 000. The amount was, however, later reversed under mysterious circumstances.

The company is poor financial position is currently being used to rally support for the proposed accelerated privatization of the airline. Some insiders are, however, convinced that the accelerated privatization interest is creating a burning platform to push their agenda: That they are harnessing government’s worst fear that the airline may collapse to rush the privatization process through.

The motivation to rush the privatization process is being justified by the assessment that the airline can not achieve operational reliability unless they buy a new airplane. The current argument is that Air Botswana is in the red and can not afford to buy a new airplane without government’s subvention.
Some managers however argue that when the decision to privatize was made, there was nothing to support the argument that Air Botswana can only buy a new aircraft through a government subvention. To the contrary, in latter months several financial institutions proposed to finance the purchase on very easy terms.



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