It was in 2008 that Botswana was crudely shaken off its heavy reliance on South Africa for electricity that it seriously considered alternative ways of sourcing electricity for the country after 23 years of power adequacy and the experience to this point has been nothing short of winding. The generation of electricity in Botswana started in 1985 with a coal fired thermal power station at Morupule operating at a capacity of 132 MWH, according to Statistics Botswana
One such option was engaging Independent Power Producers (IPP) but the process so far is said to be proving challenging. According to the local economic think tank, Econsult, the first of the IPP deals is to be carried out by Posco, the South Korean company in a joint venture with Marubeni, Japanese company to build and operate the coal-fired power station for a period of 30 years. The station will be an expansion of Morupule B with an additional two units, five and six. “However, the deal has run into problems with the financial guarantees required from Government, which has to underwrite BPC’s commitment to buy the power produced, given BPC’s weak financial position,” says Econsult. Stefan Schwarzfischer admitted when the year started that “BPC is not in good shape financially.” He had said that the cash-strapped corporation straddled a debt of P96 million is in dire need of a financial turn-around. If it were the days when government coffers didn’t have a squeeze it would bail out the corporation as it had done with others before but the times have changed and today government has to contend with a tightly pinched purse. Econsult explains in its latest report that government’s ability to borrow and provide guarantees is limited by the Stocks, Bonds and Treasury Bills act, which limit each of domestic and foreign debt and guarantees to 20 percent of GDP. It makes known that total foreign debt and guarantees totalled 16.1 percent of GDP at the time of the 2017 Budget. This restricts government’s ability to provide guarantees even if it is for crucial projects as generating and delivering sufficient power for the country.
“If government wants to promote power generation by the private sector through IPPs,whether by coal, gas, solar or any other method, guarantees will always be needed, and an appropriate way to treat such guarantees under the law must be found, without undermining debt sustainability. a solution needs to be found urgently, as a failure to proceed with the Marubeni/POSCO IPP could have major financial costs for BPC and the Government, not to mention credibility costs,” Econsult advises. Another recommendation it makes is better coordination between the Ministry of Finance and Economic Development (MFED), which is the custodian of the public finances and Ministries undertaking large projects with significant financial commitments. To emphasise the point it cited the example of BCL mine which had involved itself in a deal with norilsk nickel amounting to over $300 million to acquire its regional nickel assets which is presently at a stalemate. “In the event BCL did not have the funds to complete the deal, but it had not made formal arrangements to obtain sufficient finance from government. As a result, the deal was unable to proceed, and BCL had to be put into liquidation,” it says.
The sentiments shared by Econsult are also echoed by Power Africa, a market-driven, U.S. Government-led public-private partnership launched in 2013 with the intention to double access to electricity in sub-Saharan Africa. “Previous IPP projects have not succeeded due to regulatory framework challenges; however production in Botswana for export by an IPP is permitted by the 2007 Amendment to the Electricity Supply Act. To create a more enabling environment, the GOB passed a law to establish an energy regulator in 2016 and is currently working to stand up the agency,” it noted last month. Power Africa says that it is currently in negotiations with the government of Botswana to establish a Memorandum of Understanding (MoU) on the development of electricity generation especially methane from coal generation and solar PV.
Morupule B’s current capacity is 600 MW. Statistics Botswana reported in its electricity generation and distribution brief for the first quarter of the year that imported electricity decreased by 63.9 percent (334,684 MWH) from 523,736 MWH to 189,052 MWH when compared to importation during the first quarter of 2016. “The decrease in imported electricity could be seen to be a result of increased production to reduce reliance on importation,” it says.