Despite having exhausted its subvention fund, and consequently forcing government to drawdown foreign reserves to fund the importation of electricity, Botswana Power Corporation (BPC) actually recorded increased power generation during the 2016 fourth quarter (q4).
The national accounts office says that Morupule B, BPC’s 600 Mega Watts power plant which has never worked efficiently since construction, has escalated power production during the last three months of 2016 , leading to less imports from South Africa’s ESKOM.
Headed by Statistician General Annah Majelantle, Statistics Botswana noted in its report, published this week that the physical volume of electricity generation during the fourth quarter of 2016 stood at 783, 141 MWH, giving an increase of 11.1 percent (77, 940 MWH) as compared to generation of 705, 201 MWH during the fourth quarter of the previous year (2015).
Comparison of the physical volume of electricity generated during the third and fourth quarters of 2016 gives an increase of 18.4 percent (121, 896 MWH) from 661, 245 MWH during the third quarter of 2016 to 783, 141 MWH during 2016 fourth quarter.
“These increases were largely due to the on-going remedial works of the Morupule B Power Station, with the intension of meeting the nation`s electricity demand,” said Dr Burton Mguni, who was acting on behalf of Majelantle.
Statistics Botswana says that that electricity generated locally during the 2016 q4 contributed 77.4 percent to electricity distributed during the fourth quarter of 2016, as compared to 67.7 percent during the corresponding quarter in 2015, and 66.5 percent during the third quarter in 2016.
Year-on-Year comparison of distributed electricity during the fourth quarter of 2016 and the same quarter in 2015 depicts a decrease of 2.8 percent (29, 448 MWH), from 1,041,132 MWH during the fourth quarter of 2015 to 1,011,684 MWH distributed during the last quarter of 2016. The quarter-on-quarter comparison of electricity distribution shows an increase of 1.7 percent (17, 084 MWH), from 994, 600 MWH during the third quarter of 2016 to 1, 011, 684 MWH during the quarter under review.
Interestingly, imported electricity declined by 32 percent (107, 388 MWH) from 335, 931 MWH imported during the fourth quarter of 2015 to 228, 543 MWH imported during the quarter under review, which means that BPC may have spent 32 percent less, importing from ESKOM.
“This decrease was attributable to Botswana Power Corporation’s focused efforts on the improvement of domestic electricity generation,” Dr Mguni noted. However, despite BPC having reduced importing from ESKOM, it actually spent a lot of money, which may yet contradict expectations. Despite having been one of the beneficiaries of the largest budget allocation last year, BPC exhausted its allocation and benefitted from foreign reserves, which are normally cashed under conditions of exigency. In 2016, BPC was one of the beneficiaries of the largest share of the national development budget.
The major energy infrastructure projects which benefitted include; Morupule A Power Station rehabilitation at P135 million, NorthWest Electricity Transmission Grid at P225 million and Rakola sub-station at P257 million. In addition, the Botswana Power Corporation received a cash injection of P1.35 billion to cater for emergency power supply and P257 million under ESP for rural electrification. However, it seems BPC utilised its funds and remained with a shortfall, to the extent as to prompt Finance and Development Planning Minister Kenneth Matambo to draw down from the foreign reserves, specifically to fund BPC.
As at December 2016, foreign exchange reserves stood at P76.8 billion, compared to P84.9 billion in December 2015, representing a decline of 9.5 percent.
The foreign reserves however do not only belong to government, most of the money belongs to the private sector, and only the Government Investment Account (GIA) holds money belonging to government.
The state investment account declined from P35.5 billion in December 2015 to P33.3 billion in November 2016, due to increased payments for imports relative to exports receipts during the period. The implication being that P2.2 billion was withdrawn, and this is the money that may have been used to fund the broke power utility provider.
“A fall in reserves is primarily as a result of an increase in demand for foreign exchange to pay for imports, notably for imported electricity by Botswana Power Corporation (BPC),” Matambo said during his budget speech, insinuating that a significant portion of the billions of Pula was used on importing power by BPC. However, the minister did not elaborate further on what else the money was spent on. Botswana imports most of its power from South African power producer ESKOM.
Government has been spending billions annually on BPC, which has for years been failing to meet the national power demand requiring it to purchase power and thus paying ESKOM ‘in gold’ on power imports. Government has never revealed how much they spend on ESKOM annually. The corporation itself is one of the worst performers in quasi-government institutions. It incurred a loss of P2.60 billion in 2015 as compared to P1, 37 billion in 2014 before a tariff subsidy grant of P2.33 billion. In the year under review, BPC recorded a loss of P274.91 million, compared to P61.5 million recorded in the previous year.
The loss arose from the expense of P5.63 billion against the income of P5.36 billion. The income comprised revenue of P2.53 billion, other income of P79.26 billion, tariff subsidy and emergency power grant of P2.33 billion, interest income of P20.59 million and fair value gain on cross currency and interest rate swap of P398.32 million. The expenditure comprised of generation, transmission and other expenses of P380.27 million, finance costs of P170.82 million and net exchange losses of P863.70 million.
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. Prior to this period, most of Botswana’s electricity was imported from South Africa’s power utility, Eskom. In 2008 South Africa’s electricity demand started to exceed its supply, resulting in the South African government restricting power exports. As a result and to avert its own power shortages, the Government opted for alternative ways of sourcing electricity for the country; hence the plan to increase local generation of electricity at Morupule Power Station. The Morupule Power A plant of capacity 132 MWH was augmented with Morupule Power B which was to have a capacity of 600 MWH upon completion. Botswana and the entire Southern African region experienced massive power shortages because of the reduced electricity exports from South Africa