Bakang Seretse quotes the conviction that added to the notoriety of Nazi propagandist Joseph Goebbels: “If you repeat a lie often enough, people will believe it, and you will even come to believe it yourself.” However, the former Managing Director of Kgori Capital immediately notes that the beauty of the truth is that it cannot be changed.
According to Seretse, the continuous ‘narrative’ that money was stolen from the National Petroleum Fund (NPF) by some “greasy businessmen” as a response to the current fuel crisis engages in diversion of the real problems of the NPF and the fuel industry at large. As an accused in the NPF saga, he is eager to refute slanderous claims that “a sanctioned government transaction” was somehow criminal and detrimental to the well-being of the country. He actually believes by now the public should have realized that it is not within their habit to respond to each and every negative media comment.
“But it is about time certain facts are put out to the public and that the public is educated on the true workings of the NPF and the oil industry so as to allow the country to deal with the real issues with the fuel crisis,” Seretse says. “Let us begin by stating a few facts.”
The facts, as stated by Seretse, are that the government, of its own volition, decided to procure P250 million worth of equipment from Israel with money from the NPF. Seretse also states that the government has received value in the goods it purchased. He says it is a fact that the Directorate of Intelligence of Security Service (DISS), which is an organ of the government, has paid back the money it had received from the NPF.
“So which P250 million seems be have been taken by some ‘greasy businessmen,’ thereby shackling the NPF from cushioning Batswana against harsh global oil prices?,” he queries rhetorically. Another fact, according to Seretse, is that to this day, there has been no complainant from the NPF that money is missing. Consistently the courts, and in particular the highest court in the land, the Court of Appeal, has found no wrongdoing, not once but twice he says.
He states it as a fact that the Government of Botswana engaged Basis Points Capital (Pty) Ltd to raise P3.4 billion to build Tshele Hills Fuel Storage Facility in order to avert fuel crises. However, the government subsequently decided not to utilise the funds but have since embarked on the same project seven years later, albeit with enormous price escalations.
“Therefore, this puerile attempt to blackmail us into silence by asserting that we somehow should take responsibility for many years of government indecision, lack of foresight and naked personal interest of certain individuals at the expense of national projects is simply disingenuous and smacks of arrogance,” says Seretse in the interview.
He sees the current fuel crisis as a glimpse of the future. “Just like in years gone by, it would appear we still haven’t learnt our lesson,” he continues. Finger-pointing may score us political points, but at the end of the day we will have to face the reality that real work has to be done in availing safeguards of fuel supply in times of emergency.”
THE FUEL INDUSTRY, THE NPF AND THE CURRENT FUEL CRISIS
Having been a Transaction Advisor to the Ministry of Mineral Resources, Green Technology and Energy Security, Seretse says he gained vast experience and developed valuable insight into the successes and failures of Botswana in the fuel space. Because of this, he believes that he is qualified to share some background to the current fuel crisis in Botswana.
Botswana imports 100 percent of its petroleum product requirements from neighboring countries mostly from South Africa, but small parcels come from Namibia and Mozambique. Seretse emphasises that Botswana is a net importer of these products and has no control over the pricing, noting that such countries are normally referred to as “price takers.”
According to Seretse, petroleum pricing in Botswana is determined through a pricing mechanism called as a “slate,” which is a price buildup adopted by member-countries of the Southern African Customs Union (SACU). The slate contains six components: Product cost (Landed in Durban), exchange rate, transport costs, recovery elements, levies and duties, as well as oil industry margins. Computation of these components results in the pump price. The bulk of the cost of the pump price goes to product cost.
Seretse explains further that the difference between the product cost and the pump price results in the over-recovery or under-recovery. Accumulation of the under/over-recovery results in a cumulative over/under-recovery. “When it is under-recovery, it means that pump prices are lower than product costs, and when it is over-recovery, it means that pump prices are more than the product costs,” he says. “When it is over-recovery, the oil industry pays money into the NPF, and when it is the under recovery, the NPF pays oil companies.”
The NPF is a Fund established by the government to cushion motorists against rising petroleum prices. Prices of petroleum products are by nature volatile and can change every minute as they react to forces of supply and demand in international markets. In his view, prices in Botswana have not been managed efficiently as they have not been adjusted timeously. They lag behind and are usually adjusted once in six months as opposed to monthly, as it is done in SA.
Seretse says it is important to note that countries like Botswana may devise different strategies to cushion motorists against increasing petroleum prices. Among these are:
- Keeping strategic stocks to be released in the event of prices increasing to levels that are not affordable and restocking when prices decrease. This, he says, would ensure that prices are managed efficiently and effectively.
- Hedging against increasing prices to ensure that prices are locked at a determined level. This is a price management tool.
- Adjusting prices timeously to align them to international prices
- Cushioning prices by using the NPF to pay oil companies for under- recoveries.
According to Seretse, petroleum prices in Botswana and around the world have been increasing at rates and to levels that have not been seen historically due mainly to the war between Russia and Ukraine. “The Botswana Energy Regulatory Authority (BERA), as an energy regulator, has not been effective as it has failed to come to the party to provide the necessary interventions as I just outlined,” he says.
Because of this failure and inefficiency petroleum prices in Botswana have been increasing up to a level where the cumulative under-recoveries are reported to have reached P1.2 billion, which is by far outside the capacity and capability of the NPF as a cushioning mechanism. Seretse says progressive regulators in the region have come to understand that cushioning prices by using a Fund is not sustainable and that the only option is to adjust prices timeously.
But petroleum product prices in Botswana are the lowest in the region – lower than they are even in its supplier South Africa – even though Botswana is a price taker. Traditionally, Seretse explains, the NPF was used to cushion the prices. However, due to rising crude oil prices in international markets that is resulting in growing under-recoveries of up to P4 per litre, the NPF can no longer manage. The NPF levy is currently at 13.5 thebe per litre while the under-recovery is at P4 per litre, resulting in a shortfall of P3.86.
“In short this means that to address the under-recovery and break even, prices should be increased by P3.87 per litre,” Seretse notes. “Further, there is a need to increase the NPF levy by P1 per litre for a period of 12 months in order to allow the Fund to accumulate enough money over time to pay off the debt to the oil companies.” Because prices in Botswana have not been managed properly and the necessary interventions are not implemented in a timely manner, the situation is getting out of hand. As Seretse points out, this is currently the case and oil companies are owed billions of pula in a situation that is worsening on a monthly basis.
As a solution, the businessman says the government should construct Tshele Hills as a matter of urgency so that there are adequate stocks that can be released in times of high prices while managing the prices efficiently and effectively as cushioning prices through a dedicated fund is not sustainable. The point, says Seretse, is that prices change every day while the Fund is stagnant and can never catch up. This, he emphasizes, explains the current unmanageable levels of billions of pula in under-recoveries.
“The government should be proactive and not reactionary,” he says. “The current reaction of BERA does not help the economy and the inflation as the huge price increases shock the system as a result of the poor price management.” He dismisses views that petroleum prices are rising because the NPF is depleted, saying prices are on the increase in Botswana and internationally mainly because of the war between Russia and Ukraine. Petroleum prices are skyrocketing on international markets and Botswana as a price taker with absolutely no control over them is on the receiving end.
“It is of critical importance for the government to take a deliberate decision to subsidise consumers through either suspension of some of the levies in order to reduce the price or direct cash injection by paying the oil companies for the under-recoveries,” Seretse argues. “This would also help to stabilise the prices and provide a relief to motorists.”
He adds that we have seen prices rising to over R20 per litre in South Africa and Namibia while in Botswana they went from P12 per litre to P16 per litre. He explains prices being favourable in Botswana in terms of low levels of levies and duties compared to other SACU member countries. “Countries like Rwanda have taken a deliberate decision to subsidise motorists by direct cash injections to oil companies by the government,” he says.