Botswana Oil (BOL), the state-owned fuel company under the Ministry of Minerals and Energy, believes its mandate to import 90 percent of the country’s fuel requirements came at the right time, as the previous model of the willing buyer-willing seller had outlived its usefulness.
BOL started importing 90 percent of the country’s fuel needs in April this year, allowing oil marketing companies to purchase fuel from BOL instead of importing it themselves.
BOL, established 11 years ago, previously operated on a willing buyer-willing seller model, meaning there was no binding commitment between BOL and its customers. “The 90 percent import mandate came at a time when we recognised that the willing buyer-willing seller model had run its course,” said BOL CEO Meshack Tshekedi at the launch of the mandate on Thursday.
“While unsustainable, it helped us develop the necessary capacity for the 90 percent import mandate.”
In preparation for the mandate, Tshekedi said BOL ensured the necessary infrastructure was in place, including taking over strategic facilities in Gaborone and Francistown. This also involved establishing quality management systems and other essential protocols. “All these measures were aimed at building the required capacity so that when we took over, we could definitely deliver,” Tshekedi explained.
“We are expanding the Francistown depot from its current 38 million liters to 98 million liters, adding an additional 60 million liters.”
In addition, BOL is developing the Ghanzi depot, which will handle fuel imports from Namibia. Tshekedi explained that the government’s strategy for securing the fuel supply is based on the importation model, with captive volumes in place to control the country’s fuel availability. This, he said, underscores the importance of infrastructure development.
“The government played a pivotal role in ensuring that Botswana Oil developed the necessary capacity,” Tshekedi added. He also praised the Botswana Energy Regulatory Authority (BERA) for its role in developing the enabling legislation and regulations that govern the 90 percent import mandate.
According to Tshekedi, the consultations with the government began around 2018/2019 and continued until 2021, culminating in the approval of the importation mandate and the amendment of the Act. BERA also conducted extensive operational readiness planning, including engagements with stakeholders in the oil industry to ensure smooth planning and execution.
Despite this progress, there were challenges. “In the early stages of implementation, we faced difficulties due to the shutdown of the Natref Refinery in South Africa, which is a major supplier. One of the key petrol grades we import, ULP93, was affected, and this is the only refinery in the region that still produces this grade.”
Minister of Minerals and Energy, Lefoko Moagi, noted that under the previous willing buyer-willing seller model, the government could not guarantee the security of fuel supply or achieve much-needed sectoral transformation. “To ensure security of supply and obtain significant captive volumes, the government increased the volume imported by Botswana Oil by consolidating these volumes through an importation quota for petroleum products under the national oil company,” Moagi said during the launch.
Moagi explained that his ministry advised the cabinet on the need for reforms in the energy sector. As a result, BERA announced the Importation of Petroleum Products Quota Allocation Order in September last year.
“This led to the issuance of an import license to Botswana Oil Limited to import 90 percent of the petroleum products consumed in Botswana,” Moagi said.
“The main change in the petroleum industry is that international oil marketing companies now purchase petroleum products from Botswana Oil instead of importing them directly.”
Moagi acknowledged the role of international oil marketing companies in the industry’s development and growth. He added that the remaining 10 percent of imports has been reserved for citizen-owned companies that already have operating licenses. These companies can import fuel for their own consumption and distribution through their retail networks, with no restrictions on the volume they can import.
Moagi commended BOL for its turnaround, noting that the company had transformed its operations after years of financial losses.
“For the 2022/2023 financial year, the company grew its revenue to P2.6 billion, with volumes rising to 187 million liters and a profit of P99 million,” he revealed.
The profit reduction, Moagi explained, was due to supply disruptions and investments in mobilising resources in preparation for the 90 percent import mandate. For the first time since its inception, BOL declared a P10 million dividend to the government.
With the new mandate in place, Moagi anticipates that BOL will grow its revenues to around P50 billion soon, with profits ranging between P400 million and P500 million. He believes the 90 percent import mandate will drive transformation in the petroleum industry, which will benefit the country.
“BOL’s Citizen Economic Empowerment Programme (CEEP) includes value-chain development, entrepreneurship and enterprise development, supplier development, and performance management,” Moagi added. In 2022, BOL and Debswana Diamond Company collaborated on a CEEP partnership that has facilitated four citizen transporters to deliver petroleum products to Jwaneng Mine and OLDM, worth over P8 billion for a five-year period.