The Botswana Power Corporation (BPC) is under growing financial pressure as it struggles to recover the full cost of generating and importing electricity, forcing the government to pour in more subsidies to keep the utility afloat.
According to the National Energy Compact for Botswana, the corporation’s financial health has worsened significantly, raising concerns about the sustainability of the country’s energy supply.
The report shows that BPC’s tariff increases over the past five years have failed to keep pace with escalating production and import costs. The utility implemented a 22 percent tariff hike in 2020/2021 and a further 3 percent increase in 2021/2022. However, its subsequent requests for adjustments in 2023 and 2024 were rejected, widening the cost-recovery gap.
In 2023, the average electricity selling price was 127 thebe per kilowatt-hour, while the cost of generation and imports reached 159 thebe, leaving a shortfall that required continued government support. The Compact notes that although subsidies have been “ongoing,” they have not been sufficient to close the widening gap between BPC’s revenues and expenses. Factoring in financing and foreign exchange costs would deepen the deficit even further.
BPC’s financial strain is reflected in its ballooning liabilities. The Compact shows that trade payables surged by more than 50 percent—from P1.9 billion in 2021 to P3.1 billion in 2023—equivalent to over eight months of operating costs. This raises red flags about the corporation’s ability to meet its obligations to suppliers, threatening operational continuity.
The utility’s liquidity has also deteriorated sharply. Its bank overdraft expanded fourfold, from P37 million in 2021 to P158 million in 2023, leaving short-term liabilities far exceeding liquid assets. “The current liquidity position poses a risk to the continuity of operations and supplier relations,” the Compact warns.
Despite heavy state support, BPC’s finances continue to erode. The government injected P802 million in 2020 and P404 million in 2021 in equity contributions for transmission projects. Yet BPC’s cash reserves plunged from P1.5 billion at the start of 2020 to just P304 million by the end of 2023, underscoring its deepening cash-flow crisis.
The squeeze on liquidity has also curtailed investment. BPC’s capital expenditure fell from P1.9 billion in 2021 to P661 million in 2022 and P484 million in 2023—well below depreciation levels. Analysts say the shortfall suggests the utility is struggling to maintain or replace its aging infrastructure, potentially undermining supply reliability in the years ahead.
On the financing front, the Compact notes that nearly all of BPC’s long-term debt—about US$825 million (P11.3 billion)—is owed to the Industrial and Commercial Bank of China (ICBC). The remainder is financed through the Nordic Development Fund via government channels. Apart from a small overdraft facility, the utility has no commercial financing on its books.
Although BPC employs currency and interest rate swaps to manage foreign exchange risks tied to its Chinese loans, the volatility of the pula and rising global interest rates have compounded its financial challenges. The National Energy Compact calls for a “sustainable cost-recovery tariff framework” and greater private-sector participation in power generation to ease the burden on government finances.
“BPC’s current model is not sustainable,” the report warns. “Without a pathway to cost recovery and operational efficiency, the utility’s capacity to support Botswana’s energy transition will remain severely constrained.”
