Botswana Oil may need capital injection
Government may be forced to inject more cash into the operations of Botswana Oil Limited, that is if the entity is not granted an exclusive petroleum import licence, Botswana Guardian has learnt.
The business model of the five year old company hinges on the company being granted an import licence, whose application has already been rejected by Botswana Energy Regulatory Authority (BERA), citing several factors ranging from technical to financial. This week, Botswana Oil Chief Executive, Willie Mokgatle said, when the company was established, the idea was to prop-up their balance sheet through income they received after negotiating favourable prices with oil suppliers internationally for petroleum products that they would be importing into Botswana.
This explains why the company has made certain strategic agreements with other national oil companies. As things stand, the company’s revenue is based on speculation. That is, if the current oil companies in Botswana face supply crisis that would allow Botswana Oil to supply them for a fee. “We cannot operate like that as a business,” said a concerned Mokgatle in an exclusive interview on Tuesday. In the absence of an import licence, Botswana Oil is limited as far as revenue generation is concerned. They have no intention of venturing into the retail business within the oil sector, as they will be competing with international and emerging local companies, the latter which they are supposed to help enter the almost secret and expensive oil industry.
“If we are to venture into the retail business, the shareholder will be forced to inject more cash into the business to build infrastructure such as filling stations which can be expensive,” added Mokgatle. Botswana government is the sole shareholder of the company but a long term plan is to sell part of its shares through privatisation. Nonetheless, the company is off to a good start as far as bottom-line is concerned. Writing in the latest annual report for the financial year to March 2016, Board of Directors Chairman, Dr Joel Sentsho said the company made a profit of P13 million, higher than P8, 3 million of the year before. “This profit was driven by various factors, amongst them, an increase in revenue and margins compared to the previous year, the sale of cleaner fuels (ULP95 and AGO50PPM) to International Oil Companies and declining crude oil prices as well as Government strategic reserves procurement income,” said Sentsho who is also trade advisor to Government. The country’s petroleum industry is dominated by foreign companies such as Total, Shell and Vivo, who put their business interests ahead of the country’s broader economic objectives. Most of the supplies come from South Africa, which puts the country at risk especially that South Africa is also struggling to meet its demands. As Botswana Oil is granted the above licence, this risk will be curtailed.
“When fuel is in short supply, it is Botswana who suffers the most,” he added. According to the company’s annual report, Botswana Oil Limited (BOL) was established in order to achieve the Government’s broader economic objectives of ensuring the security of fuel supply, management of the Government’s strategic storage facilities and the facilitation of active citizen involvement in the petroleum industry. Meanwhile, Botswana Oil has since chosen not to take BERA to court for the latter’s rejection of their licence. In fact, the institution has chosen the most diplomatic way of engaging with government on the matter, in a bid to find a harmonious solution. Mokgatle, who is an old hand in the petroleum industry, said government, through the minerals resources, green technology and energy ministry have taken a decision to find lasting solution to issues related to the rejection of the licence by BERA.