Botswana’s AfDB’s latest rating positive
A total of 11 Batswana work for AfDB Bank financed local projects worth billions Botswana assumes AfDB Advisor position this month
The latest AAA rating by the African Development Bank ( AfDB) is positive and good news for shareholders and borrowers like Botswana as they can continue borrowing at low interest rates.
The Fitch Ratings recently affirmed AfDB’s Long Term Issuer Default Rating at AAA with a Stable outlook. In some quarters financial experts have been quoted as saying that AfDB is rated above the American Government.
But the indisputable fact is that AfDB shareholders and borrowers stand to benefit significantly. This was confirmed by the Minister of Finance, Peggy Serame and Permanent Secretary Dr. Wilfred Mandlebe in an interview with, Botswana Guardian this week.
So far AfDB has financed big projects such as the Pandamatenga agricultural infrastructure development, Morupule B Power Plant, as well as extended credit lines to Botswana Development Corporation ( BDC) amounting to billions of Pula.
Serame believes that the AfDB’s positive rating is good news for Botswana. According to the Finance Minister, AAA credit rating refers to the risk assessed by credit rating agencies of lending to the institution, for example, the risk that there will be a default on bonds issued by AfDB.
The maintenance of the AAA rating is good news for AfDB, its shareholders and its borrowers as it affects the ability of the institution to raise funds in capital markets to finance and expand its operations. She said that as a borrower from AfDB, the credit rating has a direct impact on Botswana.
It is said the interest rate that AfDB charges on loans to borrowers ( such as government) is directly related to the AfDB’s cost of funds. Therefore, the AAA rating will ensure that AfDB can continue to borrow at low interest rates, and pass on that benefit through low interest
rates charged on borrowers.
Serame said Botswana has received grants, loans and technical support from the Bank and major infrastructure programmes funded in Botswana. For example, the Loan for the Pandamatenga Agriculture Infrastructure Development Project in 2007 for the amount of USD 60,020, 000 about P741, 967,240 with government contribution of USD 8,060,606, approximately P99, 645, 211.
The project was to facilitate water control and access road development for rain- fed agricultural production within farmlands in Pandamatenga area and also incorporate water management and ecosystem conservation concepts in crop production, train beneficiaries and provide equipment for effective production activities. This was in efforts to improve food security in the country.
Another project financed is Botswana Power Corporation ( BPC)’ s Morupule B Power Project in 2008 for an amount of Euro 153 million for the construction of transmission lines, a substation and a reactive power compensator.
Others are a Line of Credit to ( BDC) amounting to USD80 million in May 2019 for on- lending to the private sector. This is for sectors in manufacturing, logistics and services in order to promote industrialisation by upgrading various technologies and manufacturing plants.
There is also a Budget Support Loan of USD 137 million in 2021 for funding of the budget deficit for the 2021/ 22 and 2022/ 23 Budget.
“This was support for private sector led agriculture, tourism and industrial sector transformation, as well as to enhance economic and social inclusion”.
In relation to support for local mining companies, Serame said the Bank has a policy on Non- Sovereign Operations which may provide financing or investment without sovereign guarantees to private entities that meet specific eligibility requirements, as well as financing of regional development finance institutions ( DFIs).
Further that in promoting private sector development, the Bank group aims to contribute to strong and inclusive economic growth that will lead to economic transformation and sustainable development.
There is also “the Private Sector Development Policy which will ensure that the bulk of the Bank Group’s financing and non- financing activities contribute to strengthening the private sector.”
Further, if a government guarantee is sought, the Public Finance Management ( PFM) Act provides for a guarantee to be extended to SOEs, like BDC, who would then extend the proceeds to the private sector.
Serame said government through the Ministry of Finance organised a Financing Workshop in July 2022 which brought together private sector, private investors and development partners.
It was also a platform for the private sector to appreciate what facilities are offered by the development partners that can assist them to play a meaningful role in the economy through delivery of government projects.
“The government continues to explore other avenues in which the private sector can deliver projects through accessing facilities from the different funding facilities not only from the AfDB”.
In addition, government has received a Technical Assistance grant of $ 1.4 million for the Zambezi Integrated Agro- Commercial Development Project ( ZIACDP) in 2021 as efforts to support the government to develop a viable integrated commercial agricultural development project that will improve food security, diversify agriculture, and create jobs.
The Technical Assistance will specifically provide support to technical, financial and legal assistance to the ZIACDP; and it will institutionalise a governance and implementation management structure that will enable infrastructure development of the ZIADCP under PPP.
She said whilst no decision has yet been made, the Ministry of Finance is currently in consultation with the Ministry of Agriculture to review some facilities offered by the Bank, especially the African Emergency Food Production Facility ( AEFPF).
“Without preempting the outcome of the ongoing discussions, we have since taken note of the benefits which could accrue from this facility but there are other considerations to be made since the facility is not a grant but a loan. It is our understanding that Mozambique is not considered under the same terms as Botswana as regards the kind of facilities they could access from the Bank,” Serame explained.
The varying economic conditions of the two countries as classified by the Bank and the vulnerability of Mozambique to adverse climatic conditions give the latter the advantage of access to grant facilities.
Government on the other hand, has to assess and evaluate the credit terms of the facilities before making commitments.
The good news is that currently there are 11 Batswana who work at the bank with eight based in Cote d’Ivoire, two in South Africa and one in Kenya. They assume the following positions in the bank; Protocol Officer, Integrity Officer, Performance management Partner, Young Professional, Procurement and General Service Coordinator, Health Analyst, Procurement Officer, Financial Analyst, Urban Development Officer, Investment Assistant and Division Manager.
In addition, Botswana also assumes positions in the constituency office. There are four Professional Positions in the Constituencies held on a rotational basis for a period of three years.
For the Southern Africa Group one Constituency which includes Botswana, the configuration is as follows Executive Director ( Botswana), Alternate ED Mauritius, Senior Advisor ( Zambia) and Advisor from Malawi.
It is said that the Executive Director, Senior Advisor and Advisor are resident at the Bank’s Headquarters in Cote d’Ivoire whilst the Alternate ED is non- resident.
The Executive Director’s position will be coming to an end on 31st July 2022 and Botswana will assume the Advisor position from August 2022 for a period of three years.