The P8 billion Debswana fuel windfall

  • An insight on how citizen owned companies will benefit from Debswana CEEP and its anticipated legacy 

The Projects | Citizen Economic Empowerment

Scores of citizen-owned companies in the petroleum industry are lining up to benefit from one of the biggest citizen economic empowerment deals by the partly state-owned mining giant, Debswana Diamond Company.

Debswana has been increasing the ante in its commitment towards empowering the citizen, having launched the much-touted Citizen Economic Empowerment Programme (CEEP), in which citizen companies will enjoy an estimated P20 billion in shared value with 20 000 jobs created by 2024.

The fuel deal is another gesture geared at creating economic opportunities in the space that has been for years dominated by foreign companies. The decision appears to be an act of faith. Many citizen-owned companies, which have been watching from the sidelines, stand to have a share of the cake, but first they must be capacitated to meaningfully participate in the opportunity. That is where Botswana Oil Limited (BOL) — a state-owned company — comes in.

When announcing the landmark deal late April, the two entities described the collaboration as a “strategic partnership that is aimed at capacitating citizen-owned companies in the fuel supply value chain.” The partnership is expected to create under 100 jobs directly and create hundreds of other job opportunities in value-add activities, Botswana Oil has revealed.

Through the agreement, BOL will play the facilitatory role of handholding and assisting emerging citizen-owned fuel supply and fuel transportation companies to supply Debswana’s Jwaneng and Orapa Letlhakane Damtshaa (OLDM) mines with diesel and petrol for their operations. It is part of Debswana’s CEEP, which seeks to accelerate citizen participation in its supply chain.

Through this agreement, Debswana anticipates an increase in citizen companies’ market share in the fuel supply and transportation industries. The agreement will also ensure security of supply for Debswana operations which are a mainstay of the Botswana economy. Debswana contributes up to 30 percent of Botswana’s Gross Domestic Product (GDP) and accounts for 90 percent of Botswana’s exports.

The 50/50 joint venture between Botswana Government and De Beers group procures approximately a 100 million litres of fuel per annum. As part of their mandate to facilitate citizen participation in the petroleum sector, BOL will under the agreement be obliged to transfer skills to citizen suppliers and transporters during the contract period and ensure delivery of competent and skilled citizen suppliers and transport companies upon completion of the agreement.

The five-year partnership, valued at P8 billion, will also create opportunities for support services along the oil value chain, such as trucks staging, truck stops, tyre services, wash bays, truck service, maintenance jobs and other related support activities for Batswana.

BOL will leverage on the volume economies of scale to ensure a sustained commercial value to all the parties. The partnership is in line with both Debswana and BOL’s citizen empowerment ambitions.

The two companies are currently working on a joint transition plan that will culminate in the August 2022 kick-off consignment. In her remarks regarding the partnership, Debswana Acting Managing Director Lynette Armstrong expressed her delight at the development: “This is a huge milestone for Debswana, especially for our “One Dream, One Team” (ODOT) 2024 strategy which is very intentional about citizen participation.

Armstrong said she is also proud that with this major step forward, Debswana is well underway to realising its strategic ambitions under the Debswana Citizen Economic Empowerment Programme. The programme has two breakthrough outcomes on creating and delivering shared citizen spend value of P20 billion and 20 000 jobs by 2024.

The Debswana Acting MD said the deal therefore forms part of the 2021 CEEP key breakthrough actions which include the continued localisation of Debswana’s long term contracts, the development of citizen participation in the supply and transportation of fuel and delivering on a transformational plan that creates opportunities for citizen ownership participation in the Original Equipment Manufacturers (OEM) sector.

“We remain resolute and intentional about impacting our communities and economy at large through such transformational initiatives. To Botswana Oil, we thank you for coming on board and we look forward to a fruitful relationship,” she said.

Commenting on the partnership, Botswana Oil Chief Executive Officer Meshack Tshekedi said, for Botswana Oil Limited, this is a thrilling development that brings to life the third prong of the company’s mandate which emphasizes the meaningful facilitation of citizens in the oil and gas industry through BOL’s CEE programme.

“Through this collaboration, BOL will play a faciliatory role by hand-holding citizen companies which will be selected to participate in the Debswana’s fuel value chain. As an anchor partner, BOL will shoulder the responsibility for the development of the citizen suppliers and ensure business continuity to Debswana’s operations,” Tshekedi said.

According to the BOL CEO, supply margins which have over the years, been made outside the country through the importation of fuel, will now accrue to BOL (the National Oil Company of Botswana). He said the benefits that will be realised from these margins will trickle down, even to the ordinary Motswana ultimately when BOL pays taxes locally and dividends to the Government.

“The partnership is a worthy investment which will play a significant role in the development of homegrown oil companies and transporters as envisaged in BOL’s citizen facilitation framework,” he said.  

The project is scheduled to commence in August 2022, with BOL, through Citizen Owned Oil Companies, expected to deliver their first consignment to Debswana on the 01st of August 2022.

As part of opening opportunities for citizen service providers in the fuel supply space within Debswana, the parties will in the near future issue a joint ‘Request for Proposal’ to identify suitable citizen service providers (logistics and fuel supply) to partner with Botswana Oil as sub-contractors for delivery of the contract scope.

LEGACY OF THE FIVE YEAR-PARTNERSHIP

Head of Stakeholder Relations at BOL, Matida Mmipi said they believe the partnership will become a blueprint for other citizen initiatives even in other sectors of the economy. She said the partnership has succeeded in unlocking opportunities that never existed for ordinary citizens who aspire to grow and do business with big companies like Debswana.

Some of the benefits that will result are the development of:

An additional pool of competent and experienced of citizen entrepreneurs in the field of bulk fuel transportation  
An additional pool of competent and experienced citizen suppliers in the supply of bulk supply fuel products  
A fully fledged truck staging centre in the Orapa, Letlhakane area  
A fully fledged truck staging centre in Jwaneng  

The number of companies to be on-boarded will be determined by the economics at the time of engagement. BOL has said its role in the deal is limited to providing citizen companies Oil industry technical capability and capacity to deliver on the requirements of the contract.

Securing funding will remain the responsibility of the beneficiaries. This could be through government financing entities including Citizen Entrepreneurial Development Agency (CEDA) or through commercial banks. Further to this, beneficiaries may benefit from the agreement that Debswana has with financial institutions to support the Debswana Citizen Economic Empowerment Programme.

As the facilitator, BOL will not directly benefit financially from its role as citizen empowerment in the petroleum value chain is core to BOLs mandate.

“BOL does not pursue citizen facilitation for financial benefit but rather we engage in citizen facilitation as a social aspect of our mandate, Citizen facilitation comes at a cost, but it is the right thing to do for the country to develop the oil and gas industry,” said Mmipi.

Commenting on the move Minister of Minerals & Energy Honorable Lefoko Moagi applauded the initiative as a step in the right direction. ” This part of the Debswana CEEP programme and in line with Government’s Agenda on the empowering of citizens. The Debswana programme seeks to spend BWP20bn and create 20000 jobs by 2024, and this fuel contract will see BWP8bn spent in the next 5 yrs, in Botswana by Batswana.

“This speaks to further capacitation of our people and Debswana as one of the big revenue earners for the Government cannot be risked, hence the bold move. We will continue to unlock these values for Batswana, by venturing into other channels like maintenance and other services” he said

FACT SHEET

Project ValueP8 billion
Company Debswana Diamond Company
FacilitatorBotswana Oil Limited
Period August 2022 – August 2027
Total
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