OP releases statement on AB

| Thursday April 26, 2007 00:00

*Recently, there has been considerable debate, in Parliament, the media and elsewhere, about ongoing negotiations with South African Airlink ('Airlink') over the possible privatisation of Air Botswana. As a matter of democratic principle Government welcomes public discussion of this important initiative. It is in this context that we wish to clarify some aspects of the privatisation initiative that have been questioned.

*It should, however, be noted that, as the negotiations are ongoing, there are genuine limits as to the extent of information we can release at this time, as further disclosure might compromise Government's bargaining position.

*This statement follows legal advice received from the Attorney General, which has since been released as a statement to the public. The advice was sought after Parliament had passed a motion calling for the cessation of ongoing negotiations. In her advice the Attorney General clarified that, 'the current Air Botswana negotiations should be seen as a process that falls squarely in the preserve of the executive function, and can not be suspended simply by a Parliamentary motion to that effect.'

*In her opinion, the Attorney General also made a distinction between the process and outcome of  the negotiations. It is thus only after these negotiations have come to a possible conclusion that Cabinet will be in a position to consider whether and how to proceed with any proposed transaction. In accordance with relevant laws and established practice any conclusions resulting from the negotiations will be referred to Parliament.

*Concern had been expressed in Parliament that Airlink's proposal is based on a different model of privatisation than had been originally anticipated. The proposal would involve the setting up of a new joint venture instead of selling shares in Air Botswana as a going concern.

*Questions have been asked in Parliament and elsewhere as to whether such a possibility would be in conformity with existing legislation. Further concerns have been expressed about what steps Government is contemplating to protect the interests of both Air Botswana staff and the wider public interest, in conformity with the existing Privatisation Policy.

*The first initiative that sought to privatise Air Botswana as a going concern began in 2000. Unfortunately it had to be suspended largely due to the slump in global air travel in the immediate aftermath of the September 11th 2001 terrorist attacks in the USA. The following year, after signs of possible revived market interest, Government undertook a second initiative, which began with the canvassing of more than 80 airlines. In the end only five submitted written expressions of interest, none of which ultimately submitted bids. The latest is thus the third attempt, following the previous initiatives, which have in each case been communicated to the public.

*With Air Botswana facing growing operational problems due to its ageing aircraft fleet, the Government had started to consider the possibility of re-fleeting. Initial indications were that this would require a massive investment amounting to hundreds of millions of Pula.

In April 2006 Government again invited airlines to bid for Air Botswana. In view of the experience of the two previous initiatives, this time potential bidders were free to propose alternative solutions for providing Botswana with scheduled air transport services. Eight companies initially expressed interest, of which three ultimately submitted bids. When the tenders were evaluated, Airlink was found to be the most suitable bidder.

9. It was in the above context that, in December 2006, Cabinet agreed to the selection of Airlink as the prospective strategic equity partner to participate in the proposed privatisation of Air Botswana.

Cabinet then appointed a Government team to explore Airlink's proposal based on a defined mandate and set of negotiation parameters and require them to report back to Cabinet and the end of the exercise.

10. In carrying out the negotiations, Government remains mindful of the need to conform with relevant laws and policies. Upon concluding the negotiations, and before seeking a decision from Cabinet, the negotiating team will propose options for executing the privatisation to ensure such conformity.

*As to whether the Government is doing enough to safeguard Botswana's interests, we wish to reassure the public that every effort is being made to arrive at a transaction that will best serve the national interest. Government has a long tradition of successfully negotiating agreements with outside parties, and there is every reason to expect this will be true in the present case.

*Government also wishes to reassure Air Botswana staff that it is taking the necessary steps to protect their interests. Among other things the transaction agreements are expected to provide for an Employee Share Ownership scheme and an Investment Trust Fund to facilitate citizen investment.

*In addition to safeguarding of staff interests, the Government negotiating team has been mindful of the need to ensure conformity with the Privatisation Policy, including with respect to citizen economic empowerment, governance and control of the joint venture, and regulatory arrangements.

*According to the present timetable, it is expected that negotiations will be concluded within a short period of time. In the meantime we wish to ask the general public for a little more patience until negotiations have been concluded and Cabinet has had an opportunity to consider whether and how to proceed.