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The conundrum of State Owned Enterprises

Over the past 10 financial years, Botswana‘s national coffers have been on the receiving end of poorly performing state owned enterprises (SOEs).These quasi- governmental organizations have been returning to authorities’ year and year out to seek more capital investment, some seeking  guarantee to loan facilities offered by commercial banks.

However even up to today the financial performance of these institutions is still very much found wanting. After a series of restructurings, remodeling, and retrenchments, among other things,  state owned enterprises space remains a no go area for Botswana to derive any source of pride from, and  one of the burning issues as the nation goes into national polls next week. Earlier this year, Auditor General reported that almost P1 billion pula of public funds has been drowned by 18 of the biggest state-owned enterprises in the 2018/19 financial year. In total, these businesses have registered combined loss adding to P742, 187, 254.00, with 9 parastatals yet to submit their annual reports as at May this year, signaling possibilities of losses figure going up.


THE BACKDROP

Following the 2008 global financial crises the country’s state owned investment arm Botswana Development Corporation (BDC) was the first to be hit, registering losses and failing to pay dividends to government. BDC then whirled into downward trajectories in the following years, marred with allegations of corruption, poor investment decisions. Some of its investment businesses liquidated and collapsed, such as the Palapye Glass project which was later auctioned at just over P10 million after hundreds of millions of investment.

Another culprit is Botswana Meat Commission (BMC), the once globally celebrated and financial sound meat producer registered a net loss of P229.7 million in 2016, following a net profit of P332.6 million in 2015. The net profit realized in 2015 was due to Government cash injection of P600 million. BMC was recently reported to be in over P40 million debts. National Development Bank has  also in the recent years  drowned into financial crises, failing to service its government loans and failing to retrieve its loans from its clientele, thus making losses year and year out. NDB recorded a net loss of P168.2 million in 2017, compared to a net loss of P21.2 million in 2016. NDB was given P400 million by Ministry of Finance during 2016/17 financial year, while P200 million was disbursed during the 2017/18 year.

National utility outfits in Botswana Power Corporation (BPC) registered a net loss of P140.2 million in 2017; compared to a net loss of P99.6 million in 2016 while Water Utilities Corporation (WUC) on the other hand recorded a net loss of P137.6 million in 2017, from a net profit of P119.4 million in 2016. National commercial flights outfit, Air Botswana registered a net loss of P12.4 million in 2017, compared to a larger net loss of P86.1 million in 2016.In 2018 Air Botswana recorded a loss of P42.10 million while Motor Vehicle Accident Fund recorded a loss  of P126.49 million. Botswana Agriculture Marketing Board BAMB recorded a loss P65.36

On a major highlight, in February 2016 government agreed to guarantee a 1 billion pula loan acquired from Barclays Bank by BCL, a state owned mine, 8 months later the country’s oldest copper and nickel mine was shut down sending over 5000 direct employees to streets. It was reported that 3 weeks before a decision was taken to close BCL , the company’s management had submitted a proposal requesting another P1 billion from the government, and decision makers reached a consensus that enough was enough, no more bail out.

CALLS FOR PRIVATIZATION

Calls have been rife across all walks of political and economic commentary, with observers urging government to exit doing business with a view to give space for private sector. In 2016, while speaking at Grant Thornton Private Growth Business Awards, former cabinet minister and business man, Charles Tibone indicated his lack of faith in the public enterprises in terms of their growth potential owing to their continued non-performance. “What is even more concerning is that the majority of these parastatals businesses are chronically unprofitable, they operate on negative returns on investment or on life support from Government through subsidies,” he said.

Tibone noted that a case can be made for parastatals that provide a social service like Water Utilities Corporation (WUC) or those which regulate sectors such as Botswana Communication Regulatory Authority (BOCRA) or Civil Aviation Authority (CAAB) not investment business, banking and financial services , logistics and airline businesses.
Last year former Member of Parliament for Tati East, Samson Guma Moyo made a public call to government, urging the state to fast track disposing of Botswana Development Corporation (BDC), Local Entrepreneurship Agency (LEA), National Development Bank (NDB), & Citizen Entrepreneurship & Development Agency (CEDA) into one competitive development Bank. Moyo said the aforementioned parastatals were a complete waste of government limited resources as their mandates and purpose of establishment were more or less the same and a duplicate of one another.

RESTRUCTURING, MERGING PRIVITISATION EFFORTS

One of the ministries that house a good number of parastatals is Ministry of Investment, Trade & Industry (MITI). Currently 80 % of MITI total recurrent budget allocation goes to funding its parastatals. MITI houses 8 parastatals and 3 state owned enterprises making a total of 11.In the 2017/18 MITI channeled over P753 million pula on its 9 parastatals which include CEDA, BITC and LEA amongst others compared to P721 563 220 spent in the previous financial year being 2016/17.

Figures indicate that The Citizen Entrepreneurship Development Agency (CEDA) has been receiving the largest share of this money from the past 5 financial years. In 2013/14 CEDA received over P340 million, in 2017/18 the agency received over 298 million pula. CEDA which is a financing agency to promote entrepreureship amongst local’s suggestion were already proposing its merger with BDC and /or NDB. Last year Minister of Investment Trade and Industry Bogolo Kenewendo announced that a process was ongoing to merge some of her ministry parastatals.

In February this year government through PEEPA announced that  state owned airline Air Botswana currently running four operations in house, being passage business, ground handling facilities, engineering and maintenance, as well as cargo services would be restructured.“We want to unbundle it and asses these divisions separately and propose independent operations of this segments so they run efficiently” he said. With BMC, PEEPA CEO said in an interview with WeekendPost in February this year that following government‘s decision to liberalize the beef industry and open up the market with regard to beef oversea exportation , more players will emerge  mirroring the end BMC monopoly.

WE STILL NEED STATE OWNED ENTREPRISES – PROFESSOR LUMUMBA

In this wake of privatization wave, experts and observers however still note that Africa still needs state owned enterprises to realize its developmental goals, transformation of its economies and creation of employment for its people.   Renowned Lawyer, thought leader and international pan African speaker Professor Lumumba is of the view that the African Agenda of high income economies will require significant government participations.

In a interview with local journalists in Gaborone last week Lumumba said African countries should borrow a leaf from Scandinavian countries in the area of successfully combing government participation with private sector for economic growth “I don’t agree with the talk that private sector is the solution to all our problems, we need to combine public ownership and mix it up with private sector DNA, by doing so we ensure that the social investment aspect of the business is take care off” he said.

Observers say non performance of State owned enterprises in Africa and Botswana in particular is an issue of poor management, political interference and corruption. “Norway, Sweden, Demark and other Scandinavian countries have successfully managed to combine commercial interest with best interest of the general population, the private sector comes with good corporate governance and wining business models, and government comes with social investment interest”

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Bangwato regent speaks ‘respect for Dikgosi’

23rd May 2022
Bangwato

Presidential Commission of Inquiry into the Review of the Constitution held a meeting in Serowe this week. The meeting was to accord Bangwato, just like other tribes, a platform to give their opinions, contributions and what they think is the horse power and limitations of the current Constitution of Botswana.

Bangwato Regent, Kgosi Serogola Seretse said, he is of the understanding that the Commission has not come for anything apart from getting their opinions on how things could be made better. His contribution was that he solely knows of only two social positions in the world; Dikgosi and Pastors. He said other positions are just benedictions. He further urged that, Batswana should respect God’s ordained protocols such as Dikgosi and Pastors.

Seretse pointed out the importance of acknowledging and appreciating Dikgosi as nation builders. He cautioned and warned that, the Commission should ensure that their dealing with Dikgosi is harmonious. He called for an amendment to be made on the ‘National Order of Precedence’ noting that Dikgosi are put at number 11, but should at least be taken a little higher to number 7.

One resident, Tshepo Moloi while giving his contribution said there must be provisions of Social Justice that ensure equal distribution of resources to all citizens. He said this provision should entail an obligation that all citizen have equal opportunities to different Government Initiatives. Moloi substantiated that, all ‘Presidential Commissions’ be engraved on the Constitution

Alfred Thogolwane who is as well a resident of the biggest village in the Central District, pointed out the need for preservation of the country and resources thereof, saying “it must dawn onto all that, the calabash that fetches water for the family cannot fixed once its broken.”  Another resident, Keikantsemang Sebedi advocated for Polygamous marriage, saying that men should marry as many wives as they please. She said there is no need for any socioeconomic assessment done on men who wish to marry more than one wife.

She advised that, the country should benchmark from the Zezuru culture that does it, with no complexities. On the other hand, Sebedi said that, there must be considerations done on the Old Age Pension. She said people who earned P4000 should not receive the old Age Pension upon their fullness of age.  Forshia Koloi called for amendments on Section 77 and all the provisions that speaks to the subject of Bogosi and the powers infested in them. He said they should be made more detailed and avoid ambiguity in clauses.

Mr Tlhaodi said there must be Land Audits done in the country. Citing an example of the Tati Land as one that should be thoroughly audited. He further advised that, Election Day be put on the Calendar. He said, if it happens that the day be a Saturday, there should be some special dispensation for the 7th Day Adventist Church members to take part in voting without compromising on their day of worship. Tlhaodi added that there must be People’s Complaint Commission in the country.

Speakers emphasized the need for the country to review the exercise of ‘Political Party Funding’. They articulated that lack of funding political parties’ results in political parties resorting to finding funds for themselves. They reiterated that sometimes going to the extent of getting funds through illegal means. Bangwato agreed in one accord that they want the President be tried whilst in office if suspected of any criminal offences. This was revealed in their contributions. They pointed out that, the law should not to wait until the end of their tenure.

For his part, the Deputy Chairperson of the Commission Johnson Motshwarakgole expressed gratitude to the residents of Serowe. He applauded women for their kindness saying it is only them, who always take responsibility for doing things amicably in the society.

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Parliament unveils major shake-up plans & reforms

23rd May 2022
Parliament

Parliament has revealed that it plans to rollout a Community Score Card (CSC) exercise as part of sweeping reforms to its role and mandate among others.

The planed shakeup, along with the rollout of CSC will see creation of new Parliamentary Portfolio Committees on Health, HIV&AIDS, Education and Skills Development, Trade and Economic Development, Agriculture, Lands and Housing and Local Governance and Social Welfare.
Parliament informed government ministries and departments that the CSC is a participatory, community based monitoring and evaluation tool that enables citizens to assess the quality of public services and interact with services providers to express their concerns.

According to Parliament, the CSC will assist to inform community members about available services and their entitlements and to solicit their opinions about the accessibility and quality of certain services related to the portfolio committees mentioned.  It said the main objective is for Parliament through identified oversight committees is to conduct a participatory monitoring and evaluating process that puts ownership and responsibility for delivery of services in the hands of both the Government and the service recipients.

“Through scorecards developed around identified sectors and services, communities and implementing departments remain in touch with progress made through the programme delivery cycle and are able to respond timely to bottlenecks,” the National Assembly said.  Some of the measurements and expected outcomes for the rolling out of the CSC include among others, improved monitoring and economic evaluation, to determine the impact of spending, so as to be able to direct resources from where they having the least benefit to those projects and programmes where they will have a larger positive impact.

The National Assembly explained further that this could result in a willingness to close down ineffective programmes and institutions and not to implement projects that do not deliver adequate returns, improved productivity in the public services, especially given the substantial pay increases.

The National Assembly believes that the rolling out of CSC is also expected to result in efficiency savings: many public services and programmes could be delivered more effectively at lower costs, by improving management and accountability, and making use of e-services. “This would yield financial savings that could be used for development programmes or reducing the deficit,” the National Assembly said.

The exercise is also expected to result in “Careful scrutiny of subsidy schemes and termination of those that do not address market failure or assist truly needy Batswana.”  The National Assembly revealed that proposed Parliamentary Portfolio Committee on Health and Wellness has been established in accordance with the Standing of National Assembly of Botswana.  It explained that the mandate of the Committee is mainly to exercise Parliamentary oversight and scrutiny over Government Ministries, Departments and Agencies with portfolio responsibilities in respect of Health and HIV/AIDS.

“There is need to identify reasons for inefficiency and poor outcomes and ensure that health system reform improve productivity and value for money. Key areas of focus for scorecard, availability of drugs, staffing ratios, accessibility of health services, speciality care and services and sexual reproductively health,” the National Assembly said.

Another proposed Committee is on Local Governance and Social Welfare. The mandate of the Committee is mainly to exercise Parliamentary Oversight and Scrutiny over Government Ministries. Departments and Agencies with Portfolio responsibilities in respect of Local Governance and Social Welfare.

“Strategies under NDP 11 to improve outcomes of social uplifment include; diversification of rural economies, development and support of small businesses, provision of social safety nets, eradication of absolute poverty, provision of quality and equitable education and harmonisation of social protection programmes,” said the National Assembly.  It said social nets need to be improved so as to target these most in need (at present some social safety nets benefit many people who are not the most needy, but also miss out some of those who are needy).

“Some social development policies more broadly should also aim to reduce household vulnerability to shocks such as those arising from fluctuations in agriculture, climate change, incomes and employment and improve their ability to handle shocks, thereby building household resilience,” the National Assembly said.

Another Committee established is on Agriculture, Lands and Housing. The mandate of the Committee is mainly to exercise Parliamentary oversight and scrutiny over Government Institutions, Departments and Agencies with portfolio responsibilities in respect of Agriculture, Lands and Housing.

The National Assembly said the average growth rate of the agricultural sector since the beginning of National Development Plan 11 (NDP11) (i.e. during the 2017/2018 and 2018/19 financial years) was 2.5 percent, making it the slowest growing sector of the economy, in line with its historical performance.

“Over the same period, its share of GDP has been stagnant at around 2 percent. The sector also contributes job opportunities for about 80 000 adults. Food security has become paramount since the onset of the corona virus pandemic,” the National Assembly said.  The National Assembly said the Government realises the need to increase food production for products in which Botswana has a cooperative advantage such as beef, grains and other horticulture products.

The Committee on Finance, Trade and Economic Development has also been established. One of the mandates of Committee would be to exercise Parliamentary oversight and scrutiny over government ministries, departments and agencies with portfolio responsibilities in respect of Finance, Development, Trade and Industry.

“The sector is at the core of industrialisation aspirations and strategies for economic development in Botswana. Manufacturing in particular can be the driver of economic growth through technological improvements and innovation,” the National Assembly said. Hence, it said, the development of the sector could also foster export diversification and export led-growth in Botswana while benefitting from the African Continental Free Trade Area (AFCFTA).

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Salbany, Bareetsi threaten to sue DIS

23rd May 2022
Salbany Bareetsi

Two senior members of Directorate on Corruption and Economic Crime (DCEC) have threatened legal action against Directorate of Intelligence and Security (DIS), it has transpired. The threat is contained in an answering affidavit of Director General of DCEC, Tymon Katlholo in which he is seeking an interdiction from High Court to stop the DIS from accessing investigation files at his office.

After the DIS detained DCEC officials Joao Salbany and Tsholofelo Bareetsi on December 16, 2021, they filed an official complaint against DIS and some officials. They complained about abuse of office by DIS and five officers. Salbany and Bareetsi also complained about unlawful detention by DIS and unlawful dissemination of classified information contrary to Section 44 of Corruption and Economic Crime Act. “The DIS interviews were premised on information divulged during the course of official DCEC work product, that is the Monday media brief meeting,” they wrote.

They further requested leave to institute a civil suit against the DIS and its officers, and invariably the State for inhuman and degrading treatment they suffered and unlawful detention. They also pondered a declaratory seeking a sanction against the DIS and Botswana Police Service (BPS) and clarification of the role of BPS officers seconded to DIS.

“The envisaged suit against BPS and DIS officers and the DIS will inevitably centre on investigations done by the DCEC and the scope of the protection availed to DCEC officers for conduct done in the course and scope of DCEC official duties.” The duo said it was self-evident from the conduct of the DIS officers that there was nothing urgent about the information required by the DIS, justifying their detention at its Sebele facility from 08:30 hours on December 16, 2021 until 02:00 hours on December 17, 2021.

They reasoned that the information required by the DIS could have been obtained by a simple request to DCEC Director General. “What the DIS did was to seek to intimidate officers of the DCEC whom they knew were carrying out investigations against some of the DIS officers who were part of their investigation team. This turn of events has a chilling effect not only on the functioning of the DCEC but also on the official conduct of officers of the DCEC as to how they conduct their official duties.”

They concluded by stating that in the event the request is granted, they would further request to be advised as to the provision of legal representation as the unalwful detention and the degrading and inhuman treatment by the DIS was in relation to matters conducted by and on behalf of the DCEC.

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