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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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Civil Service volatility: Democracy vs Bureaucracy

19th April 2021
President Masisi

Here is how one Permanent Secretary encapsulates the clear tension between democracy and bureaucracy in Botswana: “President Mokgweetsi Masisi’s Government is behaving like a state surrounded with armed forces in order to capture it or force its surrender. The situation has turned so volatile, for tomorrow is not guaranteed for us top civil servants.

These are the painful results of a personalized civil service in our view as permanent secretaries”. Although his deduction of the situation may be summed as sour grapes because he is one of the ‘victims’ of the reshuffle, he is convinced this is a perfect description of the rationale behind frequent changes and transfers characterising the current civil service.

The result of it all, he said, is that “there is too much instability at managerial and strategic levels of the civil service leading to a noticeable directionless civil service.” He continued: “Changes and transfers are inevitable in the civil service, but to a permissible scale and frequency. Think of soccer team coach who changes and transfers his entire squad every month; you know the consequences?”

The Tsunami has hit hard at critical departments and Ministries leaving a strong wave of uncertainty, many demoralised and some jobless. In traditional approaches to public administration, democracy gives the goals; and bureaucracy delivers the technical efficiency required for implementation. But the recent moves in the civil service are indicative of conflicting imperatives – the notion of separation between politicians and administrators is becoming blurred by the day.

“Look at what happened to Prisons and BDF where second in command were overlooked for outsiders, and these are the people who had sacrificially served for donkey’s years hoping for a seat at the ladder’s end. The frequency of the changes, at times affecting the same Ministry or individual also demonstrates some level of ineptitude, clumsiness and lack of foresight from those in charge,” remarked the PS who added that their view is that the transfers are not related to anything but “settling scores, creating corruption opportunities and pushing out perceived dissident and former president, Ian Khama’s alleged loyalists and most of these transfers are said to be products of intelligence detection.”

Partly blaming Khama for the mess and his unwillingness to let go, the PS dismissed Masisi for falling to the trap and failing to outgrow the destructive tiff. “Khama is here to stay and the sooner Masisi comes to terms with the fact that he (Masisi) is the state President, the better. For a President to still be making these changes and transfers signals signs of a confused man who has not yet started rolling his roadmap, if at all it was ever there. I am saying this because any roadmap comes with key players and policies,” he concluded.

The Ministry of Health and Wellness seems to be the most hard-hit by the transfers, having experienced three Permanent Secretaries changes within a year and a half. Insiders say the changes have everything to do with the Ministry being the centre of COVID-19 tenders and economic opportunities. “The buck stops with the PS and no right-thinking PS can just allow glaring corruption under his watch as an accounting officer. Technocrats are generally law abiding, the pressure comes with politically appointed leaders racing against political terms to loot,” revealed a director in the Ministry preferring anonymity.

The latest transfer of Kabelo Ebineng she says was also motivated by his firm attitude against the President’s blue-eyed Task Team boys. “The Task Team wants to own the COVID-19 pandemic and government interventions and always cry foul when the Ministry reasserts itself as mandated by law,” said the director who added that Masisi who was always caught between the crossfire decided on sacrificing Ebineng to the joy of his team as they (Task Team) were in the habit of threatening to resign citing Ebineng as the problem.

Ebineng joins the Office of the President as a deputy Coordinator (government implementation and coordination office).The incoming PS is the soft-spoken Grace Muzila, known and described by her close associates as a conformist albeit knowledgeable.

One of the losers in the grand scheme is Thato Raphaka who many had seen as the next PSP because of his experience and calm demeanour following a declaration of interest in the Southern African Development Community (SADC) Secretary post by the current PSP, Elias Magosi.

But hardly ten months into his post, Raphaka has been transferred out to the National Strategy Office in what many see as a demotion of some sort. Other notable changes coming into OP are Pearl Ramokoka formerly with the Employment, Labour and Productivity Ministry coming in as a Permanent Secretary and Kgomotso Abi as director of Public Service Reforms.

One of the ousted senior officers in the Office of the President warned that there are no signs that the changes and transfers will stop anytime soon: “If you are observant you would have long noticed that the changes don’t only affect senior officers but government decisions as well. A decision is made today and the government backtracks on it within a week. Not only that, the President says this today, and his deputy denies it the following day in Parliament,” he warned.

Some observers have blamed the turmoil in the civil service partly to lack of accountable presidential advisers or kitchen cabinet properly schooled on matters of statecraft. They point out that politicians or those peripheral to them should refrain from hampering the technical and organizational activities of public managers – or else the party (reshuffling) won’t stop.

In the view expressed by some Permanent Secretaries, Elias Magosi, has not really been himself since joining the civil service; and has cut a picture of indifference in most critical engagements; the most notable been a permanent secretaries platform which he chairs. As things stand there is need to reconcile the imperatives of democracy and democracy in Botswana. Peace will rein only when public value should stand astride the fault that runs between politicians and public managers.

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Morupisi fights for freedom in court

19th April 2021
morupisi

Former Permanent Secretary to the President, Carter Morupisi, is fighting for survival in a matter in which the State has charged him and his wife, Pinnie Morupisi, with corruption and money laundering.

Morupisi has joined a list of prominent figures that served in the previous administration and who have been accused of corruption during their tenure in office. While others have been emerging victorious, Morupisi is yet to find that luck. The High Court recently dismissed his no case to answer application.

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Pressure mounts on Biden to suspend Covid-19 vaccine patents

19th April 2021
Joe Biden

United States President, Joe Biden, is faced with a decision to make relating to the Covid-19 vaccine intellectual property after 175 former world leaders and Nobel laurates joined the campaign urging the US to take “urgent action” to suspend intellectual property rights for Covid-19 vaccines to help boost global inoculation rates.

According to the world leaders, doing so would allow developing countries to make their own copies of the vaccines that have been developed by pharmaceutical companies without fear of being sued for intellectual property infringements.

“A WTO waiver is a vital and necessary step to bringing an end to this pandemic. It must be combined with ensuring vaccine know-how and technology is shared openly,” the signatories, comprising more than 100 Nobel prize-winners and over 70 former world leaders, wrote in a letter to US President Joe Biden, according to Financial Times.

A measure to allow countries to temporarily override patent rights for Covid related medical products was proposed at the World Trade Organization by India and South Africa in October, and has since been backed by nearly 60 countries.

Former leaders who signed the letter included Gordon Brown, former UK Prime Minister; François Hollande, former French President; Mikhail Gorbachev, former President of the USSR; and Yves Leterme, former Belgian Prime Minister.

In their official communication, South Africa and India said: “As new diagnostics, therapeutics and vaccines for Covid-19 are developed, there are significant concerns [about] how these will be made available promptly, in sufficient quantities and at affordable prices to meet global demand.”

While developed countries have been able to secure enough vaccine to inoculate their citizens, developing countries such as Botswana are struggling to source enough to swiftly vaccine their citizens, something which world leaders believe it would work against global recovery therefore proving counter-productive.

Since the availability of vaccines, Botswana has been able to secure only 60 000 doses of vaccines, 30 000 as donation as from the Indian government, while the other 30 000 was sourced through COVAX facility.  Canada, has pre-ordered vaccines in surplus and it will be able to vaccinate each of its citizens six times over. In the UK and US, it is four vaccines per person; and two each in the EU and Australia.

For vaccines produced in Europe, developing countries are forced to pay double what European countries are paying, making it more expensive for already financially struggling economies.  European countries however justify the price of vaccines and that they deserve to buy them cheap since they contributed in their development.

It is evident that vaccines cannot be made available immediately to all countries worldwide with wealthy economies being the only success story in that regard, something that has been referred to as a “catastrophic moral failure”, head of the World Health Organisation (WHO), Tedros Adhanom Ghebreyesus.

The challenge facing developing countries is not only the price, but also the capacity of vaccine manufactures to be able to do so to meet global demand within a short time. The proposal for a patent waiver by India and South Africa has been rejected by developed countries, known for hosting the world leading pharmaceutical companies such US, European Union, the United Kingdom, and Switzerland.

According to the Financial Times, US business groups including pharmaceutical industry representatives, have urged Biden to resist supporting a waiver to IP rules at the WTO, arguing that the proposal led by India and South Africa was too “vague” and “broad”.

The individuals who signed the letter, including Nobel laureates in economics as well as from across the arts and sciences, warned that inequitable vaccine access would impact the global economy and prevent it from recovering.

“The world saw unprecedented development of safe and effective vaccines, in major part thanks to US public investment,” the group wrote. “We all welcome that vaccination rollout in the US and many wealthier countries is bringing hope to their citizens.”

“Yet for the majority of the world that same hope is yet to be seen. New waves of suffering are now rising across the globe. Our global economy cannot rebuild if it remains vulnerable to this virus.”
The group warned that fully enforcing IP was “self-defeating for the US” as it hindered global vaccination efforts. “Given artificial global supply shortages, the US economy already risks losing $1.3tn in gross domestic product this year.”

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