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Business model or the people: Why are Public Enterprises failing?

The National Development Bank (NDB) has joined the bandwagon of the underperforming in retrenching its staff, with scores of the bank staff, save the Chief Executive Officer (CEO) having been told that no one is guaranteed survival of the imminent chop from the country oldest parastatal. Staff Writer ALFRED MASOKOLA examines underlying factors that have rendered State Owned Enterprises (SOEs) inefficient, unprofitable and unsustainable. 

State Owned Enterprises (SOEs), Public Enterprises or simply parastatals as it is the case here, are government owned or controlled institutions which were created with a clear mandate to engage in commercial activities. According to a report titled; “State-Owned Enterprises Catalysts for public value creation?” published by international auditing firm, PCW, public enterprises have been rising in influence in the global economy over the past decade. 

For instance, the proportion of SOEs among the Fortune Global 500 has grown from 9 percent in 2005 to 23 percent in 2014, including a greater presence in the top rankings.  China has been a model of what influence public enterprises can have in the economy, with corporation like Sinopec Group, China National Petroleum and State Grid having consistently made the top ten of Fortune 500.  

SOEs have become tools for some countries to better position themselves for the future in the global economy given increased global competition for finance, talent, and resources. However, in Botswana, parastatals have become a burden in the economy in recent years, with government have to come to rescue on several occasions to bail them out. Botswana Meat Commission (BMC), National Development Bank (NDB), Botswana Power Corporation (BPC) and Air Botswana being some of the institutions that have knocked on doors of government seeking financial rescue. 

Three of the above-mentioned institutions are monopolies, which even complicates matters on whether the problem with public enterprises their business models or the talent leading them. The BMC, WUC and Botswana BPC are among vital public enterprises that have been experiencing perennial losses for the past decade. In 2006, WUC, BMC and BPC made a combined net profit of P371.9 million while, in the latest budget speech, Finance Minister, Kenneth Matambo indicated that the three entities recorded a worrisome combined loss of P507. 5 million.

Duncan Majinda, Chief Executive Officer (CEO) of Botswana Accountancy Oversight Authority (BAOA), an institution with mandate to audit public enterprises tried to offer diagnosis on the matter. “A new area in our mandate was recently introduced in corporate governance and financial reporting monitoring. The initial results reflect that private and listed companies, and banks perform significantly better than state-owned enterprises,” Majinda told WeekendPost recently.  

“In order to explain the reasons for differential performance, it is appropriate to use an analogy. The engine of a car is the most important component of the car without which it cannot operate. By the same token, in an organisation, the Board and executive management is the engine of the entity. Poorly constituted boards without the requisite balance of knowledge, skills and expertise are the main problems of poorly performing entities.”

Majinda contended that private and listed companies have very strong boards constituted along best international practice through corporate governance codes like King III and IV. “Parastatals on the other hand are dominated by pre-determines ex-officio appointments so that if there is such a balance, it is by coincidence rather than design. Committees such as renumeration, Nomination, Risk are not common with parastatals,” he argued. 

Majinda however said there is obvious need to conscious of the nature of the mandates of these different entities as some are commercially oriented while others are geared towards providing a public good or service where commercial initiatives are constrained through, for example, controlled prices and levies. “That notwithstanding, good corporate governance can be applied right across industries and sectors, public or private, profit making or non-profit making, to ensure efficiency, effectiveness and economy in doing business. Good strong boards produce good and robust strategies that result in good strategic decisions,” he said. 

Following a litany of calls from various quarters, including legislators and the business community over the need to merge some ministries in a bid to improve efficiency and profitability, Ministry of Investment, Trade and Industry have given in. “It has been observed that the mandates of some of the parastatals are converging resulting in some overlaps and duplications,” Minister of Trade, Bogolo Kenewendo, indicate in her first media briefing as minister.

“A rationalisation exercise is ongoing in that regard, and the exercise will go a long way in eliminating duplication of efforts across the ministry’s parastatals where existent, culminating in improved service quality.” While a backbencher, Kenewendo had made her believes known that a number of parastatals do have overlapping mandates therefore requiring a rationalisation that would produce efficiency.

With the rationalisation process likely to affect mostly the funding institutions under the supervision of trade ministry such as Citizen Entrepreneurial Development Agency (CEDA), Botswana Development Corporation (BDC), Local Enterprise Authority (LEA) and possibly NDB, CEDA CEO, Thabo Thamane has cautioned government about the possibility of misdiagnosing the problem bedevilling public enterprises.

“I know what CEDA does, I have been here for the past 15 years; I know what LEA does, and I know what other financiers do. What is very critical is that we must be every carefully when making this analysis of merging public enterprises because their mandates were very specific,” he warned.

“It is one thing as for an institution that is not performing as per its mandate. If it does not perform, you do not just say you merge it. You basically say; why is it not performing? Is it the people or is it the mandate? So that is the starting point; If it is the people, you then put the right people so that they can make it perform; if it is the mandate, then review the mandate and then merge it with other institutions.”

Thamane contended that the last thing that government needs is to create a monster of an institution, because the bigger the institution, the bigger the process. “We welcome this idea of a possible review of the institutions, and where possible some will be merged. If they decide CEDA merges with other institution, I will take it, “he said.

BUSINESS MODEL FAILER: NDB CASE 

NDB has found the going tough in recent years, with the bank riddled with perennial losses amid a funding model that has been ruled out as not sustainable. This year, the bank has found itself in dire crisis as it had only P10 million to disburse for loans. The situation has forced the bank to retrench employees, with P31 million budgeted for the exercise. In May this year, the bank’s executives approached Parliamentary Committee on Public Enterprises and Statutory Bodies to lobby for recaptialisation. 

WeekendPost has established that NDB’s problems and bottlenecks are deeper than simply the matter of recapitalisation. The structure and sources of funding mean that they have an unfavourable cost structure which paralyses their competitiveness. “It is almost a chicken and eggs situation that for them to lower their cost of funding, they need to be deposit taking, that is through banking license, but it appears they need to capitalise a bit more to prepare for qualification as a deposit taking institution,” the committee member observed.

NDB has been sourcing its funds from BIFM Capital, Barclays Bank and First National Bank Botswana (FNBB) at an interest rate of 8.5 percent, and 9.5 percent for BIFM capital. This, according to the bank, is brought about by the verity that government has stopped issuing bonds to the bank, forcing it to find alternative funding avenues. It has merged that most of committee members are sympathetic to NDB and are determined to make a case in their favour before parliament. Parliament has the authority to authorise government spending and has in the past approved bailing out of several public enterprises which were struggling financially. 

Though NDB was at one point making profit, it does not get subvention from government on annual basis despite the bank being a development bank. In 2016, NDB requested government to inject capital amounting to about P1 billion in the next three years in order to transform the bank and prepare it for commercialisation.  Last year, it was offered P400 million by government, P100 million of it being a grant while the remaining P300 million was a loan.

As per Chief Executive Officer of the Bank, Lorato Morapedi’s statement before the parliamentary committee on Statutory Bodies and Enterprises in 2016, NDB wanted government to inject P400 million in the next financial year [2017], followed by two government guaranteed loans of P165 million and P250 million in subsequent years.

NDB is one of the quasi-government institutions that have been put up for privatisation, with Botswana Telecommunication Corporation (BTC) having successfully gone through the process. It is expected that, like the BTC, government will retain 51 percent shareholding in the company, while 5 percent is offered to employees, with the rest of the shareholding being offered to the public.

 However, there has been debate both within and outside NDB with regard to whether the bank is in a state to be commercialised. Some school of thought is that in its current state, government would be either giving it away or nobody will show interest in its stock, hence the need to recapitalise the bank.

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MoESD Steps in for Learners with Acute and Multiple Disabilities

29th February 2024

In an era where the advocacy for the rights and inclusion of marginal groups, especially individuals beset with profound and multiple impairments, grows more fervent, the Ministry of Education and Skills Development is actively devising schemes to integrate these individuals comprehensively.

Embarking on a pioneering venture, heralded by the Minister Douglas Letsholathebe, the establishment of a novel facility designated for individuals faced with disabilities is on the horizon, set to inaugurate in Maun by mid-2024.

This forthcoming entity, bestowed with the title “Maun Center for Learners with Severe and Multiple Disabilities,” is set to emerge as a sanctuary for those grappling with intense and diverse disabilities in the expanse of the Ngamiland District. Its mission extends beyond serving as a haven; it aims to elevate educational standards and secure outstanding scholastic achievements for this special cohort.

With palpable optimism, Dr. Letsholathebe heralds that this sanctuary, a collective effort of the ministry’s allies, is constructed and awaits its ceremonial launch in the June of 2024, marking a significant epoch in the winter season.

“Construction of the Maun Center for Learners with Severe and Multiple Disabilities has concluded, now in the stewardship of my Ministry. We are poised for its operational unveiling come June 2024,” Dr. Letsholathebe revealed, signaling a new chapter of assurance.

The Government of the Republic of Botswana is steadfast in elevating the status of individuals with disabilities, fostering an environment where their rights are fervently protected and upheld.

Echoing this commitment, the recent adoption of the Persons Living with Disabilities Act marks a historic stride. Its foremost objective is the establishment of the National Disability Coordinating Office alongside the National Disability Council, aligning with the mandates of the Convention on the Rights of Persons with Disabilities (CRPD). This movement is expected to significantly influence the integration of disability-centric issues.

Moreover, this legislative framework is set to fortify ongoing initiatives, increasing the economic participation of disabled individuals, thereby enhancing their living conditions and steering them towards securing a life marked by dignity and fulfillment.

 

 

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Unemployment hits People living with disability hard

29th February 2024

In light of historical evidence, individuals bearing disabilities have consistently encountered significant obstacles in securing employment, often finding themselves at the margins of the workforce. Constraints to equitable employment opportunities compared to their non-disabled counterparts were a common plight.

A substantial portion of employers harbor reservations about integrating people with disabilities into their workplaces, fearing potential complications. Only a select few are open to the idea of employing individuals with disabilities. Consequently, these individuals face heightened unemployment rates and a lack of social support, exacerbating their vulnerability to economic hardship. The International Labour Organisation (ILO), along with the nation of Botswana, champions the cause of workplace inclusion for people with disabilities.

Statistics from Botswana’s multi-topic survey for the fourth quarter of 2021 underscore the situation. The labor force comprising individuals with disabilities saw an uptick to 11,553 from 8,649 in just a year. Among these, 4,313 were males and 7,240 were females. The unemployed tally stood at 2,195, against 9,358 who were employed. A notable majority resided in Urban Villages, with the remainder spread across rural locales and cities.

During this quarter, individuals with disabilities accounted for approximately 1.3 percent (9,358 persons) of the overall 717,418 employed populace, marking a significant increase from the previous year. The distribution of employed persons with disabilities across various areas also saw changes, with urban regions employing a majority, followed by rural areas and cities.

The report further delves into the occupational landscape for people with disabilities, noting a predominant employment in service/sales roles over elementary positions – a contrast to the broader employment data.

Despite a reduction in unemployment figures for individuals with disabilities from the preceding year, the unemployment rate stands at a worrying 19.0 percent, with disparities between genders. Urban areas house the majority of the unemployed, with rural areas and cities following suit.

Unemployment across different age groups reveals a balanced distribution, highlighting a widespread issue across the demographic spectrum. This paints a vivid picture of the ongoing challenges and gradual progress within the sphere of employment for people with disabilities.

Majority of employers are still hesitant to employ people with disabilities because they believe they may bring problems in the workplace. Only a few employers are willing to hire workers with disabilities. This as a result makes people living with disability to be affected by high unemployment and insufficient social protection which then further increases their risk of poverty. The International Labour Organisation (ILO) is advocating for the inclusion of people with disability in the world of work and Botswana as a country too is advocating for their inclusion in the workplaces.

According to statistics Botswana, multi-topic survey quarter 4, 2021 labour force module report, the total labour force for people with disability was estimated at 11,553 persons, an increase of 2,904 persons over a period of twelve months (from 8,649 persons recorded in Q4 2020). From this total, 4,313 persons were males while 7,240 were females. In addition, 2,195 persons were unemployed whereas 9,358 persons were employed. Furthermore, the data showed the majority of labour force with disability were in Urban Villages (6,185), 3,708 were in rural areas and 1,661 in Cities & Towns.

 

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28th February 2024

The essence of community and local flair reigns supreme as St Louis Lager takes a bold step with its ambitious “Hype the Homegrown” Initiative, designed to bolster the visibility and support for local artists and home-based brands, weaving them into the fabric of mainstream success through revolutionary partnerships.

The launchpad for this endeavor has been set with a plethora of creative projects. Among them, a musical odyssey titled “The Journey,” featuring the fusion of local House and Pop virtuoso Hanceford Magapatona, widely celebrated as Han C. Enriching the project further are talents like the visionary Producer Flex the Ninja and the RnB Phenom, Priscilla K, whose track “Away” has captured hearts. This six-track EP, ripe with local genius, is up for grabs across all streaming services, inviting listeners to a world of Botswana’s finest.

But “Hype the Homegrown” transcends the bounds of musical exploration, delving into the realms of fashion and lifestyle, stitching a dynamic collaboration with Collections by B.K. Proctor. This venture, rooted in 100% local ownership by the trailblazing Rapper and Entrepreneur Bokang β€œBK” Proctor alongside Digital Maverick, Fifi Wale, showcases a vibrant melding of St Louis Lager and Collections by BK Proctor insignias across a series of street-savvy sneakers and tees. These exclusive pieces have hit the shelves at the Collections by BK Proctor boutiques within the bustling hubs of Gaborone Fairgrounds Mall, Grand Palm, and Toro Junction Mall in Francistown.

Unveiled by the marketing maestro of Kgalagadi Breweries Limited, Gaamanngwe Ramokgothwane, this initiative not only shines a spotlight on KBL’s enduring commitment to the arts but also underscores the wealth of creativity brewing within Botswana, deserving of grand stages and accolades. Ramokgothwane passionately advocates for a collective embrace of this homegrown brilliance, positioning “Hype the Homegrown” as not merely a campaign but a clarion call to action for institutions far and wide to champion and elevate local talent.

Echoing this sentiment, KBL’s steward Carlos Bernitt envisions a future where these artisans not only sparkle locally but also etch their mark on the global canvas, all through the unified backing of Batswana. With “Hype the Homegrown,” a legacy of innovation, creativity, and inspiration is in the making.

The Deputy Permanent Secretary of the Ministry of Trade and Industry, Seipati Olweny, acknowledged this campaign as a turning point for the creative community. She stressed the indispensable role of local talent in crafting Botswana’s cultural tapestry and stimulating economic diversification, pledging unwavering support from the ministry towards this collective journey of uplifting local flair.

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