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How Austere Are Our Accountants?

David Magang

On August 12, I was keynote speaker at the Botswana Institute of Chartered Accountants’ (BICA) Gala Dinner.

I had been invited to deliver an address titled Mitigation Against Dependency on Diamonds.

The component discussion points I was expected to expound upon, however, were myriad. And not only that: they were so disparate, more or less, as to constitute standalone themes in their own right. The result was that in a bid to ensure that the speech balanced out and that it did not drone on wearisomely, I refrained from propounding on the sub-themes to a level of depth I would ordinarily have liked. Some of the underlying issues I only superficially dwelt upon: just scratched on the surface. The sense of insubstantiality galled. Brevity   has never been one of my strengths: I prefer to engage a subject to the fullest extent possible.

One of the talking points, to me the most relevant given the preponderance of the audience I was addressing, related to the role accountants were expected to play in propelling the economy of Botswana forward. I found this bit particularly pertinent given the efflux of corporate accounting scandals that have dogged the Western world over the years, wreaked havoc on stock markets, and brought untold hardships to investors and employees alike.

When a multi-billion dollar company unravels in a blaze of financial impropriety, it is a serious indictment as much on its management as on its auditors. It can also inflict a telling dent on the national kitty in view of the now lost source of tax dollars. Accountants and auditors therefore are critical to ensuring that the Internal Service Revenue, or BURS in Botswana’s case, sustains its liquidity momentum, which in turn bolsters the economic potency of the country since it is tax revenues that make the macroeconomic engine chug.

But accountants do not always live up to their professional billing. There are times when they turn out to be the very embodiment of a hoodlum. The Enron Scandal, now the archetype of corporate tanking induced by fraudulent accounting, was one such case.


Founded in 1985, Enron was an American energy, commodities, and services company based in Houston, Texas. It was the seventh largest corporation in the United States, employing 20,000 people and churning out revenues north of $100 billion annually.  

At its peak, the corporate behemoth was worth about $70 billion and its shares traded for about $90 each, making it one of the hottest stocks on the New York Stock Exchange. The highly regarded Fortune magazine named Enron "America's Most Innovative Company" for six straight years.  But just as it soared to skyscraping heights, it literally overnight faced a dizzying collapse. The cookie had crumbled with a deafening thud that sent shockwaves throughout the business world. What went wrong?

It was a confluence of factors,  which included individual and collective greed born in an atmosphere of market euphoria and corporate arrogance, but the nub of the matter was deceptive financial reporting in which the company executives and its auditors were complicit. The basic essentials of the scam are summed up as follows by one pundit:

“The company would build an asset, such as a power plant, and immediately claim the projected profit on its books, even though it hadn't made one dime from it. If the revenue from the power plant was less than the projected amount, instead of taking the loss, the company would then transfer these assets to an off-the-books corporation, where the loss would go unreported. This type of accounting created the attitude that the company did not need profits, and that, by using the mark-to-market method, Enron could basically write off any loss without hurting the company's bottom line.”

By 2000, Enron was already a powder keg, needing only the tiniest spark to conflagrate. It was swimming in the very blood it had haemorrhaged, almost wholly engulfed and gasping for breath. It was a dead man walking but without making the slightest hint to the public that it was at death’s door. How did the company manage to so blindfold zillions of faces?


On August 14 2001, Kenneth Lay, Enron’s Chairman and Chief Executive Officer, sought to assure a modicum of discerning cynics who were now casting aspersions at the company’s bona fides with the following words: “There are no accounting issues, no trading issues, no reserve issues, no previously unknown problem issues. I think I can honestly say that the company is probably in the strongest and best shape that it has probably ever been in."

That outright lie came apart at the seams only four months later: on December 2, Enron filed for bankruptcy. It emerged that through the use of what are known as off-balance-sheet vehicles, Enron had overstated profits by $600 million from 1997 to 2001. The company had gone on a reckless and imprudent investment binge, without doing adequate due diligence, in the process accumulating billions of debt from fruitless deals and projects which it swept under the rug. All this was happening under the “watchful” eye of Arthur Andersen, its auditors, who were responsible for both internal and external audit. Andersen staff in fact permanently occupied a whole floor within the plush Enron edifice itself.

But it was not only the ultra-ambitious bottom line designs of the Enron executives and the dereliction of duty on the part of Andersen that redounded to the downfall of the company. Much of the finger pointing was directed at the Securities Exchange Commission (SEC) for its systemic and catastrophic failure of oversight: Enron’s post-1997 annual reports were replete with red flags which could have captured the SEC’s attention had it been only a shade vigilant.

The Credit Rating Agencies, the Standard & Poor’s of this world, also did a poor job of their mandate when they consistently awarded Enron investment grade ratings right up to the eve of its collapse. Meanwhile, the investment banks continued to sing panegyrics about Enron, punting it with positive research analysis, hyping up its stock, and infusing billions of dollars of investment into the company when they should have been one of the first to blow the whistle on its rather straitened circumstances.


The Enron implosion saw the company’s stock price plummet from $90 on August 23 2000 to 12 cents on January 11 2002, with shareholders losing close to $11 billion.  With assets valued at just under $65 billion, Enron went into the annals of US history as the largest corporate bankruptcy to date.

The company was indebted to the tune of nearly $70 billion. Of the $2 billion its 20,000 employees lost from their pensions, the only compensation they received was $3,100 each.

A number of Enron employees were indicted, including Chairman and CEO Kenneth Lay and Chief Operating Officer Jeff Skilling. All in all, 16 people pleaded guilty for crimes committed at the company.

Skilling was convicted of 19 of 28 counts of securities and wire fraud.  He drew 24 years and 4 months, though the sentence was subsequently reduced by 10 years after he struck a deal with the US Department of Justice.

Lay subliminally chose to head for Hell rather than jail: he died of a heart attack, so beleaguered was he mentally, emotionally, and sentimentally. At the time of his death in May 2006, he was awaiting sentencing for conspiracy and fraud and the SEC was seeking to recover more than $90 million from him on top of civil fines when he was practically penniless, his single-basket investments having gone up in the Enron smoke.   

With the demise of Enron came the dissolution of Arthur Andersen, at the time one of the world’s five largest audit and accounting partnerships.


In recent years, we have laid our own claim to miniature Enrons here in Botswana. A few examples will suffice, with KFC conspicuous by its absence as its fate is not conclusive yet.

In 2008, Lobtrans, a fuel transporter that served the entire SADC region and boasted a tanker fleet of about 300, went belly-up, deluged in a P270 million debt. It left 600 employees in the lurch. Where were the auditors when signs emerged that the company was headed for the abyss?

In 2014, Delta  Dairies, the first citizen-owned milk production facility, ceased to exist after only six years. Creditors had been furiously  knocking on its doors, demanding that it make good on its  P20 million aggregate debt. The irony of the matter was that the company was riding on the crest of a P68 million government tender. Once again, did the auditors do their job of pointing out the nether aspects of the company’s financial conduct?

In 2015, Fengyue – the very mention of that name actually gives me nausea – bit the dust under a quicksand of a most odious debt.  The glass manufacturing project, which was established in 2007, gave up the ghost before it produced a single pane, with its consort BDC losing close to a billion Pula. Where were the auditors when the writing had been on the wall from day one – plain and unequivocal?

In the last ten years, a number of diamond cutting and polishing firms, all foreign-owned,  have set up in the country. I do not know who audits their books, but whoever it is, are they objective and scrupulous enough to ensure that their numbers are not cleverly cooked in a bid to limit or even evade altogether tax obligations?

It is not only the collapse of a company we should be concerned about: it is transparent and conscientious reporting too. Remember, the reason why Arthur Andersen was so lax in assessing the books of Enron was that it didn’t want to blight a contract with a blue chip client that grossed it over $50 million in annual fees.

True, auditing is not meant to stop companies from making dumb business moves—just to make sure those moves are properly disclosed. But we cannot wish away the fact that some managers can be notorious in manipulating the perception of operating performance. Auditors therefore must always be on the qui vive, both to get their clients to present operating results truthfully and to put out sprouts or flickers of financial trouble before they take on inferno proportions ala Enron.

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Chronic Joblessness: How to Help Curtail it

30th November 2020
Motswana woman

The past week or two has been a mixed grill of briefs in so far as the national employment picture is concerned. BDC just injected a further P64 million in Kromberg & Schubert, the automotive cable manufacturer and exporter, to help keep it afloat in the face of the COVID-19-engendered global economic apocalypse. The financial lifeline, which follows an earlier P36 million way back in 2017, hopefully guarantees the jobs of 2500, maybe for another year or two.

It was also reported that a bulb manufacturing company, which is two years old and is youth-led, is making waves in Selibe Phikwe. Called Bulb Word, it is the only bulb manufacturing operation in Botswana and employs 60 people. The figure is not insignificant in a town that had 5000 jobs offloaded in one fell swoop when BCL closed shop in 2016 under seemingly contrived circumstances, so that as I write, two or three buyers have submitted bids to acquire and exhume it from its stage-managed grave.

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The Era of “The Diplomat”

30th November 2020

Youngest Maccabees scion Jonathan takes over after Judas and leads for 18 years

Going hand-in-glove with the politics at play in Judea in the countdown to the AD era, General Atiku, was the contention for the priesthood. You will be aware, General, that politics and religion among the Jews interlocked. If there wasn’t a formal and sovereign Jewish King, there of necessity had to be a High Priest at any given point in time.

Initially, every High Priest was from the tribe of Levi as per the stipulation of the Torah. At some stage, however, colonisers of Judah imposed their own hand-picked High Priests who were not ethnic Levites. One such High Priest was Menelaus of the tribe of Benjamin.

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Land Board appointments of party activists is political corruption

30th November 2020

Parliament has rejected a motion by Leader of Opposition (LOO) calling for the reversing of the recent appointments of ruling party activists to various Land Boards across the country. The motion also called for the appointment of young and qualified Batswana with tertiary education qualifications.

The ruling party could not allow that motion to be adopted for many reasons discussed below. Why did the LOO table this motion? Why was it negated? Why are Land Boards so important that a ruling party felt compelled to deploy its functionaries to the leadership and membership positions?

Prior to the motion, there was a LOO parliamentary question on these appointments. The Speaker threw a spanner in the works by ruling that availing a list of applicants to determine who qualified and who didn’t would violate the rights of those citizens. This has completely obliterated oversight attempts by Parliament on the matter.

How can parliament ascertain the veracity of the claim without the names of applicants? The opposition seeks to challenge this decision in court.  It would also be difficult in the future for Ministers and government officials to obey instructions by investigative Parliamentary Committees to summon evidence which include list of persons. It would be a bad precedent if the decision is not reviewed and set aside by the Business Advisory Committee or a Court of law.

Prior to independence, Dikgosi allocated land for residential and agricultural purposes. At independence, land tenures in Botswana became freehold, state land and tribal land. Before 1968, tribal land, which is land belonging to different tribes, dating back to pre-independence, was allocated and administered by Dikgosi under Customary Law. Dikgosi are currently merely ‘land overseers’, a responsibility that can be delegated. Land overseers assist the Land Boards by confirming the vacancy or availability for occupation of land applied for.

Post-independence, the country was managed through modern law and customary law, a system developed during colonialism. Land was allocated for agricultural purposes such as ploughing and grazing and most importantly for residential use. Over time some land was allocated for commercial purpose. In terms of the law, sinking of boreholes and development of wells was permitted and farmers had some rights over such developed water resources.

Land Boards were established under Section 3 of the Tribal Land Act of 1968 with the intention to improve tribal land administration. Whilst the law was enacted in 1968, Land Boards started operating around 1970 under the Ministry of Local Government and Lands which was renamed Ministry of Lands and Housing (MLH) in 1999. These statutory bodies were a mechanism to also prune the powers of Dikgosi over tribal land. Currently, land issues fall under the Ministry of Land Management, Water and Sanitation Services.

There are 12 Main Land Boards, namely Ngwato, Kgatleng, Tlokweng, Tati, Chobe, Tawana, Malete, Rolong, Ghanzi, Kgalagadi, Kweneng and Ngwaketse Land Boards.  The Tribal Land Act of 1968 as amended in 1994 provides that the Land Boards have the powers to rescind the grant of any rights to use any land, impose restrictions on land usage and facilitate any transfer or change of use of land.

Some land administration powers have been decentralized to sub land boards. The devolved powers include inter alia common law and customary law water rights and land applications, mining, evictions and dispute resolution. However, decisions can be appealed to the land board or to the Minister who is at the apex.

So, land boards are very powerful entities in the country’s local government system. Membership to these institutions is important not only because of monetary benefits of allowances but also the power of these bodies. in terms of the law, candidates for appointment to Land Boards or Subs should be residents of the tribal areas where appointments are sought, be holders of at least Junior Certificate and not actively involved in politics.  The LOO contended that ruling party activists have been appointed in the recent appointments.

He argued that worse, some had no minimum qualifications required by the law and that some are not inhabitants of the tribal or sub tribal areas where they have been appointed. It was also pointed that some people appointed are septuagenarians and that younger qualified Batswana with degrees have been rejected.

Other arguments raised by the opposition in general were that the development was not unusual. That the ruling party is used to politically motivated appointments in parastatals, civil service, diplomatic missions, specially elected councilors and Members of Parliament (MPs), Bogosi and Land Boards. Usually these positions are distributed as patronage to activists in return for their support and loyalty to the political leadership and the party.

The ruling party contended that when the Minister or the Ministry intervened and ultimately appointed the Land Boards Chairpersons, Deputies and members , he didn’t have information, as this was not information required in the application, on who was politically active and for that reason he could not have known who to not appoint on that basis. They also argued that opposition activists have been appointed to positions in the government.

The counter argument was that there was a reason for the legal requirement of exclusion of political activists and that the government ought to have mechanisms to detect those. The whole argument of “‘we didn’t know who was politically active” was frivolous. The fact is that ruling party activists have been appointed. The opposition also argued that erstwhile activists from their ranks have been recruited through positions and that a few who are serving in public offices have either been bought or hold insignificant positions which they qualified for anyway.

Whilst people should not be excluded from public positions because of their political activism, the ruling party cannot hide the fact that they have used public positions to reward activists. Exclusion of political activists may be a violation of fundamental human or constitutional rights. But, the packing of Land Boards with the ruling party activists is clear political corruption. It seeks to sow divisions in communities and administer land in a politically biased manner.

It should be expected that the ruling party officials applying for land or change of land usage etcetera will be greatly assisted. Since land is wealth, the ruling party seeks to secure resources for its members and leaders. The appointments served to reward 2019 election primary and general elections losers and other activists who have shown loyalty to the leadership and the party.

Running a country like this has divided it in a way that may be difficult to undo. The next government may decide to reset the whole system by replacing many of government agencies leadership and management in a way that is political. In fact, it would be compelled to do so to cleanse the system.

The opposition is also pondering on approaching the courts for review of the decision to appoint party functionaries and the general violation of clearly stated terms of reference. If this can be established with evidence, the courts can set aside the decision on the basis that unqualified people have been appointed.

The political activism aspect may also not be difficult to prove as some of these people are known activists who are in party structures, at least at the time of appointment, and some were recently candidates. There is a needed for civil society organizations such as trade unions and political parties to fight some of these decisions through peaceful protests and courts.

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