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BY KABELO SEITSHIRO
While there is no foolproof way to prevent bad leadership decisions, many global analysts believe that the field of “corporate governance” is a very good place to start.
This perhaps explains why the Botswana Accountancy Oversight Authority (BAOA) – the country’s independent audit and accounting regulator took upon itself to examine Botswana state owned statutory bodies and enterprises (SOEs) with keen interest on their corporate governance.
The report, presented to members of Parliament this past week present gloomy picture when it comes to the performance of Botswana’s SOEs in corporate governance. BAOA executives who appeared before the committee also made revelations that Botswana does not its own corporate governance code but instead uses the King Code which is not legally enforceable in the country. Here is a summary of what BAOA found out about some of the SOEs.
Botswana Railways – BR
Botswana Railways (BR) is cited in the report amongst the worst performing so far with widespread non-compliance with the International Financial Reporting Standards (IFRS).
The company’s financial statements are not timeously prepared while at the same time the quality and effectiveness of its audit is also questionable. The latter was in view of so many findings that are said to be undetected.
“Government had injected a significant amount of funds and with such poor controls, the concern became accountability for such funds”, reads part of the BAOA commentary on Botswana Railways.
Botswana Meat Commission - BMC
Botswana Meat Commission or BMC has ticked all the three non-complaint boxes. This means the meat agency is not complaint in financial reporting monitoring, corporate governance and going concern. It has also emerged that its financial statements have been materially misstated. During the period under review, BMC reported a huge deficit of P223 million attributable mainly to the Francistown abattoir.
National Development Bank – NDB
Despite the adoption of the bank’s 2015 turnaround strategy which was focused on reduction of non-performing loans and improving the quality and size of the loan book, the bank continues to rely on cash injections from government. At the time of BAOA visit, NDB was nine months behind preparation of its financial statements.
“The bank’s corporate governance compliance was poor with sufficient and appropriate cooperate governance disclosures not made in the annual report”, says BAOA.
Water Utilities Corporation – WUC
The national water supplier – WUC, which recently parted ways with its Chief Executive, has been listed amongst the SOEs that need to improve in the area of corporate governance. The accountancy oversight body says WUC has history of poor recovery of bills which negatively impacts its liquidity and going concern. WUC’s financials shows that profitability worsened during the period under review but the entity was mitigated by P388 million cash injection from the shareholder - government.
Botswana Power Corporation – BPC
For the national power utility to be a going concern entity, BAOA recommends one thing – government support. BPC’s IFRS compliance on the other hand also needs attention according to the BAOA team.
“High level of gearing are a concern as this could introduce financial risk and exposure to failure on the entity”, says BAOA.