Wednesday, December 1, 2021

A sorry state of SOEs in Botswana

Unless Botswana takes urgent action to improve accountability at some of the State Owned Enterprises (SOEs), many of them will continue to make large losses whilst at the same time needing huge subventions from the government budget to keep them afloat, a quarterly economic review compiled by local economic think tank ÔÇô eConsult Botswana has suggested. 

An analysis of Botswana’s SOEs by economists at Econsult point out to the fact that some parastatals in the country are not serious about being held accountable to the public. 

Econsult possibly reached this conclusion based on a simple criterion through which it cross checked the efficiency and transparency of such entities. This entails whether such SOEs have a functioning website and if they have published their annual reports in a form that is readily available to the public. 

From a total of 60 SOEs that Econsult examined, only four were identified as fully meeting the transparency criteria over the last five years (2012/13 ÔÇô 2016/17). These are Bank of Botswana (BoB), Botswana Housing Corporation (BHC), Botswana Telecommunication Limited (BTCL) and Botswana Stock Exchange (BSE). 

A few scored zero, with neither annual reports nor a functioning website. In most cases this reflected their being relatively new. The list includes entities such as the SEZA ÔÇôEconomic Zones regulator-, BERA ÔÇôEnergy regulator-, and BGSI ÔÇô Geoscience regulator.  

The majority of SOEs were identified as having a functioning website but a complete lack of available accounts or annual reports. 

Econsult advises that SOEs could and should better as custodians of assets that ultimately belong to the people of Botswana. “As a first step, all parastatals will be required to share their reports and accounts with BAOA (Botswana Accountancy Oversight Authority), under the Financial Reporting Act, 2010,” it proposes. 

With key economic activities taking place within government’s space through SOEs it is worth mentioning that private firms are not restricted from competing with them. However the extent to which the playing field is accommodative depends on the nature of activities; for example, those that provide water (Botswana Water Utilities Corporation) and electricity (Botswana Power Corporation) are state-sanctioned monopolies. In addition, SOEs engaged in commercial activities are governed by the same business registration and licensing laws applied to privately owned enterprises. In that regard, SOEs are expected to publish annual reports and are also subject to auditing. An investment climate statement published by U.S Department of State notes that in 2011 Parliament also began overseeing SOEs, compelling Presidents and Chairmen to appear before Parliamentary committees to provide reports and answer questions regarding their performance. The media, in most cases, then informs the public of the findings from such committee meetings.    

An OECD report titled ‘State-owned Enterprises in Southern Africa: A Stocktaking of Reforms and Challenges’ which profiled SOEs across the Southern African region had in 2014 cited 49 operational SOEs in Botswana, 19 of which it identified as commercial entities and the remainder were classified as non-commercial entities. In the past three years to date 11 more SOEs were established, this indicates an increase of 18 percent. The report expounded that the state owned sector existed as a remnant of a nationalisation policy embarked on in the 1980s which put government at the centre of industrial development policy. “At this time, a number of parastatal entities were created to drive industrial development and orient resources previously devoted to agriculture to manufacturing and the services sector,” it says. It adds that the establishment of SOEs was to assist in unhinging the economy from the pivotal mining sector and introduce other economic activities to it. This shows the importance of SOEs in driving the diversification of the economy. 

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