In his Budget Speech on Monday, the Minister of Finance dedicated a significant chunk of his message to briefing the nation on the state of the state owned parastatals. While we congratulate the minister for this, it is also our view that he should have gone further than he did. We wish that he had been much more candid and much more explicit.
It is high time parastatals are singled out individually and dissected in such forums like the national budget speech so that each of them can re-appreciate the purpose for which they were created. Our other gripe is that the Minister only went as far as mentioning star performers while leaving out the laggards, and also not telling the nation just why a majority of our parastatals have not performed up to scratch. We however draw solace from the fact that this year’s speech by the minister marks a clear break with tradition.
Tradition has always been to close ranks and adduce all sorts of outlandish excuses for sluggish performances by many of our parastatals. It has never been clear to us why the minister would found it feasible to protect parastatals that drain so much of the public fiscus while the clear option would be to confront honestly reality. As we have said so many times before on this space, many of the returns realized by our parastatals are not worth the investments.
Most comforting however has been an announcement by the Minister that going forward, the conditions for establishing new parastatals would be much tougher. Our wish of course is that he had gone further to announce a time-tagged moratorium effectively banning the establishing of new parastatals until such time that the existing ones have turned the corner, have been privatized or are realizing returns to the shareholder that make it unnecessary to make any further subventions to them. We wholly subscribe to the philosophy that parastatals, or at least a number of them should not be judged or evaluated solely or purely on their bottom line, much less on the dividends they declare to the shareholder.
Additionally, nobody has ever doubted the continued efficacy of maintaining parastatals as an integral component of Botswana’s overall economic systems. This is because some of them were established as social investments to carry out duties that no private sector would want to venture into because of a lack of profit incentives. They were created to fill existing gaps that on account of a weak private sector could not meaningfully be expected to be performed by anybody else. But in difficult economic times such as what we are going through, parastatals should not be allowed to be cash cows and honeypots for executives and their friends who they appoint to the Boards.
Government should become more aggressive in its quest to reform some of these parastatals. There is a history to the problems besieging our parastatals. Membership to the ruling party, rather than expertise used to be a defining pre-requisite for appointment to Boards. That, we must admit has changed but hangover after effects remain. While party membership is no longer the defining criterion, there is still a lot of refining to be done on the process of appointing board directors. For example it very clear that a pattern is emerging where Chief Executives Officers are now extended inordinately leeway to decide or at least influence who can sit on the boards. Because they choose their buddies and/or people they know they can easily roughshod over, the end result is to defeat the very purpose of appointing directors.
Also, it is not unusual to see two CEOs of parastatals sitting on each other’s board as non-executive directors. Inevitably, this breeds a culture of scratch your back I will scratch yours. Instead of enforcing the rules of corporate governance this CEOS-cum-directors now become agents of cross polar benefit awards from one parastatal to the other. Effectively you get Board members awarding perks to a CEOs with a full knowledge that because the same CEO also sits as a Director on the opposite Board, they too will return the favour when that time comes.
This invariably kills all prospects of oversight and undermines corporate governance. These really are evils at the centre of poor performance within our parastatals. Until such time that accountability and all the known principles of governance are upheld there will be little movement towards turning the corner.
