Tuesday, December 7, 2021

BAOA finally unmasks BoB corporate governance mess

Conventional wisdom suggests that since it’s the government that formulates pieces of regulations and laws, state owned enterprises would be at the forefront of abiding by them. But guess what? In Botswana, according to an analysis done by the Botswana Accountancy Oversight Authority (BAOA) it appears public institutions score poorly on the corporate governance index.

Infact BAOA’s Chief Executive Duncan Majinda has starkly come out to say that, “there is no corporate governance in Botswana”.

Majinda says there is lack of compliance by state-owned enterprises caused by the interference of statutes that governs such organisations.

Appearing before the parliamentary committee on Statutory Bodies and State Enterprises, this past week, Majinda said he was disappointed with performances of state owned enterprises, placing the blame on unsatisfactory internal processes, systems and statutes.

THE BANK OF BOTSWANA MESS

In what may come as a shock to many, making it to the BAOA’s list of the non-compliant public institutions is the country’s central bank.

The Bank of Botswana, according to BAOA found itself in the watch-list due to its process of the appointment of its governor. The BAOA chief executive said there is need clearly define the establishment of roles and limitations of the role of Chief Executive Officer and the role of Chairman of the Board.

The board of the BoB does not appoint the CEO. The CEO is appointed by the president. They are complying with statutes, the law, that is more than 60 years old that is out of date and is a museum piece,” Majinda told the Parliamentary committee.

Majinda further explained that the fundamentals of corporate governance dictate that there be a separation of the role of the CEO and the role of chairman of the board.

“You breach that you have broken the back of corporate governance. You make it extremely difficult to control such an environment because the board is supposed to oversee management and makes sure management implements the strategies that it lays. The board is supposed to appoint the CEO looking at the qualities they want,” Majinda said.

While Sunday Standard was unable to obtain a comment from the central bank appointing authorities on the matter, recently the incumbent Central Bank governor Moses Pelaelo told a gathering at the BSE Bell ringing ceremony that the Bank of Botswana Act and the Banking Act are at advanced stages of review. The intention, Pelaelo said, is to modernise and align the two pieces of law to best international standards and practices. It is not yet clear whether the anticipated reviews will result in the desired changes with regards to the central bank’s corporate governance.

Meanwhile the official BAOA statistics shows that there is only 13 percent compliance when it comes to corporate governance within the public institutions.

“Thirteen percent is unacceptable, and the reason for that is because state-owned enterprises are torn apart between good corporate governance and complying with their statutes”, Majinda said.

Majinda attributed the low corporate governance score on weak board of directors of some SOEs which has resulted in failure to meet mandates while also raking operational losses.

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