Botswana is likely to slouch into a failed state status as most of its parastatals are failing to meet the accepted international standards of corporate governance.
This insight was shared by the Botswana Accountancy Oversight Authority (BAOA) with Sunday Standard.
“Under the Corporate Governance review, only 14 (16 percent) of the 86 ( PIEs) Public Interest Entities reviewed between 2018 and 2022 complied with the Corporate Governance requirement of either King III or King IV, while 72 ( 84 percent ) entities did not comply with the corporate governance requirements,” BAOA said.
BOAA said large part of the problem could be attributed to the ineptness at the Government Enclave for failure to come up with Acts that would address problems that the country is facing.
“This is a multi-layered problem. We have the failure of the Government Enclave for failure to come up with laws that will address the problem. At the same time, the boards are not independent and, for you to be on the board, you have to be politically aligned,” one corporate governance guru said.
Botswana is battling with corporate governance issues and recently one of them that was exposed relates to the lack of Merger and Acquisitions laws, which one of the corporate laws firms lamented.
“The most unfortunate thing about Botswana is that we do not have the Mergers and Acquisitions’ Law. We operate on Rules, and Rules are not laws,’ Sipho Ziga, a senior partner at Armstrongs Attorneys said.
“What we need to do is to come up with laws which are incorporated in the Companies Act. They must be effective and enforceable in law like in South Africa,” he added.
Lack of appropriate commercial laws have made the corporate field fluid and has promoted greed over the national interests.
“Our state owned entities ( SEOs), boards are all about greed rather than the national interests,” an observer said.
BAOA made a catalogue of problems that it encountered in its assessment of the local SOEs landscape.
“The following deficiencies which were common across the corporate governance review of PIEs were noted:
“a) Limitations by the statutes; (SOES are incorporated by Act of parliament, these Acts are not in line with the best Corporate Governance practices,” BAOA said in short.
It said that some of the problems it observed include inadequate executive and independent non-executive in the boards and that board chairperson were not independent non-executive directors.
“Audit committee members are not all independent non executive directors, the appointment of board directors not according to the best practice and there is no annual rotation of board of directors,” BAOA lamented.
Some of the problems observed were that there was not succession plans for the roles o Chairman, ehie Executive officers (CEO) and senior executives.
“There were no inductions and on-going training of directors and the audit committee statutory roles not performed. The roles of CEOs not normalised and they were no performance reviews of CEOs, BAOA said.
However, it noted that Botswana Development Corporation (BDC) is on its own league privileged with the best management and board members and having clearly outlined systems that meet the international standards.
The P 5.1 billion entity has attracted some of the best Batswana talented people to its board and has managed to tick on the right boxes in terms of corporate governance.
“The Board is satisfied that there is consistent compliance in all material aspects to all principles of good governance, as pronounced in King Corporate Governance Code and the Companies Act Cap 42:01, as well as the principles as set out in the proposed governance Code of Botswana, as issued by Directors Institute of Botswana,” BDC said in its annual report.
The proposed Code of Botswana has attracted criticism from corporate governance experts saying BAOA as a parastatal which is snarled up in the same problems affecting other parastatal is trying to dictate to others on the best practices.
They also questioned its reports on the International Financial Reporting (IFR), saying it does not go deep enough as it does not critique the auditors reports.