Tuesday, November 28, 2023

Econsult to name and shame errant parastatals

A leading independent economic consultancy has warned that it is working on ‘naming and ‘shaming’ loss-making State enterprises and parastatals (SEPs) amid concerns that they are not accountable to the taxpayer.

A scathing report, compiled by former Bank of Botswana Deputy Governor and Managing Director of Econsult Keith Jeffries and his colleague Sethunya Sejoe states that “… there are clearly some parastatals that are not serious about being held accountable to the public.”

The report says that parastatals “may perhaps meet their requirements to reporting to their sponsoring ministries (but we do not know, as neither the parastatals nor government nor PEEPA (Public Enterprises Evaluation and Privatisation Agency) provides this information), but they could and should do much better as custodians of assets that ultimately belong to the people of Botswana.”

While the economists acknowledge that many parastatals have performed reasonably, but with a bit more effort could do a lot better ÔÇô “we do not see any reason why a parastatal cannot publish its report and accounts within six months of the end of its financial year. “

“Banks, for instance, are required by the regulator Bank of Botswana (BoB) to publish their accounts within three months of their financial year and, as noted above, companies listed on the BSE (Botswana Stock Exchange) have to do so within six months.

As a first step, all parastatals will be required to share their reports and accounts with BAOA, under the Financial Reporting Act, 2010.

“In a subsequent review we will examine parastatal performance in more detail, looking at financial performance and just how much the taxpayer is contributing to meet the costs of the ever-expanding range of parastatals, and of inefficient performance. We will also make some suggestions as to which parastatals should ready themselves for privatisation,” the duo states in their quarterly review report.

Furthermore, they state that, instead of contributing positively to government finances, through profits and dividends, parastatals as a whole have been a drain on the budget, many of them making large losses and needing huge subventions from the budget to keep them afloat.

“There is also evidence that some parastatals are badly run, overstaffed, poorly managed, and subject to unnecessary political interference. Oversight, by government or the public – their eventual owners ÔÇô is weak,” the report says.

The report says parastatals are public entities and are therefore indirectly or directly accountable to the public; there are various accountability channels, some legally mandated, some adopted by choice.

The economists examined how the parastatal sector has evolved over the years, and consider whether they are discharging their responsibilities with regard to public reporting and transparency.

They considered the transparency of parastatals according to two simple criteria; does the entity have a functioning website and does the entity publish its annual report and/or annual accounts in a form that is readily available to the public?

With regard to the availability of annual reports, the ideal situation is that a soft copy is available on the relevant website, with a working link that enables it to be downloaded anywhere in the world.

“Somewhat less ideal than this is a situation where the institution will make a soft copy available by email on request. Some institutions publish hard copies only, but these are typically only available if one is prepared to go to the institution and collect, and sometimes cannot even be taken away. We ranked the 60 parastatals by scoring points for availability of annual reports and of a functioning website,” the report says.

According to the report, “There was a particularly disappointing result from PEEPA, the entity charged with evaluating the performance of public enterprises.”

The report found that PEEPA does not have a functioning website, and as far as it has not published anything relating to discharging this part of its mandate.

“Indeed, if it had, this article might have been unnecessary. Also bouncing around the bottom of the rankings is SPEDU, for which ÔÇô as an investment promotion agency ÔÇô not having a functioning website is a serious failure. It is also striking that the Ministry of Minerals, Energy and Green Technology needs to do more to foster transparency amongst most of the parastatals it is responsible for,” the report says.

The results of the analysis by the economists show a wide range of performance across parastatals in terms of efficiency (speed of publishing annual reports and accounts) and transparency.

“Although we have not done a formal analysis of how parastatals performance has changed over time, the front-runners include both those who have consistently maintained good performance over the years (BoB, BSE), others whose performance has improved dramatically (BHC, BTCL), and new entities with a commitment to transparency (BICA),” the report says.

In terms of accountability and transparency, only four parastatals gained the maximum 50 points namelyÔÇô BoB, Botswana Housing Corporation (BHC), Botswana Telecommunications Limited (BTCL) and the BSE.

They all had functioning websites and fully up to date annual reports or accounts. In joint fifth place were BICA and LEA.

A large number of parastatals scored 40 points, in equal 8th place; this score largely reflects the failure to publish up to date annual reports for the most recent financial year (i.e. within 6 months of their financial year end).


Read this week's paper