Recent utterances on privatisation in the press, parliament and the general public demonstrate a general lack of ease with the process.
The BCP has promised court action relating to Air Botswana privatisation.
PEEPA’s reconstituted board of directors are alleged to be three too many, and legal opinion suggests PEEPA’s subsequent decisions could be illegal.
Allegations of conflict of interest have been levelled at some involved in Air Botswana negotiations.
Despite the unease, one thing remains clear: there is no discrediting the Privatisation Policy for lack of legitimacy.
The Policy came about after extensive national consultations and was enacted after proper legislative process.
Current expressions of unease however rest with the approaches government has been using to carry out this important policy.
I suggest, therefore, that the major problem most sceptics have with privatisation is the lack of credibility on the part of the institutions that government uses to carry out privatisation.
Government lacks credible precedents to showcase as reasons for momentous change that is privatisation.
Consequently, government needs to build credible institutions to act as indicators for its commitment to change that will be sustainable and ethical. Privatisation policy represents a sharp break with past relationships between citizens and government. Government can, therefore, rely on the good governance narrative to a limited extent only.
Lacking precedent of such momentous changes, citizens are uneasy because the institutional arrangements selected by government to implement an otherwise legitimate policy lack credibility.
Legitimate governments can and do produce policy outcomes lacking credibility.
Sceptical citizens will only believe in privatisation once there is evidence that change agents will act with predictability, moral integrity (let’s face it, privatisation presents opportunities for moral hazard), and reliability.
Problems with the current approach include the non-existence of an overarching legislative microeconomic policy framework to both enable and constrain action by change agents, lack of appropriate institutions to govern the changing economic circumstances, and the persistence of ministerial capture in corporate governance of PEEPA.
A major problem with the current approach is the apparent preference for ad-hoc approaches to privatisation. It is untenable that government asks for time and space to conduct certain activities ostensibly on behalf of the public without there being a shared understanding of what an ideal outcome will be. The lack of a clear, legislated microeconomic change framework means that privatisation is done in an ad-hoc manner.
The problem with ad-hoc approaches is that it creates institutional vacuums, which can be exploited by enterprising entities to advantage themselves over others.
Institutions both enable and constrain behaviour. Without clear institutional frameworks self-interest may take precedence. Ad-hoc action gives too much power to the executive to conduct privatisation to the exclusion of other interested parties including the legislature.
While privatisation may be about selling state assets, the debate and process themselves cannot be privatised.
Further, a privatisation framework must indicate what objectives (whether efficiency, universal access, competition regimes, etc) are intended by the policy.
Which take precedence over others?
Furthermore, such objectives need to clearly be aligned with Botswana’s long-term vision and the economic empowerment policy if or when it becomes reality.
Such a framework must quantify the preferences of the legislature and by extension the general public.
A further challenge for the credibility of privatisation is the absence of competition law and appropriate regulatory institutions in Botswana.
Admittedly fragments of competition law exist across the economic spectrum.
Yet the lack of an authority dedicated solely to the application of competition law is worrying in view of the fact that Botswana is looking to attract global capital to the country.
Institutions are a good indicator for commitment and by extension credibility.
Retrospective application of competition law will be complicated and is bound to be resisted by corporate entities.
Retrospectively applying the law will also breed uncertainty, and enhance the potential for capture. Why privatise without clearly articulating the rules of the game?
A further fundamental reason for the lack of credibility is the lack of clarity of what exactly privatisation is meant to achieve; management expertise, attraction of capital, efficiency, citizen economic empowerment or what?
It has to remembered that parastatals were created mainly for political and developmental reasons and the objectives surrounding their new status must be clearly stated to citizens who theoretically are shareholders but who are about to become consumers ÔÇô which is a radical change in relationships.
The existing lack of clarification also means it’s unclear whether the institutional model of privatization pursued by government is the appropriate one? Two decades of global privatisation activity have yielded considerable knowledge on institutional models of privatisation. Yet the rhetoric coming out of government suggests that privatisation in essence means disinvestments (and to some extent) public private partnerships.
Government has a whole continuum of choices, including contracting, commercialization, corporatization and incorporation.
The seeming enthusiasm towards one model without clear explanations of why raises more questions.
Other models of privatisation also need a lot of preparatory work for them to be viable.
For example, the problems associated with contracting for cutting grass at Gaborone City Council and the various unfinished primary schools (contracted to the private sector) are clear examples of why there is need to train staff for contractual governance.
As a result, capacity building for privatisation, therefore, goes beyond just informing the public on government’s course of action.
A further institutional barrier to the credibility of privatisation must be the corporate governance structure of PEEPA, which is government’s major agent for privatisation. Arguably the PEEPA directors have been used as a tool executive capture consequently creating doubts of credibility of the outcomes.
Past concerns about recycling similar personalities in the boards of directors of state owned enterprises in Botswana might seem like bitterness from self-interested individuals; they may well be.
However such concerns cannot be dismissed on those grounds alone. Boards of directors also serve as a link between stakeholders in an agency or corporation and those stakeholders.
Boards of directors can enhance the capacity of the institutions and properly constituted can serve as representational instruments. On the other hand, PEEPA’s board of directors overly represents one set of interests and under-represents others; giving the impression that the stakeholders in privatisation are just one set of interests.
The corporate, financial, accounting and economic professionals (or business) are over-represented in the PEEPA board of directors.
Labour, trade unionists and other sections of the community are under-represented.
It is not mere coincidence those not represented find the privatisation process intrinsically flawed, if exclusion in major decision-making occurs now, what about later?
Furthermore, centralising appointing powers in the executive and excluding the legislature means suspicions that institutions like PEEPA represent the will of the executive only will continue.
In a parliamentary democracy like Botswana, political accountability is attained mostly through building consensus.
The legislature therefore must have an active role in both drawing up the boundaries of action for the executive and appointing personnel to decision making structures of importance.
The executive must learn to abide by these.
Executive discretion is not limitless; it makes sense within legislative guidance to be legitimate.
The Air Botswana instance where the executive might have deliberately ignored legislative guidance (and without bothering to explain) is surely not the way to proceed.
In as much as some have rightly argued against legislative tyranny, executive arbitrariness is also not a viable alternative.
The executive can ensure that there are no further motions to stop negotiations by demonstrating respect for legislature.
Governments are not neutral and need to build enduring institutions to ensure sustainable policy outcomes.
Obtaining widespread support for privatisation now will ensure long-term sustainability for the process.
Not doing so could lead to hostile and costlier problems in future.
As no legislature can bind their successors, policies lacking credibility in the present term face being reversed in the future.
Policy reversals (including re-nationalization) could prove costlier for Botswana and erode Botswana’s viability as an investment destination.
*Gape Kaboyakgosi is a Research fellow at the Botswana Institute for Development Policy Analysis. He writes in his personal capacity.
