Rationalise para(site)statals now
Titus Mbuya | Tuesday June 17, 2025 13:26
Senior officials, often shielded from scrutiny, were grilled by Members of Parliament in an unprecedented show of democratic oversight. The revelations from these sessions have been sobering. They confirm what many had suspected: a public sector riddled with dysfunction, operating in silos, weighed down by poor coordination, corruption, and weak accountability.
But if the rot uncovered within government departments was alarming, what lies within state-owned enterprises (SOEs), or parastatals as they are commonly known, could be even worse. Calls are mounting for the Committee on Statutory Bodies and State Enterprises (CSBSE)—PAC’s sister committee—to follow suit and broadcast its proceedings live. The CSBSE has traditionally been toothless and ineffective, its recommendations ignored, and its work undermined by absentee members and uncooperative agency heads. Yet it is precisely within the SOE sector that urgent reform is needed.
Botswana’s SOEs were created to fill market gaps, address strategic national interests, or provide essential public goods—ranging from water and electricity to housing, transport, and financial services. In principle, their existence is not only defensible but necessary. However, the sector today faces a legitimacy crisis. Of the 70-plus SOEs, barely a third are revenue-generating; the rest rely entirely on government subventions. Several operate under overlapping mandates, creating duplication, inefficiency, and unnecessary fiscal burden.
According to a study by the International Monetary Fund (IMF), Botswana’s parastatals pay a wage premium of up to 56 percent compared to the public and private sectors—an indictment of bloated, top-heavy management structures. Despite this, most SOEs continue to post dismal financial results, with little to no returns in the form of dividends to the government. Instead, they draw repeated bailouts from the national treasury exposing the economy to fiscal risk.
In response to these inefficiencies, successive governments have flirted with privatisation. The 2000 Privatisation Policy and the 2005 Master Plan laid out a strategy for divestiture, outsourcing, and public-private partnerships. Flagship entities such as the National Development Bank, Air Botswana, and the Botswana Power Corporation were earmarked for reform. Yet, nearly two decades later, implementation remains piecemeal and largely unsuccessful.
The partial listing of Botswana Telecommunications Corporation in 2016 remains the only notable success. Plans to privatise Air Botswana stalled. Meanwhile, new SOEs like Botswana Oil, the Okavango Diamond Company, and the Mineral Development Company, have been established—ironically, even as the case for rationalisation was being made. This policy inconsistency has left the sector bloated and directionless.
Moreover, the global evidence on privatisation—particularly in Africa—is hardly encouraging. Studies show that privatisation has often led to job losses, weakened labour rights, increased inequality, and, in some cases, facilitated elite capture and corruption. Privatisation of SOEs in Africa has resulted in national assets being taken over by foreign multinationals because citizens could not afford to buy them. Even the World Bank and IMF, long-time proponents of privatisation, have acknowledged its mixed outcomes.
Rather than privatisation, Botswana should pursue a bold, strategic rationalisation of its SOEs. Rationalisation involves merging or dissolving entities with overlapping mandates, eliminating inefficiencies, and streamlining operations to align with the national development agenda.
This is not a new idea. As far back as 2006, the Public Enterprises Evaluation and Privatisation Agency (PEEPA) recommended mergers among entities such as BOTEC, RIPCO, BEDIA, IFSC, Botswana Savings Bank, and Botswana Post. Some steps were taken—such as the formation of BITC from BEDIA and IFSC—but overall implementation has been disappointing. There is no reason, for instance why BOMRA and BOBS cannot be merged into one, or BICA and BAOA should not be one body. In the intervening years, more SOEs have been added including Nardi, SEZA, BOTEPCO, etc, instead of consolidated, underscoring a lack of political will.
The primary obstacles are not technical, but political. SOEs have become repositories of patronage, used to reward loyalists with executive positions and inflated salaries. This undermines both performance and public trust. Many board members and senior managers lack the requisite expertise to lead complex, capital-intensive entities. Worse, they operate with impunity, confident that government subventions will continue regardless of performance.
Beyond governance and efficiency, the fiscal implications of the current SOE model are profound. High payroll-to-operating profit ratios expose the government to chronic fiscal leakage—what economists term “drip risk.” These are not one-off bailouts, but persistent, unmonitored injections of public funds that erode the national budget silently and steadily.
To address this, government must place strict conditions on SOE financing. Bailouts should not fund recurrent expenditure but be reserved for capital projects vetted and approved by the responsible line ministry. Furthermore, any SOE requiring government guarantees should, at a minimum, operate at breakeven or show a clear path to profitability. Transparency in performance and accountability for results must be non-negotiable.
Botswana can no longer afford to carry a bloated SOE sector. The country is grappling with economic headwinds stemming from declining diamond revenues, a widening fiscal deficit, and rising public debt. International lenders, including the IMF and World Bank, are rightly pressuring government to rein in the public wage bill. But this must be done intelligently—not by wholesale privatisation, but by targeted reform.
The goal should not be to discard SOEs, but to reinvent them. A 25% reduction in the number of SOEs—through mergers, closures, or integration into ministries—would streamline operations and free up fiscal space. There is no reason why, for instance, the roles and functions of PEEPA – which has basically outlived its usefulness – can not be transferred to the Enterprise Development Policy Unit of the Ministry of Finance, which is already doing some of the work done by PEEPA. A single unit should be responsible for monitoring performance, enhancing SOE governance, and implementing the reform strategy. The remaining entities must be restructured to focus on delivering public value efficiently and transparently.
In conclusion, state-owned enterprises have a legitimate and often critical role in national development. But in their current form, Botswana’s parastatals represent more of a fiscal liability than a strategic asset. The answer is not to sell them off to the highest bidder, but to clean them up, scale them down, and make them work better for the nation.
The rationalisation of SOEs is not just a policy imperative—it is a moral one. It is time to choose between serving the public interest or preserving the patronage networks that have long outlived their usefulness.