More SOE rot exposed
Mbongeni Mguni - Pauline Dikuelo | Monday July 14, 2025 09:35
The country has 62 SOEs which are this year due to receive the bulk of the P16.2 billion set aside for grants and subventions in the 2025-26 budget. This is despite the fact that the majority of these entities are loss-making, weighed down by operational inefficiencies, lack of strategic direction and over-reliance on government support, despite the fact that many by law enjoy monopolies in their area of focus such as electricity.
Parastatals are key to service delivery and are divided into commercial and non-commercial, meaning those expected to run on a profitable or ‘going concern’ basis and those that by the nature of their activities exclusively rely on support from government for sustenance.
This week, Vice President, Ndaba Gaolathe, confirmed recent findings by the Botswana Accountancy Oversight Authority (BAOA) that most SOEs are running untethered in terms of governance and other parameters.
Responding to a question in Parliament, Gaolathe, who is also the Finance Minister, said just 14 out of 45 SOEs were compliant with the King III or King IV codes of corporate governance.
“Key areas of non-compliance report include imbalanced board compositions, where the majority of non-executive directors lack independence due to outdated statutory provisions. “Further, many boards have failed to conduct regular performance evaluations, develop succession plans for senior positions, or even ensure continuity in leadership, while some entities have operated for extended periods without substantive CEOs or senior executives in place,” Gaolathe revealed.
The Vice President’s findings echo BAOA’s assessments in recent years showing that many SOEs and other public entities do not have effective monitoring of ethics or have CEO roles that are not formalised, with no performance reviews for directors. Some have board memberships which are not according to recommended best practices and others do not have approved legal compliance frameworks.
A disturbingly large number of SOEs have also operated for long periods with improperly constituted boards and acting CEOs.
The Auditor General, on the other hand, has perennially uncovered a litany of wastage, poor accounting and financial abuse amongst SOEs, with a high level of non-compliance in terms of turning over accounts for auditing.
This week, Gaolathe also reported that while the Public Enterprises Evaluation and Privatisation Agency (PEEPA) has rolled out a Corporate Governance Framework (CGF), just 19 out of the 62 SOEs had provided the requested responses.
The framework comprises adoption of board charter, signing of shareholder compacts between the SOE boards and parent ministries, undertaking performance of self-monitoring by SOEs and implementation of board evaluation by the SOEs.
“As at end of June 2025, only 19 out of 62 SOEs submitted responses,” said Gaolathe. “Of the 19, 16 had majority of corporate governance tools in place while three only had some in place. “In the meantime, the Agency is exploring additional ways to engage with the SOEs to get the requested information, including follow-up outreach or alternative methods.”
Gaolathe added that the Finance Ministry is also reviewing the Public Finance Management Act to reinforce financial accountability. The proposed changes will compel SOEs to submit annual reports within six months of the financial year-end, while parent ministries will be required to report on their respective SOEs within the same timeframe.
While central government struggles to rein in the “cowboy” SOEs, reports have emerged indicating that under the previous administration, political supremos used the poor governance at SOEs to position themselves into lucrative positions.
The poor governance, especially around board composition, ethics, appointment of substantive CEOs and regular audits, enabled political forces to position their proxies, shell companies and nominees in areas such as procurement and contracts.
Annually, SOEs control billions of Pula in procurement and contracts in key sectors where they enjoy monopolies due to their founding legislation.
“The new government is struggling to unravel complex webs of ownership and influence in some of the contracts entered into by some parastatals, as well as procurement contracts within these organisations,” a highly-placed insider told Mmegi. “There are some names that keep coming up again and again associated with the former administration where some people had placed their proxies in positions to benefit. “You will keep seeing changes in the top hierarchy of some parastatals going forward because there is an attempt being made at refreshing and reviving the system.”
Mmegi is informed that the rot in the system went to the extent of some parastatals embarking on initiatives that were secretly tailormade for political beneficiaries and their proxies.
“It’s a difficult one to untangle,” Mmegi’s insider said. “Some of these initiatives are already running, even successfully in some cases, but the motivation for the initiative and the tendering around it was completely unfair and designed to benefit a certain political elite. “It would appear that particularly in the last two years of the previous administration, many authorities began feathering their nest eggs for life after politics with these initiatives and programmes that today we see were made with benefits in mind.”
Meanwhile, the long-awaited unbundling of the Botswana Power Corporation (BPC) is set to kick off. PEEPA is next week due to sign a contract with Deloitte Botswana for the commencement of the unbundling of BPC Project.
“This strategic project marks a major milestone in Botswana’s energy sector reform, with the objective of enhancing efficiency and competitiveness in electricity generation,” PEEPA officials said. “Under the project scope, BPC will retain its transmission and distribution operations while the generation function will be corporatised and structurally separated.”
Other SOE reforms, announced in April 2022, have yet to take root, while PEEPA’s privatisation has equally proceeded at a snail’s pace over the years.