SOE reform becomes urgency for gov’t
Mbongeni Mguni - Pauline Dikuelo - Lewanika Timothy | Tuesday August 19, 2025 14:49
The rot in parastatals keeps worsening the more revelations of their state of affairs is made.
Nearly each week in recent months, top government officials have lifted the lid on the state of State-Owned Entities (SOEs) disclosing previously unknown, but largely suspected, gross violations of corporate governance, statutory non-compliance and financial failure.
The country has 63 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. The 16 that are statutorily required to turn in profits, largely enjoy operational monopolies in areas such as water, electricity and transport.
More worrying is the fact that amongst those that incurred losses in the last financial year, many have been running in the red for years, relying on bailouts from their shareholder, government, or more specifically, taxpayers.
Analysts have pointed out that bailouts and other forms of support to this category of SOEs amounts to an additional burden on taxpayers. It also amounts to the diversion of funds away from urgent priorities and towards entities established specifically to stand alone and provide citizens with services.
Each pula in the bailout equals less meals for the underprivileged and fewer medicines in hospitals, analysts say.
Conversely, each extra pula a commercial SOE makes in profit or surplus could reasonably be handed to the shareholder – government or taxpayers – as additional revenue or as lower tariffs in the case of certain sectors.
The numbers
A fortnight ago, it was revealed that a stunning 31 out of 45 surveyed SOEs were non-compliant with the prevailing codes of corporate governance, while just 19 out of the 63 SOEs had provided the requested responses for a Public Enterprises Evaluation and Privatisation Agency Corporate Governance Framework.
Last week, Vice President, Ndaba Gaolathe disclosed that just seven of the 16 SOEs mandated to operate commercially, actually turned in profits in the last financial year. The rest ran losses which technically means they failed to abide by the laws requiring them to operate as going concern.
“One of the big ticket issues that we are looking at with the President is the issue of how we modernise, revitalize, reconfigure state-owned enterprises so that they punch at their weight or more than their weight, as opposed to the punching below of the weight that they do,” Gaolathe said in Parliament.
The punching below the weight is endemic in the SOE sector. Going just by the Vice President’s own revelations, of the seven that turned in profits recently, two had been consistently posting losses until the past financial year.
The balance in the 16 represent a sad state of affairs that does injustice to the private sector that has pleaded for more space in the economy.
According to Gaolathe, entities such as the Botswana Agricultural Marketing Board, Botswana Post, the Okavango Development Company, Botswana Meat Commission, Botswana Power Corporation, Water Utilities Corporation and even the state investment agency, the Botswana Development Corporation, are amongst the poorly performing SOEs.
The reasons for the poor performance are diverse, from market weaknesses, to operational inefficiencies, outdated or sub-optimal mandates to simple mismanagement. The lack of corporate governance in many has not helped the situation, resulting in many top-heavy entities where executives operate with few limits.
Gaolathe singled out the transport SOEs, Air Botswana and the Botswana Railways – both monopolies – where he pointed out serious challenges.
“Botswana Railways and Air Botswana have recorded five consecutive years of financial losses, signalling persistent structural and operational inefficiencies. “Their continued reliance on public support is fiscally unsustainable and reflects a misalignment or malalignment between their mandates and operating models,” he said.
The solution
Parastatal reform has long been a can kicked down the road by government.
In April 2022, then President, Mokgweetsi Masisi, announced a whole-government shake-up, rearranging ministries and mandates and laying out plans for parastatals reforms. SOE mandates would be reviewed and a range of mergers would take place to ensure optimal pula-value for the shareholder and by extension, citizens.
The general elections of 2024 came and went without visible traction in the plans. With the billions that have been used annually to bailout SOEs now drying up due to the budget-wide fiscal crunch, the new government has walked into an urgency.
Both Gaolathe and Boko have spoken frequently about the need for SOE reforms, specifically the need to transform these entities into world-class drivers of growth.
“Most of our SOEs have underperformed and continue to be a burden on government,” Boko told SOE CEOs in June. “This state is unacceptable. “We shall undertake a re-organisation of many of our institutions. “Has your entity lived up to its billing? What justifies it continues existence? Are they overlapping mandates? What is the degree of overlap if any exist at all?”
While no government authority has officially announced that SOE reforms have begun, action appears to have been initiated, at least at the Ministry of Trade and Entrepreneurship, which has the largest number of parastatals.
In recent weeks, the boards of the Gambling Authority, Botswana Development Corporation, Citizen Entrepreneurial Development Agency, Local Enterprise Authority, and Copyright and Intellectual Property Authority were dissolved in what high-level sources said was a 'restart' by the government.
New caretaker CEOs were installed, while at the Gambling Authority, the CEO there was suspended, pending investigations.
Gaolathe told Parliament that for other SOEs, government was looking at inviting private partners to sit in the share registry, as well as other strategic interventions.
“We are looking at advancing the unbundling of Botswana Railways into infrastructure, which is called below the rail, and operations, which is called above the rail, to facilitate a more robust and effective rail sector ecosystem. “We are also looking to introduce a potential strategic partner or strategic partners into a partnership with Air Botswana to restore its commercial viabilities. “These reforms are critical in reorienting Botswana Rail and Air Botswana,” he said.
The BPC’s unbundling is underway, with Deloitte Consulting Botswana initiating work on the project in July. Under the project scope, BPC will retain its transmission and distribution operations while the generation function will be corporatised and structurally separated.
“BAMB is expected to benefit from commercialisation initiatives and potential public-private partnerships aimed at improving market responsiveness. “The Botswana Meat Commission is also earmarked for restructuring through a potential strategic joint venture, again intended to revitalise operations and attract private investment. “The WUC and BPC are prioritised for debt restructuring, infrastructure efficiency, and general improved strategy upgrades to address their persistent operational deficits. “Government is confident that our comprehensive governance reforms, strategic interventions alongside key partnerships will drive recovery of key commercial parastatals.”
The P-word
The private sector is keenly watching all the developments. For decades, government has been accused of “crowding” the private sector out of the economy by establishing an even greater number of SOEs and granting them monopolies in areas that could include the private sector.
The country’s privatisation programme has operated in fits and starts over the years and to date, analysts argue that there has not been a single, perfectly privatised entity 20 years after the adoption of the Privatisation Masterplan in 2005.
The Botswana Telecommunications Corporation Limited, frequently held up as a model of privatisation, in reality remains majority owned by government, while its shares are limited for trade only amongst citizens.
President Boko, in his public remarks, has appeared reluctant to even use the word “privatisation,” as have other members of his administration who prefer to speak of “partnerships,” and “strategic alliances”.
Indeed, unions are also watching the nature of the reforms around parastatals to ensure minimal or at least fair treatment of their members.
However, unlike previous administrations, the new government does not have the luxury of a padded fiscus to delay the reforms required to reduce the weight of loss-making SOEs and transform them into engines of growth for citizens.