Gov’t finetunes plans for parastatal rationalisation

Megaleng House PIC: BTC
Megaleng House PIC: BTC

Government will from next April kick-off measures to merge, chop or sell off some entities in its portfolio of 64 parastatals, as figures emerge showing that nearly half of them were loss-making for the year ended March 2020.

Parastatals are divided into commercial and non-commercial, the former being those expected to run on a profitable or 'going concern' basis and the latter being those that, by the nature of their activities, exclusively rely on support from government for sustenance.

Parastatals are key to service delivery in the country and even those running as strictly public services are required to operate at high efficiency to minimise the level of government expenditure on them and wastage of taxpayer funds.

Between the last financial year and the current one, government budgeted more than P30 billion for parastatal support, a spending level that finance ministry technocrats have said is unsustainable given the country’s fragile budget due to the pandemic.

Authorities are now redoubling efforts on the parastatal rationalisation exercise, which forms part of a broader civil service reform programme first proposed more than a decade ago.

On Monday, finance minister, Peggy Serame, who chairs a cabinet sub-committee on the parastatal rationalisation, told Parliament the exercise was expected to kick off in the next financial year, which starts on April 1, 2022.

“Given the amount of work done so far, the hope is to finalise the matter for a decision to be taken before the end of the current financial year,” she said, in response to Kanye North MP, Thapelo Letsholo’s questions. “However, I must hasten to add that, to the extent that some recommendations would involve legal and personnel matters, there is need to allow for thorough consultations, hence, sometimes the delay in completing them. “The commitment is for implementation to start during the next financial year.”

In February, Serame’s predecessor, Thapelo Matsheka had said the plans for parastatal rationalisation would be completed in the first half of the current calendar year. This week, Serame said the sub-committee had taken its recommendations to cabinet, but a decision had been made to allow more time for further consultations and considerations.

“Indeed, the recommendations for rationalisation were considered as planned but further consultations were required within government and with the respective organisations and other strategic partners, given the magnitude of the proposed changes in order to be most impactful on the economy as a whole,” she said.

Meanwhile, data collated by BusinessWeek indicates that of the 48 parastatals reviewed by the Auditor General in a report released this week, 22, or nearly half, were loss-making in the year ended March 2020. The Auditor General’s review did not cover Air Botswana, the Botswana Agricultural Marketing Board, Botswana Meat Commission, Botswana Railways, Botswana University of Agriculture and Natural Resources and five other parastatals who did not submit their financial results.

Of those reviewed, the Botswana Development Corporation was the most profitable entity in government’s portfolio of entities, with P136.4 million in profits, followed by the Botswana Telecommunications Corporation Limited with P106.4 million in profits, for the year ended March 2020.

The worst performers for the period included Okavango Diamond Company with losses of $10.6 million (about P115 million), followed by the Botswana International University of Science and Technology (BIUST) with losses of P38.2 million and the University of Botswana with P31.9 million.

However, trend analysis shows that the Okavango Diamond Company’s troubles are not perennial, as the state diamond trader reported profits of $8 million (P92 million) in 2019 and $24.4 million (P275 million) in 2018. BIUST’s performance has been topsy-turvy with profits of P4.5 million in the year ended March 2019, and losses of P22 million in the prior year.

The University of Botswana’s deficit in the year to March 2020, came from a surplus of P69 million in 2019.

Analysts told BusinessWeek that among the commercial parastatals, Serame’s committee will be eyeing those with habitual loss-making positions and high levels of government subsidy support, for full or partial privatisation. Amongst the non-commercial, the sub-committee is reportedly focussing on overlapping mandates or those that have since become redundant or incongruent with government’s new transformation agenda.

“...the objective is clear in terms of the resultant financial benefits for government,” Serame said this week. “(It includes) savings on the annual subventions to parastatals and the realisation of proceeds from the sale of shares in parastatals, the process of actually merging those with overlapping functions, the closure of parastatals that are no longer serving a useful purpose, bringing in strategic equity partners to restructure and revive parastatals in joint ventures with government and the sale of part or all of government shareholdings in parastatals through privatisation.”

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