The advice to establish the authority came through a draft ownership policy that will be presented to Cabinet, after a series of stakeholder engagements between various government research arms.
The new State Owned Entity’s ownership policy, which contains the proposal to establish an oversight authority, comes as government’s steps up its rationalisation and privatisation efforts.
Most State Owned Entities (SOE), which are ventures where government is a beneficial owner or has leading shareholding, have long run at a loss, draining government’s purse. PEEPA technocrats say this is mainly because there has been no guiding policy providing SOEs with a framework that steers their journey to profitability.
To curb this, the oversight authority would set the yardstick for the performance of SOEs, creating a framework for their operations and setting performance targets for them.
“Therefore, there is a need for a policy framework to ensure the standardisation of governance for SOEs to assure value creation for the shareholder. “The ownership policy is aimed at setting clear parameters for circumstances under which SOEs can be established and governed,” the policy draft reads.
Delivering the draft, Botswana Institute for Development Policy Analysis (BIDPA) lead consultant, Molefe Phirinyane, said the policy think-tank is worried about the poor performance of SOEs, noting that government could not continue to pour money into losing ventures that do not create value for the shareholder.
“Government has been losing a lot of money through subventions to SOEs, bailing them out of their financial challenges and we cannot continue to allow them to operate like this,” he said.
“The most important thing is for them to have a regulator that will enforce their mandates and ensure service delivery.”
Phirinyane further said since the inception of SOEs in Botswana, these organisations have been operating in a decentralised manner, with each entity under the whim of its parenting ministry. With the proposed oversight authority, SOEs will operate under a hybrid model of management with the authority providing oversight and some of the parastatals still falling under their founding ministries.
The policy draft has further warned government over the tendency to cushion SOEs when they fail to achieve their mandates, especially those that are expected to operate on commercial lines. Government has further been advised to dissolve shareholding in entities that have proved to be an investment barren land.
“Where an SOE tends to be unprofitable or continuously makes returns which are not aligned to the investment made, such SOEs may be discontinued or privatised, with an intent to minimise fiscal deficits, public debt, and SOEs subvention burden on government budget, provided provision has been made for continued service provision through the private sector,” the policy states.
Government’s annual budget for SOEs generally runs into the hundreds of millions of pula, although the Finance ministry has announced plans to trim this down going forward.
