Analyser
For Botswana to attain its envisaged 2036 dream of a high-income country status characterised by an export-led economy which is diversified, inclusive and sustainable with higher levels of productivity, there is an urgent need to reform State-Owned Enterprises (SOEs), otherwise commonly referred to as parastatals.
It is no secret that Botswana is at an economic crossroads. These headwinds were occasioned by many factors, including a historic long-lasting diamond slump. For decades, diamonds have served as the Sub-Saharan nation’s economic mainstay. This is because of structural defects that have hindered diversification efforts.However, even in the face of this torrid period, there is a light at the end of the tunnel. Botswana’s drive towards the new economic agenda will heavily hinge upon a radical shift in new ways of doing things. At the heart of this transformation is SOEs, which must come to the party.
The past five decades have seen a huge investment in these entities. Whilst some have, to a smaller degree, been able to live up to their mandate, truth be told, the bulk of them have failed. Complaints against these parastatals, in the main, are that they gobble government subvention without offering any Return on Investment (ROI). Meanwhile, restoring Botswana’s fiscal prudence and elevating it to a higher economy, therefore, would require a renewed mandate of these critical government institutions. In all honesty, it can not be business as usual.
To highlight the need for SOEs to wake up and smell the coffee, in his maiden budget speech in 2021, former Finance Minister Dr. Thapelo Matsheka had them in his crosshairs. Matsheka called for their reform to address issues of poor governance, inefficiencies, and duplication of mandate. The process of restructuring parastatals has, however, stalled and not achieved the desired outcomes. Nevertheless, with the new administration at the helm, a realignment with the reform agenda seems to be echoing louder in the government enclave. The message from the President Duma Boko is simple- parastatals must justify their existence.
Justifying the need for transformation, when delivering his inaugural budget speech in February 2025, Vice-President and Minister of Finance Ndaba Gaolathe said there was a top priority on the reform agenda. Gaolathe said: “it is high priority in our agenda to ensure value for every Pula allocated to SOEs by transforming them into high-performance organisations that fully deliver on their mandates.”
According to Gaolathe, the need to pay close attention to the parastatals is such that the government may bring the best out of them and leverage them to enhance doing business in the new Botswana. “We are also determined to transform our SOEs into engines of wealth creation for the larger population by reconfiguring and up-scaling some of them into becoming truly global players. Our posture also leans towards curtailing gross wastage and duplication that takes place at some of these enterprises,” he said.
Gaolathe said that for a long time, some of the SOEs operated without substantive CEOs for close to five years whilst others had no boards or functioned under partial boards. To this end, he maintained that this sought of neglect by politicians thus created a culture of wastage and stagnation within SOEs. However, he noted with a clear vision the need for a new culture of good governance, integrity, efficiency, effectiveness, and excellence.
Role of SOEs in the economy
Citing as an example the need for an overhaul of the power sector, the finance minister said there would be a need for legislative framework reform/ review to enable a separate power generation from power transmission and a reconfiguration of the Botswana Power Corporation, considering the much-anticipated transition. Further, the minister said farmers have called for a revamping of the Botswana Agricultural Marketing Board (BAMB) “in order to drive an effective, enabling model and facilitate equitable and fair market access for all farmers in the country.” Furthermore, he stated the need to stabilise the Botswana Meat Commission (BMC), the Botswana Vaccine Institute (BVI) and the need to review funding models of the Citizen Entrepreneurial Development Agency (CEDA), Motor Vehicle Accident Fund (MVA Fund) and other institutions. Additionally, he buttressed the need for facilitation of mega-projects, one of which entails the construction of a rail corridor which will link Namibia and Botswana.
Consequently, this will necessitate changes at Botswana Railways.
“We have started a process to persistently facilitate the Botswana Unified Revenue Service (BURS) to unlock its revenue collection potential, aiming to surpass the annual average P26 billion collection in non-mineral and non-SACU revenue achieved over the past five (5) years. A well-managed and efficient BURS can boost this revenue collection efficiency by at least 30 to 40 per cent in the next five (5) years,” said Gaolathe regarding BURS.
Against this backdrop, the government aspires to build a robust financial sector that is anchored on homegrown institutions. The long and short of it, therefore, must be that given the stake the government has in most of the SOEs and the capital investment to this end.
Demonstrating the need for immediate reform, whilst addressing a kgotla meeting in Ramotswa recently, President Boko revealed that the BMC had secured a lucrative deal for the export supply of beef to the Democratic Republic of Congo (DRC) to the tune of $4 million. Regarding the BMC, the agreement is set to resuscitate the loss-making SOE into a profitable entity. True to these words, the BMC confirmed shipment of the first consignment this week. In a press release, the BMC noted that through the deal, it is anticipated to contribute over P1 billion in export revenue by the end of the year. Moreover, Boko has buttressed the need for the revitalisation of Air Botswana and several other parastatals bearing economic potential.
In a nutshell, there is a pressing need for Botswana to revive many of its existing parastatals for it to move away from economic stagnation. Despite being regarded as an upper-middle-income country for years, the journey to a higher-income economy has faced a catalogue of challenges, with the efficiency of SOEs being one of them. As a matter of fact, properly functioning SOEs would smooth public service efficiency and help in the attraction of investors whilst contributing to GDP growth and ultimate diversification efforts. So, it’s high time the government held them to the highest standards of accountability.
In the next series, we will zoom in on the number of SOEs, their contribution to socioeconomic development, and the position of international monetary bodies on what restructuring them would entail in the New Botswana.
