A plan to rationalise State Owned Enterprises (SOEs) by merging those with overlapping responsibilities and liquidating ‘useless’ ones by Q1 2021 that was announced by former Minister of Finance and Economic Development, Dr Thapelo Matsheka, in February 2021 has all but stalled.
“I don’t think the government will implement that strategy, certainly not in the short to the medium-term,” an economist who prefers anonymity said in an interview. “The reasons are that the economy is not yet out of the woods and we are less than two years to the next election cycle. So cutting back the wage bill now may not be politically sound.” Besides, the economist added, the government runs the parastatals as an extension of itself. But in terms of productivity, the economy needs leaner, more proactive parastatals with less broad and overlapping mandates.
To a certain extent, Matsheka’s successor at MFDP, Peggy Serame, said almost what the economist implied when she told Parliament that the government had intended to rationalise, restructure and liquidate some of the SOEs in the first half of 2021 but had failed.
“Indeed the recommendations for SOEs rationalisation were considered as planned, but further consultations were required within government and with 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,” Serame said.
The economist who spoke to The Business Weekly & Review in confidence said he just did not see the political will to implement such a strategy. At any rate, the economist added, by Botswana’s conservative standards, such moves might be viewed as more revolutionary than evolutionary.
Worsened by the COVID-19 pandemic, unemployment numbers have skyrocketed to around 23 percent, according to data from Statistics Botswana. Analysts say that there is no way that the BDP government could risk having unemployment numbers rising further by such a rationalisation. “This is because the BDP’s number one campaign tool has always been creation of jobs,” an analyst pointed out. “Doing the opposite could hurt them politically. The only logical thing to do is to stall.” Another economist said COVID-19 has put a hold on privatisation plans and it is likely to remain like that until 2024.
“The first factor to consider is that government is under pressure to create jobs and the BDP came forward with that promise. The BDP can’t be seen to have failed to create jobs. Rationalizing will result in job losses and they cannot risk it, especially with elections getting closer.”
Further, she government gets comfort from the fact that minerals are rebounding which will improve government revenue. The pressure to privatise , she said, was from international funders who worried that if they give Botswana money it will be blown on the wage bill. But because mineral revenue is rebounding there’s no longer that pressure to privatise now.
But analysts also argue that the rationalisation has to be done because delaying will hurt the economy more by wastage. According to Mokaloba Mokaloba, a Political and Administrative Studies lecturer at the University of Botswana, most parastatals have been performing badly for some time even though the government continues to bail them out. His remedy? “Parastatals without a doubt need to be reformed and some even shut at the earliest possible time,” Makoloba said in an interview.
Asked if the rationalising of the SOEs would not impact the BDP-led government, he answered that because the restructuring and liquidation of the parastatals would be a process and not an event, it can be done in such a way that the government creates jobs in sustainable sectors.
Although not convincing, Minister Serame told Parliament recently that there is commitment to conclude the process “as soon as possible” so that the country’s envisaged benefits remains. “(A) substantial amount of work has been done so far,” she said.
“The hope and intention is to finalise the matter for a decision to be taken before the end of the current financial year. However, I must hasten to add that to the extent that some recommendations will involve legal and personal matters, there is need to allow for thorough consultations, hence sometimes the delay in completing them.”
Asked about legal implications of shutting down parastatals, labour lawyer Mpho Chingapane acknowledged what Minister Serame implied, saying the process may indeed lead to legal disputes, depending on how it is handled. He emphasised that litigation arising from abrupt job losses would be inevitable. “If the government stalls the process, it might be costly since there are no financial streams,” he said. “However, even the process of restructuring could (by itself) be catastrophic.”
The reluctance of the government became clearer, albeit unintentionally, this week in Parliament when the MP for Kanye North, Thapelo Letsholo, raised the matter. “The rationalisation of State Owned Enterprises (SOEs) is part of public sector reforms to promote efficiency and cost savings in the delivery of public services,” Serame said. “In this regard, a cabinet subcommittee was established to provide strategic guidance to the process.”
Asked about savings that the government expects to make from the exercise, Serame said the financial savings would be quantified once the process was completed. She added that some of the savings will depend on the terms of strategic partners investing in selected SOEs.
“While the objective is clear in terms of the results and financial benefits for government through savings on the annual subventions for SOEs, and the realisation of proceeds from the sale of share in SOEs, the process of actually merging SOEs with the closure of some SOEs that are no longer serving a useful purpose, bring in strategic equity partners to restructure and revive SOEs in joint ventures with government and the sale of part of all government shareholding in SOEs through privatisation will take some time,” Minister Serame said
At the moment, many parastatals, among them Botswana Meat Commission (BMC) and Botswana Tourism Organisation, have been running without CEOs for some time, leaving room for maladministration and corruption.