The long road to parastatal reforms
Government is considering creating yet another parastatal to monitor the large numbers of struggling parastatals. Are these entities a wasteful weight on the budget or cost-effective saviour for service delivery? The World Bank this week didn’t mince its
Despite the numerous voices that have spoken and are still speaking, there’s no debate about where the economy should be headed. Government policy, priorities and strategies echo the advice and recommendations of entities such as the World Bank, IMF and locally, the Bank of Botswana and the Botswana Institute of Development Policy Analysis.
The post-diamond future for the country, the sustainable solution to breaking out of the middle-income trap, lies essentially in private-sector led growth anchored by a suite of structural reforms in the economy.
Everything else, from the new drivers or sources of growth, to the catalysts required such as digitisation, mindset change and other conditions necessary, are all in support of the private-sector led growth ambition that all ‘voices’ agree is the sustainable path forward for the country.
All commentators agree that diamond mining has played its part and provided the basis for the next phase of growth of the economy. Government, which of necessity has dominated the economy over these decades, will similarly need to reduce its presence and cede some ground to private sector enterprise.
The debates are around the pace of this change. This is not unique to Botswana but every country that has attempted to move from its primary economic moorings to a more sustainable, value added model, has faced friction over the pace of reforms. Too fast and underprivileged citizens are left behind on the shoreline, embittered and frustrated. Too slow and windows of opportunity slam shut, occasional economic weaknesses become structural and the same citizenry sinks collectively.
Debates around public sector reforms are particularly abrasive, as they could potentially affect hundreds of thousands of jobs and livelihoods. And yet, these particular reforms are amongst the most urgent as they directly impact upon the establishment of a private-sector led economy.
Last April, President Mokgweetsi Masisi announced a whole-government shake-up, rearranging ministries and mandates and laying out plans for parastatals reforms.
The pace of the changes within the parastatals has been slow, with critics saying expecting some of the tougher reforms to be implemented in the run-up to a general election, is unrealistic.
At the last count, the country had 64 parastatals spread across the different ministries, with the majority of these loss-making and having been in such a state over many years, draining the ever-tightening budget of billions of pula annually.
Parastatals are key to service delivery and are divided into commercial and non-commercial, meaning those expected to run on a profitable or ‘going concern’ basis and those that by the nature of their activities exclusively rely on support from government for sustenance.
Thus, the majority of parastatals such as the Botswana Geoscience Institute and the Botswana Examination Council are not focused on profits but on public service. However, the balance such as Air Botswana, the Botswana Power Corporation and others, are expected to provide government with a return on its annual investment.
By law, these commercial parastatals are expected to operate as ‘going-concerns’, generating enough revenue to cover their operations and ordinarily should not require additional capital from government.