Aspects of Annual National Budget: How do we go about it Madam Minister? Part 5

In our last article, we expressed our agreement with the Minister of Finance and Economic Development that financial subventions to state- owned entities ( SOEs) should be reduced and the latter be encouraged to set their strategies for sustainability. However, we objected to a selective policy in the implementation and execution of that budgetary decision. One will recall that the decision will be applied to commercial entities. We believe that whether the organisation is profit or not profit- oriented, it should become a candidate for evaluative scrutiny and the related accountability to stakeholders.

In this article, we will discuss this issue further as it has a bearing on the national social and economic setting as far as the livelihoods of Batswana are concerned, especially, those who are not privileged to have accumulated sustainable wealth. If what is in the newspapers is to go by, it is causing concern to have this issue being so precipitated and extrapolated to this massive shift of selling those state assets some of which will be amalgamated. The question now is, have we done our homework as a nation in this important game- changing factor? Have we investigated what went wrong in the initial establishment, strategic direction, running, and maintaining these SOEs, in accordance with, proper business norms?

Do we have independent and skillful care to lead these phenomenal and social and economic livelihoods shacking undertaking? Or are we just crushing everything for the purposes of saving money for the state? Our advice is that we should tread carefully despite the limited financial resources at our disposal. With due respect, let us not find ourselves regretting decisions that we take through our leadership by throwing the baby out with the water.

Our observation of these issues that entangled us during the formation of the SOEs was their establishment without defining each of their corporate purposes for their subsequent monitoring and maintenance. Then what is the corporate purpose? “Corporate Purpose is the higher purpose of a company that goes beyond the sole profit orientation.

The purpose is to define and deliver a long- term value- creating purpose, either in the company’s local environment or in the global market environment, that is directly related to the company’s value creation.” Available at https:// globe- one. com. Accessed on 19/ 04/ 2022.

This definition implies that although there is profit, there are other factors in addition to profit that create value for all stakeholders both proximate and unknown stakeholders. Therefore, it is not the right thinking to say the notfor- profit organisation has not made a profit.

In the last article, we explained the three ways of the incorporation or corporatization of SOEs ( Parastatals), either through a special Act of Parliament, or companies incorporated through the Companies Act which are in two forms, companies limited by shares and companies limited by guarantee. Organisations incorporated through the Act of Parliament and companies limited by guarantee are established to provide service in a variety of ways to the public. A proper way of financing these two types of organisations is to grant them financial seeds to finance their establishment and commencement. After their commencement, they should be steered by the Governing Body to prepare a strategic plan comprising their purposes, visions, mission statements, objectives, and goals.

A reasonable strategic plan should take a period of five ( 5) years. To make this value creation document realistic and practical, every year a business plan should be prepared to indicate the organisation’s aspirations of the intended provision of services to the public.

From the business plan, the management should derive a ‘ statement of financial position of the organisation which, in essence, will give a picture on a regular basis of the financial status of the organisation. For the purposes of the assessment of the financial performance of the organisation, there should also be a projected income statement. Another important factor of projections will, also, be the projected cash flow statement which will indicate how the financial expenditure will be spread over the year.

These three statements will be part of the budgetary proposal sent to the line Ministry for financing. Prior to that, the Governing Body would have grilled the management on this documentation and, more importantly, on the underlying assumptions of the monetary and non- monetary items of the business plan.

Since the business plan is the main basis of the oversight from the perspectives of the Governing Body and, subsequently, the line Ministry, both stages should start building their conversance with it for the purposes of monitoring and evaluating on how the activities of the business plan are faring in terms of strategic targets and measures. It should be noted that during the implementation and execution of the business plan, the projected statements will then be compared with the actual activities.

In the next article, we will advise on the expected nature of the oversight and ask a question, do we have effective and ethical SOEs Governing Bodies and role clarity between these bodies and the SOEs’ ownership?