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PUBLIC ENTERPRISES IN BOTSWANA: OWNERSHIP AND GOVERNANCE

(PEEPA). PUBLIC ENTERPRISES IN BOTSWANA: OWNERSHIP AND GOVERNANCE Presentation to High Level Meeting of the State Ownership Authorities: state as an owner – ownership policy, execution of state interests and fostering of public-private dialogue Ljubljana, Slovenia 5 - 6 September, 2011.

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PUBLIC ENTERPRISES IN BOTSWANA: OWNERSHIP AND GOVERNANCE

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  1. (PEEPA) PUBLIC ENTERPRISES IN BOTSWANA: OWNERSHIP AND GOVERNANCE Presentation to High Level Meeting of the State Ownership Authorities: state as an owner – ownership policy, execution of state interests and fostering of public-private dialogue Ljubljana, Slovenia 5 - 6 September, 2011

  2. PRESENTATION OUTLINE • Botswana: History and Geography • Map of the World • Botswana – Political /Administrative Setup • Botswana Economy • Botswana – International Relations • PEEPA’s mandate • Public Entities and Privatisation • The Private Enterprise landscape in Botswana – ownership model • Botswana Public Enterprise by Ownership and Classification

  3. PRESENTATION OUTLINE... Cont. • Botswana Public Enterprise – fulfilling commercial and non-commercial objectives • Botswana Public Entities – Contribution to GDP • Botswana Public Enterprises – Board Nominations • Botswana Public Enterprises – Board Nomination Approach • Rationale for Current Board Nomination Approach • Board Nomination Approach – Challenges • Performance Monitoring and Evaluation • Opportunities for improvement • Conclusions

  4. BOTSWANA - HISTORY & GEOGRAPHY • Botswana became Independent on 30th September,1966 after 80 years as a British Protectorate • Botswana is a landlocked, semi-arid country of 582,000 km 2(about the same size as Kenya and France). • It is located in Southern Africa and shares a border with Angola, Zimbabwe, South Africa, Namibia and Zambia. (see map) • The population was estimated at 1.8 million in 2008

  5. Map of the World • Botswana is a landlocked, semi-arid country of 582,000 km2 (about the same size as Kenya and France). • It is located in Southern Africa and shares a border with Angola, Zambia, Zimbabwe, South Africa and Namibia.

  6. BOTSWANA- POLITICAL / ADMINISTRATIVE SET-UP • Constitution of Botswana provides for 3 arms of government: • Legislature- Members of the National Assembly are directly elected from the constituencies. • Judiciary - An independent judiciary with a High Court presided over by the Chief Justice. Subordinate courts are Magistrates’ Courts and Customary Courts • A Court of Appeal deals with appeals from the High Court. • The Executive- The President is head of the Executive arm of Government and presides over Cabinet. President selects his Ministers from among the members of the National Assembly.

  7. BOTSWANA - ECONOMY • Economy continued to show signs of steady recovery from the effects of the 2009 global recession. • Gross domestic product (GDP) grew in real terms at an annual rate of 10.8% in the first nine months of 2010, compared to a contraction of 3.7% in 2009. • The main contributor to the turnaround has been mining sector output, which increased by 21.9% compared to a decrease of 27.1% in 2009. Non-mining GDP grew by 6.5% in 2010 compared to 6.2% in 2009 • The mining sector accounted for 30.8% of total GDP, up from 25.9% in 2009, but still below the longer-term trend level of close to 40 percent.

  8. BOTSWANA – ECONOMY cont. • The forecast is that in real terms, the economy will grow by 6.8% in 2011 and 7.1% in 2012 • Forecast Total GDP in current prices for the current financial year will be P101.59 billion (US$14.5 billion), followed by P109.5 billion (US$15.7 billion) in 2011/12, and P118.1 billion (US$16.9 billion) in financial year 2012/13. • Botswana GDP per Capita at current prices was reported at P45,874.54 (US$6,533.57) in 2009, according to the International Monetary Fund (IMF). • In 2015, Botswana's GDP per Capita at current prices is expected to be P81,395.00 (US$11,628.00)

  9. BOTSWANA - INTERNATIONAL RELATIONS • The country is a member of various international organisations, such as: • United Nations • World Bank • International Monetary Fund • World Trade Organisation • African Union and regional bodies, such as the Southern African Customs Union (SACU) and the Southern African Development Community (SADC). • SADC Headquarters located in Gaborone, Botswana.

  10. PEEPA’s mandate • Advising Government on matters related to privatisation and subsequent implementation • Privatisation Policy for Botswana mandates PEEPA to : • Advise Government on appointment of directors of PEs and monitor their performance. • Review objectives of existing parastatals and set objectives of entities to be commercialised and/or corporatised • Assist Government in setting performance targets of PEs • Monitor performance of PEs in meeting their objectives PEEPA’s mandate entails..

  11. PEs and Privatisation • Botswana has a National Privatisation Policy – adopted 2000 • Aimed at improving service delivery and enhancing efficiencies • Managed by the Ministry of Finance & Development Planning (MFDP) • PEEPA established to implement the Policy • Involves different forms of Privatisation; e.g. Outright Sale, Part Sale, Commercialisation, Restructuring • Some transactions being implemented (e.g. BTC, NDB, mergers)

  12. THE PUBLIC ENTERPRISE (PE) LANDSCAPE IN BOTSWANA – Ownership model • Botswana has adopted the decentralised PE Ownership model • PEs belong to different line Ministries who are the shareholders • The line Ministers appoint Boards of Directors of the PEs that report to them • Most of the PEs are established through Acts of Parliament as statutory corporations while some are established as companies through the Companies Act • PEs are set up as autonomous bodies with their own corporate identities, they get policy direction from the line Ministries, based on the National Development Plans (NDP) and Ministry Strategic Plans. • The mandates of PEs are normally spelt out in their establishing documents.

  13. THE PE LANDSCAPE IN BOTSWANA – Ownership model (cont.) • PEs submit periodic performance reports to their line Ministries. PEEPA PE review exercises have however, established that oftentimes, PEs are given too much autonomy to set their own targets. • The Governance of PEs is normally provided for in the establishing documents

  14. BOTSWANA PUBLIC ENTERPRISES BY OWNERSHIP AND CLASSIFICATION

  15. BOTSWANA PUBLIC ENTERPRISES BY OWNERSHIP AND CLASSIFICATION- continued

  16. BOTSWANA PUBLIC ENTERPRISES BY OWNERSHIP AND CLASSIFICATION- continued

  17. BOTSWANA PUBLIC ENTERPRISES BY OWNERSHIP AND CLASSIFICATION- continued

  18. BOTSWANA PUBLIC ENTERPRISES –FULFILING COMMERCIAL AND NON-COMMERCIAL OBJECTIVES • Some sectors such as Telecommunications have clear policies for Universal Service obligations, while the rest of the sectors are still lagging behind, with no clear policy. • It is therefore common to find PEs with dual mandates, or tasked with carrying out both commercial and non-commercial activities. • PEs are treated as arms of government therefore required to fulfil developmental role of government • As part of the broader Corporate Governance Framework, PEEPA is advocating for the adoption of a PE ownership Policy in Botswana and performance contracting between PEs and the Shareholder (Government) which should spell out the obligations of both parties, including how social obligations would be financed. • Line ministries operate as owners and regulators of PEs

  19. BOTSWANA PUBLIC ENTERPRISES –contribution to GDP

  20. BOTSWANA PUBLIC ENTERPRISES– Board nominations • Board compositions are provided for in the establishing Acts/ Constitutions. • Ministers usually appoint senior Ministry officials to serve on the Boards of PEs falling under their portfolio. • Following the approval of the Privatisation Policy of Botswana of 2000, Ministries are now required to seek the assistance of PEEPA in identifying candidates to be considered for Boards of PEs • There is provision for candidates from the private sector to be appointed to PE boards to bring private sector expertise • As a result there has been an increase of board members from the private sector

  21. BOTSWANA PUBLIC ENTERPRISES –BOARD Nomination Approach

  22. Rationale for current Board nomination Approach • The board nomination process is intended to: • Introduce a transparent merit based director selection process • Achieve a balanced board with respect to expertise and skills • Identify and reduce risk of nominating members who may be over committed • Identify potential conflict of interest • Achieve continuity in the Board functioning by staggering Board Membership tenure • Promotes good corporate governance

  23. Board nomination Approach - Challenges • Identified challenges include: • Adoption of transparent merit based board nomination process not mandatory • Restrictive provisions in some constitutive documents on Board Membership • Appointment of public servants not based on transparent merit based approach • Adherence to good Corporate Governance principles generally not enforced • Lack of Board performance evaluation

  24. Private Entity Performance Monitoring and Evaluation • Principal approach has been through annual PE Performance reviews, aimed at: • establishing alignment of PE’s strategy with developmental expectations, plans and sector policies • determining achievement of PEs developmental objectives and resultant impact • assessing adequacy of resourcing and internal resource utilisation • evaluating long term financial sustainability of PE • evaluating adoption of good corporate governance practices • Assessing opportunities for private sector participation

  25. Opportunities for Improvement • Adoption of Corporate Governance Framework by PEs • Adoption of Botswana Corporate Governance Code • Managing Commercial VS developmental roles • Adoption of an over-arching PE ownership policy

  26. CONCLUSIONS • Ownership model requires improvement • Need to separate regulation from ownership • Develop a clear PE ownership policy • Promote private sector participation for efficiency enhancement • Continue to increase Board Members from the Private Sector • There are many lessons to be learnt from other regions

  27. Thank You Public Enterprises Evaluation and Privatisation Agency Plot 50370, 2nd Floor, Twin Towers, East Wing Fairgrounds Office Park Private Bag 00510 Gaborone Tel: +(267) 3188807 Fax: +(267) 3188662 Email: peepa@peepa.co.bw www.peepa.co.bw Contact Details

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