24th April 2023
Botswana is likely to slouch into a failed state status as most of its parastatals are failing to meet the accepted international standards of corporate governance.
This insight was shared by the Botswana Accountancy Oversight Authority (BAOA) with the Sunday Standard publication.
“Under the Corporate Governance review, only 14 (16%) of the 86 ( PIEs) Public Interest Entities reviewed between 2018 and 2022 complied with the Corporate Governance requirement of either King III or King IV, while 72 ( 84% ) entities did not comply with the corporate governance requirements,” BAOA said.
BOAA said the bulk of the problem could be attributed to the ineptness at the Government Enclave for failure to come up with Acts to address problems that the country is facing.
“This is a multi-layered problem. We have the failure of the Government Enclave to come up with laws that address the problem. At the same time, the boards are not independent and, for you to be on the board, you have to be politically aligned,” one corporate governance guru said.
Botswana is battling corporate governance issues, not least the lack of Merger and Acquisitions laws which recently came to light, a fact lamented by a local corporate law firm.
“The most unfortunate thing about Botswana is that we do not have the Mergers and Acquisitions’ Law. We operate on Rules, and Rules are not laws,’ Sipho Ziga, a senior partner at Armstrongs Attorneys said.
“We need to come up with laws that are incorporated in the Companies Act. They must be effective and enforceable by law like in South Africa,” he added.
The lack of appropriate commercial laws has rendered the corporate field fluid, thus promoting greed over the national interests.
“Our state owned entities (SEOs) boards are all about greed rather than national interests,” an observer said.
BAOA catalogued a series of problems that it encountered in its assessment of the local SOEs landscape.
“The following deficiencies which were common across the corporate governance review of PIEs were noted:
“a) Limitations by the statutes; (SOES are incorporated by Act of parliament, these Acts are not in line with the best Corporate Governance practices,” BAOA said in short.
BAOA observed issues including inadequate executive and independent non-executive in the boards, and that board chairpersons were not independent non-executive directors.
“Audit committee members are not all independent non executive directors, the appointment of board directors is not based on best practice and the boards of directors are not rotated annually,” BAOA lamented.
“There were no inductions and on-going training of directors and the audit committee statutory roles not performed. The roles of CEOs was not normalised, and there were no performance reviews of CEOs, BAOA said.
However, it noted that the Botswana Development Corporation (BDC) is in its own league and has the best management and board members, with clearly outlined systems that meet the international standards. Valued at P 5.1 billion, the entity has attracted some of the best local talent to its board and ticks all the the right boxes in terms of corporate governance.
“The Board is satisfied that there is consistent compliance in all material aspects to all principles of good governance, as pronounced in King Corporate Governance Code and the Companies Act Cap 42:01, as well as the principles as set out in the proposed governance Code of Botswana, as issued by the Directors Institute of Botswana,” BDC said in its annual report.
The proposed Code of Botswana has attracted criticism from corporate governance experts, who say it is rich for BAOA, a parastatal that is itself beset by the same issues other parastatals are facing to lecture others on best practices. They also questioned its reports on the International Financial Reporting (IFR), saying it does not go deep enough as it does not critique the auditor reports.
