PEEPA 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 PEEPA presentations

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 2 PEEPA presentations

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 § § § 3 Rationale for Current Board Nomination Approach – Challenges Performance Monitoring and Evaluation Opportunities for improvement Conclusions PEEPA presentations

BOTSWANA - HISTORY & GEOGRAPHY n Botswana became Independent on 30 th September, 1966 after 80 years as a British Protectorate n Botswana is a landlocked, semi-arid country of 582, 000 km 2(about the same size as Kenya and France). n It is located in Southern Africa and shares a border with Angola, Zimbabwe, South Africa, Namibia and Zambia. (see map) n The population was estimated at 1. 8 million in 2008 4 PEEPA presentations

Map of the World § 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, Zambia, Zimbabwe, South Africa and Namibia. 5 PEEPA presentations

BOTSWANA - POLITICAL / ADMINISTRATIVE SET-UP n Constitution of Botswana provides for 3 arms of government: Ø Legislature- Members of the National Assembly are directly elected from the constituencies. Ø 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. Ø 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. 6 PEEPA presentations

BOTSWANA - ECONOMY n Economy continued to show signs of steady recovery from the effects of the 2009 global recession. n 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. n 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 n The mining sector accounted for 30. 8% of total GDP, up from 7 25. 9% in 2009, but still below the longer-term trend level of close to 40 percent. PEEPA presentations

BOTSWANA – ECONOMY cont. n The forecast is that in real terms, the economy will grow by 6. 8% in 2011 and 7. 1% in 2012 n Forecast Total GDP in current prices for the current financial year will be P 101. 59 billion (US$14. 5 billion), followed by P 109. 5 billion (US$15. 7 billion) in 2011/12, and P 118. 1 billion (US$16. 9 billion) in financial year 2012/13. n Botswana GDP per Capita at current prices was reported at P 45, 874. 54 (US$6, 533. 57) in 2009, according to the International Monetary Fund (IMF). n In 2015, Botswana's GDP per Capita at current prices is expected to be P 81, 395. 00 (US$11, 628. 00) 8 PEEPA presentations

BOTSWANA - INTERNATIONAL RELATIONS n The country is a member of various international organisations, such as: Ø Ø Ø 9 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. PEEPA presentations

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

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) 11 PEEPA presentations

THE PUBLIC ENTERPRISE (PE) LANDSCAPE IN BOTSWANA – OWNERSHIP MODEL § Botswana has adopted the decentralised PE Ownership model Ø PEs belong to different line Ministries who are the shareholders Ø The line Ministers appoint Boards of Directors of the PEs that report to them Ø Most of the PEs are established through Acts of Parliament as statutory corporations while some are established as companies through the Companies Act Ø 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. Ø The mandates of PEs are normally spelt out in their establishing documents. 12 PEEPA presentations

THE PE LANDSCAPE IN BOTSWANA – OWNERSHIP MODEL (CONT. ) Ø 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. Ø The Governance of PEs is normally provided for in the establishing documents 13 PEEPA presentations

BOTSWANA PUBLIC ENTERPRISES BY OWNERSHIP AND CLASSIFICATION Ministry Agriculture Revenue Generating PEs Botswana Agricultural Marketing Board Botswana Meat Commission Botswana Vaccine Institute Banyana (PTY) Ltd Lands and Housing Botswana Power Corporation Water Utilities Corporation Botswana College of Agriculture National Food Technology Research Centre Botswana Housing Corporation Minerals, Energy & Water Resources Non-Revenue Generating PEs Water Apportionment Board 14 PEEPA presentations

BOTSWANA PUBLIC ENTERPRISES BY OWNERSHIP AND CLASSIFICATIONcontinued Ministry Revenue Generating PEs Finance and Development Planning Botswana Development Corporation Botswana Savings Bank National Development Bank of Botswana 15 Ministry of Transport & Communication s Air Botswana Post Botswana Railways Botswana Telecommunications Authority Botswana Telecomms Non- Revenue Generating PEs Botswana Privatisation Asset Holdings Botswana Institute for Development Policy Analysis Botswana Stock Exchange Botswana Unified Revenue Service Financial Intelligence Agency International Financial Services Centre Motor Vehicle Accident Fund Non-Bank Financial Institutions Regulatory Authority Public Enterprises Evaluation and Privatisation Agency Public Procurement and Asset Disposal Board Selebi Phikwe Economic Diversification Unit Statistics Botswana Civil Aviation Authority PEEPA presentations

BOTSWANA PUBLIC ENTERPRISES BY OWNERSHIP AND CLASSIFICATIONcontinued Ministry Education and Skills Development Infrastructure, Science & Technology 16 Environment, Wildlife & Tourism Non-Revenue Generating PE Botswana Examinations Council Botswana College of Distance and Open Learning Botswana International University of Science and Technology Tertiary Education Council Botswana Training Authority University of Botswana Innovation Hub Botswana Technology Centre Rural Industries Promotions Company Botswana Tourism Organisation PEEPA presentations

BOTSWANA PUBLIC ENTERPRISES BY OWNERSHIP AND CLASSIFICATIONcontinued Ministry Revenue Generating PEs Trade and Industry Citizen Entrepreneurial Development Agency State President Non-Revenue Generating PEs Botswana Bureau of Standards Botswana Export Development & Investment Authority Competition Authority Local Enterprise Authority Botswana National Productivity Centre 17 PEEPA presentations

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 18 PEEPA presentations

BOTSWANA PUBLIC ENTERPRISES – CONTRIBUTION TO GDP 19 PEEPA presentations

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 20 the private sector PEEPA presentations

BOTSWANA PUBLIC ENTERPRISES – BOARD NOMINATION APPROACH Review and identification of Board vacancies – PEEPA director database Advertise for expression of interest from candidates Induct new Board members Screening submissions from potential candidates Solicit feedback on decision made to update PEEPA director database 21 Recommendations of candidates to serve on PE Board PEEPA presentations

RATIONALE FOR CURRENT BOARD NOMINATION APPROACH § The board nomination process is intended to: Ø Introduce a transparent merit based director selection process Ø Achieve a balanced board with respect to expertise and skills Ø Identify and reduce risk of nominating members who may be over committed Ø Identify potential conflict of interest Ø Achieve continuity in the Board functioning by staggering Board Membership tenure Ø Promotes good corporate governance 22 PEEPA presentations

BOARD NOMINATION APPROACH CHALLENGES § Identified challenges include: Ø Adoption of transparent merit based board nomination process not mandatory Ø Restrictive provisions in some constitutive documents on Board Membership Ø Appointment of public servants not based on transparent merit based approach Ø Adherence to good Corporate Governance principles generally not enforced Ø Lack of Board performance evaluation 23 PEEPA presentations

PRIVATE ENTITY PERFORMANCE MONITORING AND EVALUATION § Principal approach has been through annual PE Performance reviews, aimed at: Ø establishing alignment of PE’s strategy with developmental expectations, plans and sector policies Ø determining achievement of PEs developmental objectives and resultant impact Ø assessing adequacy of resourcing and internal resource utilisation Ø evaluating long term financial sustainability of PE Ø evaluating adoption of good corporate governance practices Ø Assessing opportunities for private sector participation 24 PEEPA presentations

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 25 PEEPA presentations

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 26 PEEPA presentations

THANK YOU CONTACT DETAILS Public Enterprises Evaluation and Privatisation Agency Plot 50370, 2 nd 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 27 PEEPA presentations