2014 BUDGET SPEECH (PART 7) PERFORMANCE OF PUBLIC ENTERPRISES Madam Speaker, state owned enterprises or parastatal organisations can play a major role in promoting economic growth. Over the years, the parastatal sector has grown both in quantity and complexity, and hence, the need to revisit the strategic role they play in the development of this country. The overall performance of the parastatal organisations during the past year was mixed, with some performing satisfactorily, while others incurred losses. Some of those which performed satisfactorily during the financial year 2011/12 include the Botswana Telecommunications Corporation, which recorded a net profit of P375.6 million and the Botswana Development Corporation which recorded a net profit of P143.3 million, despite the challenges with some of its projects. The National Development Bank also recorded a net profit of P45.7 million, despite the depressed economic growth and a heightened competition from new entrants in the banking sector. Similarly, the Botswana Savings Bank also achieved a net profit of P18.6 million reflecting a significant increase in interest income occasioned by the high uptake of unsecured personal loans, and the impact of cost containment measures during the period under review. However, for various reasons, other parastatal organisations under-performed during the same period. The Botswana Power Corporation (BPC) was one of those that recorded a huge loss of P1.652 billion in 2011/12, following a loss of P796.6 million recorded in the previous year, due to operational challenges at Morupule B Power Station. As a result of technical problems that delayed commissioning of the Morupule B Power Station, BPC was forced to undertake emergency power supply. Such measures included the use of diesel fuelled generators and continued import of power from South Africa to complement domestic power supply. All these increased BPC operational costs thereby requiring Government funding support. The Botswana Meat Commission also registered a loss of P290.9 million in 2012, following another loss of P233.5 million in 2011. The low performance for the year 2012 was attributable to the delisting of BMC from the European Union market, as well as the outbreak of foot and mouth disease in the North East District. Madam Speaker, there is no doubt that state owned enterprises played a major role in the development of our economy, especially in the earlier years after Independence. However, I believe that the role of state owned enterprises in the development of this country should continue to complement that of Government, given the limited resources at the disposal of Government. In this regard, it is important that these organisations are managed efficiently and effectively for them to contribute to sustained economic growth. I therefore wish to highlight some of the measures that Government will be pursuing to ensure that the parastatal sector continues to contribute to economic growth of this country. First, Government will continue implementation of the privatisation policy in order to reduce the burden on the fiscus. As it would be clear from the budget proposal, Government subventions to these organisations have grown substantially over the past few years most of which have gone towards payment of personal emoluments. Progress has been made in merging some parastatals. The process to merge Botswana Postal Services and Botswana Savings Bank, for example, is scheduled to be concluded by March 2014. This follows the passing by Parliament in December 2013 of the Botswana Postal Service Amendment Bill and approval by Cabinet of a Holding Company, the Botswana Post and Savings Group Limited, under which the merger will operate. Parliament also passed the National Development Bank Transition Bill in December 2013 to facilitate privatisation of the National Development Bank as part of increasing its efficiency and promoting citizen economic empowerment. Second, Government will be working on guidelines for the operation and management of existing organisations. The Public Enterprises Evaluation and Privatisation Agency (PEEPA) has already started drafting guidelines to be used by Government in overseeing performance of parastatals and monitoring overall implementation. The oversight responsibility of parastatals will be decentralised to line Ministries. Relevant Accounting Officers will have overall accountability for ensuring that their Ministries implement the guidelines, with regular reports submitted to the Productivity Improvement Committee (PIC Force) and Cabinet. Furthermore, Government is currently preparing the Privatisation Master Plan II. The main objective of the Plan is to identify services and Public Enterprises that are suitable for privatisation during the period 2014 to 2019 as well as to enhance guidance for the rationalisation of parastatals. Madam Speaker, given the increased budgetary pressures, Government will be applying strict criteria for the creation of new parastatals, as a measure to contain growth in grant subventions to these organisations. In addition, Government will continue with its efforts to reform the governance structures of these organisations to give accountability to both their Boards and management with clear performance targets. All these measures will allow Government, as a shareholder, to contain costs and demand reasonable returns on equity invested in these organisations, as well as in terms of their contributions to economic growth and employment creation.
Posted on: Mon, 03 Feb 2014 12:47:34 +0000
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