The CEO of Botswana Accountancy Oversight Authority (BAOA) Duncan Majinda says the Authority will not stop corporate failures in State Owned Enterprises (SOEs), but will identify at the earliest, institutions that are under financial stress so that action can be taken by the shareholders. Speaking at his maiden press conference this week in Gaborone, Majinda who was accompanied by BAOA board chair, Michale Lesolle and other executive members, said their role in monitoring the performance of the parastatals will be limited to advisory to the minister if there is a problem with some institutions. Last month when reading the 2018/19 budget speech, the Minister of Finance and Economic Development, Kenneth Matambo said the continued loss making by some SOEs was a major to concern for government and in an effort to address this he said institutions such as Public Enterprise Evaluation and Privatisation Agency (PEEPA) and BAOA were to monitor SOEs financial performance and governance. He said going forward government will work closely with PEEPA and BAOA to strengthen the performance mechanisms for SOEs to ensure that they deliver on their mandates and that the country derives value-for-money from their existence.
Loss making entities
Some of the SOEs that made losses during the 2016/17 financial year include Botswana Meat Commission (BMC) with a net loss of P229.7 million compared to a net profit of P332.6 million the previous year which was driven mainly by government cash injection of P600 million. In the same period last year, the National Development Bank (NDB) recorded a net loss of P168 million compared to a net loss of P21.2 million the year before while Botswana Power Corporation (BPC) registered a net loss of P140.2 million in 2017, compared to a net loss of P99.6 million in 2016. Water Utilities Corporation (WUC) recorded a net loss of P137.6 million in 2017, from a net profit of P119.4 million in 2016, while Air Botswana, improved its performance with a net loss of P12.4 million in 2017, compared to a larger net loss of P86.1 million. BAOA’s role is not only limited to monitoring financial performances of SOEs but will be looking at companies which are termed Public Interest Entities (PIEs) which include listed companies and auditors.
PIEs registered with BAOA besides listed ones include those under the supervision of Bank of Botswana which are commercial banks and bureau de changes, and those under the supervision of Non-Bank Financial Institutions Regulatory Authority (NBFIRA) which range from insurance companies, stock brokers and various financial institutions like pension funds. BAOA is also responsible for setting standards and codes, promoting high standards of corporate governance, monitoring of certified auditors and monitoring professional accountancy bodies like BICA, ACCA and CIMA. The reason the Authority takes interest in reviewing PIEs, according to Majinda, is to among others ensure compliance with international standards, ensure compliance with applicable legislation and ensuring compliance with best local and international practice in corporate governance. PIEs are expected to follow different financial reporting frameworks under which they fall such as International Financial Reporting Standards (IFRS), IFRS for Small and Medium Enterprises (SMEs) and International Public Sector Accounting Standards (IPSAS). According to Majinda, institutions are struggling with problems of compliance with international education standards, compliance with codes of ethics, compliance with IPSAS, weak disciplinary and investigation process, capacity constraints and audit quality review systems among others. He said government have problems too like resource constraints, false confidence in the accountancy and auditing profession and its ability and said government often refer organisations like the World Bank to accountants on issues of establishing and independent oversight.