Wesbank

Magang blasts privatisation failure

SHARE   |   Monday, 10 August 2015   |   By Staff Writer
Magang Magang

In his book, Delusions of Grandeur Volume II, David Magang clinically dissects Botswana’s failed attempts at privatisation, demonstrating government’s shocking implementation delay and its fears of going a path it has never dared.

Government adopted the Privatisation Policy in 2000 and set up the Public Enterprises Evaluation and Privatisation Agency (PEEPA) in 2001 and four years later (2005) the Privatisation Master Plan was finalised. Magang can’t hide his shock at the delays. “Yet as I write, not one parastatal has changed status from a state-owned enterprise to a privately-owned entity and we are talking of 15 years since Privatisation was mooted folks. It must be the longest held policy-implementation breath in macroeconomic history. But please do not misconceive me: I make this observation not necessarily because I am a fan of Privatisation but out of a concern for the scale of financial and logistical resources that PEEPA continues to gorge on when it is a virtual White Elephant," he said.


Magang’s book comes at a time when PEEPA is advanced in its quest to deliver on its first successfully privatised project – Botswana Telecommunications Corporation Limited (BTCL). There has however, been constant postponements of the launch of an Initial Public Offering (IPO), with the process having failed to be closed last year on unclear grounds. And now 2015 is about to end, with no serious pronouncement about when the privatisation will be completed.


Magang’s suspicion on what causes these delays could be right. And he quotes the founding CEO of PEEPA Joshua Galeforolwe, who comes out clearly why Government appears prone to preferring a snail pace than they would have preferred. It is premised on the basis that the privatisation path is self-imposed and hence it is easy for Government to react to resistance from unions on perceived job losses.  
Magang in discussing this subject appears to have read widely around it; from the disastrous case of imposed privatisation in Zambia, to China’s dualistic set-up, offering the experts and guru’s views, the Margaret Thatcher’s approach, and winds up the topic by declaring his stand on the concept and its application.     
Bretton Woods institutions – the International Monetary Fund and the World Bank (ardent protagonists of private business (privatization) – critics easily point to the colossal outcome Zambia privatization where President Frederick Chiluba’s government privatised 257 of the 280 state-owned companies. Magang quotes African Magazine’s apt depiction of the collapse of what was previously a bustling economy.  Observers, Magang noted, blamed the failure of Zambia on corruption.
The China model is the one that he appears comfortable with. “If China can so transform its economy with this dualistic setup, I do not see any reason why Botswana cannot. I am aware that the character of Privatisation in China is such that often it is hard to differentiate state ownership from private ownership as Government disengagement is not clear-cut. In some instances, the so-called private companies enjoy a sheltered monopoly or oligopoly. Whilst we cannot replicate China’s privatisation model in entirety, there is a lot we can learn and assimilate,” he writes.


While proponents of privatisation hail its significance in the fact that it reduces inefficiencies, and increases private sector participation, trade unions don’t want anything to do with it since it leads to job losses. Magang quotes Botswana Federation of Trade Unions (BFTU) stand that primarily points to ‘seismic job losses through redundancies leading to chronic unemployment’.


He appears to lean towards the labour unions in his conclusion of privatisation discussion, showing the compassionate side of him. “I am personally more concerned about the plight of the ordinary Motswana than the state itself because the two are not one and the same. For more than twenty years, I relentlessly agitated for beneficiation of our minerals because my desire was for all our people to be in employment. Hence, if I will support Privatisation, which in any case is now irreversible, it is only on one strong condition – that jobs of Batswana not be tampered with, that they be guaranteed,” he insists.
He further challenges government to ensure that there is retention of staff in any privatisation transaction irrespective of the stake Government keeps. He is puzzled by the choice of profit making entities as candidates for privatisation, finding no reason why BTC and the National Development Bank (NDB) should be candidate. “Besides, in the case of BTC, we are talking about a monopoly fixed line operator. What is the point of privatising a monopoly? Doesn’t privatization thrive better under competitive conditions? Why can’t Government simply licence more fixed line telephony operators rather than saddling us with the same operator disguised as a private entity?” he asks. It is not clear whether BTC privatisation will be completed this year.
Govt on BTCL privatisation
In its last comment on BTCL privatisation in December 2014, the Ministry of Transport and Communications (MTC) announced the extension of the opening of the IPO to 2015, without stating the day or month. “The Project Team has been working around the clock to bring this listing to Batswana. What has always been apparent is that the complexities and the sheer magnitude of privatising BTCL is a challenging task. It was thus always an ambitious timeline to conclude before year-end, one that all in the Project nevertheless believed was achievable.

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However, a number of material steps, including securing the necessary underwriting arrangements, remain to be concluded.  It needs to be noted that one cannot over emphasise the magnitude of the work that has been completed to date along the path to bringing this IPO. The journey to this point has taken many man hours over a number of years. We are confident that the remaining steps will comfortably be achieved in the New Year.


Throughout this project we have sought the advice and guidance of all stakeholders. This included our potential investors both as the general public via the much published “di Pitso” and through special workshops where we engaged with potential institutional investors. As we engage with the potential individual investors we are reminded of the core mandate of this IPO; “deliver an IPO that allows maximum potential for citizen participation”. A deferred IPO opening would have the additional benefit of allowing more Batswana to continue to save to enable them to participate in what will be the most significant listing in the history of Botswana,” said the ministry in a statement.  
The ministry concluded the statement by saying: “A new date for the opening of the offer (IPO) will be announced in the new year”. This announcement is still awaited.  In the IPO, Government offers 49% of the company’s shares of which 44% will be available for purchase by citizens and citizen companies and the remaining 5% will be retained for BTCL employees.

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The NDB case
Meanwhile, NDB saw a sharp fall in performance in 2014 and it remains unclear when it will advance its privatisation drive. As a primary financier of start-ups and agricultural development projects, the bank has had to contend with high default rates particularly on the back of the current drought.
  
Air Botswana
This should have been the first entity to be privatised but a series of near misses due to hesitation by Government put paid to those efforts. As things stand the national airliner has remained as a loss making entity from year to year.