Clash of ministers over SPEDU CEO exposes rot in SOES

Bame Piet

SPEDU owes P8.1million to contractor-AG SOES Non compliant with many laws-BAQA

The standoff between the Minister of Investment Trade and Industry Mmusi Kgafela and his Assistant Minister, Beauty Manake concerning the renewal of SPEDU’s acting CEO, Jazenga Ueseza’s contract is said to be just a tip of the iceberg as far as the rot in state-owned enterprises (SOES) is concerned.

Ueseza was employed in May 2015 as Director of Strategic Projects and then appointed Acting Chief Executive Officer on April 04th 2021, holding the two positions simultaneously until April 2023.

Recently the two ministers gave the Board of Directors conflicting statements concerning Ueseza’s contract renewal with the Minister Mmusi Kgafela opposed to it while Manake supported it, a situation which has caused Ueseza to drag the ministry to court and subpoena Manake to depose an affidavit in his support.

In fact, the Board Chairman, Obonetse Mothelesi who was cited as second Respondent in the lawsuit states in his affidavit that Manake reprimanded the board for not renewing Ueseza’s contract and ordered them to reconvene and renew it at a meeting she called on March 7th 2023.

“At the end of the meeting she summoned our Board to remain and she reprimanded our Board for not granting Ueseza’s application for renewal, and she further directed the board to reconsider its decision, and renew the contract,” he said.

However Kgafela responded by instructing the board to defy Manake’s instruction because she had apparently overstepped her boundaries and acted illegally.

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However, the challenge of warring ministers is not the only problem that SPEDU is facing. The Auditor General has found that there were disturbing transactions during 2020, and 2021 financial year, which put the company at risk of losing money or even facing possible liquidation.

The Auditor General’s report for year 2020-2021, raises concerns that a contractor was engaged to undertake a project called “A Works Contract for Design and Build of Phase 1 Infrastructure” in Bolelanoto and Senwele Industrial Sites. The company initiated a claim of P32.25 million against SPEDU, which ended at the High Court, which court ruled in favour of the contractor directing SPEDU to pay the amount claimed.

“Subsequent to the year-end, this amount was paid directly by the Ministry of Investment, Trade and Industry, the parent Ministry under which the company functions”.

The AG observed that the contractor further initiated a legal claim for P8.1million with interests and costs towards another phase of the same project. As at date of approval of these financial statements, the amount had not yet been paid or settled, either by SPEDU or the Ministry of Investment, trade and Industry, said the AG.

“These events and conditions present a material uncertainty around the ability of the Company to continue as a going concern as it is uncertain if the amounts already paid by the Ministry of Investment, Trade and Industry to the contractor would be recovered from the company in future. It is also uncertain about how the company would pay and settle the additional claims that may arise out of the contract in future. Therefore the auditor’s opinion was not modified in respect of the matter”.

Meanwhile The Voice Investigations has unerthed information that has indicated that many SOEs flout the rules guiding recruitment, promotions and procurement of goods, financial reporting, corporate governance processes, and prevalence of Conflict of Interest are a serious concern. Many of these findings came out during the ongoing merger of some SOEs across all ministries.

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Accountability is also compromised and reporting standards, and legislation are not complied with.

This is what the AG found against National Development Bank (NDB), Botswana Railways, and Botswana Agricultural Marketing Board (BAMB) and the Mineral Development Company Limited after the entities failed to account for the 2020-2021 financial year:

“As part of my writing this report, and in line with the long standing arrangement with the Public Accounts Committee, I had circularised all statutory bodies and state-owned enterprises requesting them to forward to me their audited financial statements and reports for the purposes of review and inclusion of their review results in this report. At the time of writing this report, National Development Bank had not submitted their annual financial statements and Management letter. In response, the Chief Executive Officer stated that the financial statements of the bank for the financial year ended 31 March 2021 were still being audited and the reasons advanced were that there were initial delays in commencing the audit for National Development Bank for the year 31 March 2021. Consequently I have not been able to carry out the review of the accounts of the Bank for the financial year ended 31 March 2021 for the benefit of the National Assembly”. The same statement was made against BR, BAMB, MDCB.

The ongoing rationalisation of some SOEs resulting in mergers and dissolution of others, has revealed a prevalence of corruption, nepotism, and blatant failure to comply with processes, laws, and international practice in recruitment, procurement of goods and services, and tendering processes.

In some instances you will find a set of families working for the same entity and an investigation will find that they did what we call scratch my back I will scratch yours, said an investigator who did not want to be mentioned by name. Even procurement is syndicated and companies that benefit belong to a small number, or same families, the source added.

“Some of these things have long been reported to the DCEC but we are not seeing any changes and the DCEC doesn’t seem to be eager to respond expeditiously. There are a lot of disturbing practices in some of these SOEs,” said the source.

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From 2018 to 2022, the Botswana Accountancy Oversight Authority has examined books of the 31 State-owned enterprises and found shocking practices far below international standards and practice.

Without mentioning any entity by name, BAOA shared the performance of bottom eight least performing SOEs in financial reporting, corporate governance, and compliance with the law.

The results as per the table below indicate that 20 (65%) entities complied with International Financial Reporting Standards and 11 (35%) did not comply. In rsponse to our enquiries, Chief Executive Officer of Botswana Acountacy Oversight Authority confirmed that they made disturbing findings in assessment of SOEs in recent years.

The following were issues noted during the Financial Reporting Monitoring reviews:

There were significant delays in preparation of financial statements; Primary financial statements were misstated due to errors mainly caused by poor quality review of financial statements; and there were material differences noted between the primary financial statement balances and notes.

BAOA added that there were inadequate or inconsistent disclosures of information in the financial statements which may be misleading; and

Significant accounting policies on some financial statement balances were not disclosed.

A total of 4 Financial Reporting Monitoring re-reviews have since been performed on 4 of these entities and only 1 entity was still lacking in terms of compliance with the international financial reporting standards while 3 were compliant.

However, another observation by BAOA is that the laws governing some of the SOEs have serious limitations, parallel to Corporate Governance requirements that make it difficult for them to efficiently execute their duties efficiently.

i. Boards not balanced – inadequate executive and independent non-executive representation in the Board; ii. Board Chairpersons not independent non-executive directors; iii. Audit Committee members not all independent non-executive directors; iv. Appointment of board of directors not according to recommended best practice; v. No Nomination Committee to assist with appointment of new directors as appointments were done at Ministerial level; and vi. No annual rotation of the Board of directors.

There were no succession plans for the roles of Chairman, Chief Executive Officer (CEO) and senior executives; there were no inductions of and on-going trainings of directors; Audit Committee statutory roles not performed; Roles of the CEOs not formalised and there were no performance reviews of the CEOs; Board and committee charters were not approved by the Board; there were inadequate disclosures in the Annual report; and there were no performance evaluations of the Boards, committees and individual directors.

In terms of Corporate Governance, a total of 10 entities were re-reviewed and only 4 (40%) were compliant with the corporate governance requirements while 6 (60%) were not compliant.

Meanwhile, theDCEC has not responded to our enquiry on the number of cases reported reported to them concerning SOEs, two months after we sent them a questionnaire on the matter. Spokesperson Lentswe Motshoganetsi has only promised to respond but never did.

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