From Anchor to Sail: Amending Botswana’s Parastatals for Economic Sustainability?

Botswana’s economy is being weighed down by an aging fleet of state-owned enterprises (SOEs) that are no longer fit for turbulent waters. These parastatals were meant to deliver essential services and stimulate growth but now struggle under the weight of inefficiency, mounting debt, and political interference. Botswana is forced to lift the anchor of state ownership and raise the sails of privatization to move forward economically. It is evident that the idea of diamonds being forever, as the anchor that kept the ship in place, prevented movement toward diversification. The industry that has shaped the country is faltering, pulling down Botswana’s parastatals, which are heavily dependent on fiscal funding.

The Illusion of Unsinkability: Diamond Dependency

Botswana’s economy is affected by a downturn in the diamond industry, as demand decreases due to the rising popularity of lab-grown diamonds, which has proven the urgency of privatization. Finance Minister Ndaba Gaolathe announced in the 2024/2025 budget speech an increase in corporate tax and the top personal income tax bracket, arguing that these adjustments were necessary to strengthen revenue collection. Recent tariffs imposed by the US on Botswana are a possible strike to the iceberg, raising panic as the ship is slowly bowing to the ice depths. This means lower diamond revenues, which could widen the budget deficit already projected at 9.3% of GDP and slow down economic recovery. The dominant, diamond-funded public sector needs dismantling before it crumbles due to a lack of income.

Unlike the United Arab Emirates, another federation strongly dependent on commodity exports, Botswana has failed to set up a large investment fund that could help diversify the economy and build up a manufacturing industry. Experts argue that the government has failed to implement necessary measures to aid the country’s struggling economy and combat youth unemployment, which stands at a staggering 38.2% as of the first quarter of 2024. In numerous studies and publications on Botswana’s economy over the years, the International Monetary Fund (IMF) has repeatedly stressed the necessity of cutting the public wage bill to bring it in line with levels that a developing country like Botswana can manage. According to the IMF’s 2024 report on Botswana, the government was greatly influenced to address the unsustainable wage bill due to the nation’s fiscal buffers and diminishing revenue. “The public sector wage bill is high by international standards, at 13 percent of GDP,” researchers at the IMF noted.

Cracks in the Hull: The Weight of Inefficiency

The privatization process in Botswana has been failing considerably, and the country’s state-owned enterprises are growing more inefficient and costly. Instead of fulfilling their service mandate, numerous parastatals, including Botswana Power Corporation (BPC), Water Utilities Corporation (WUC), Botswana Meat Commission (BMC), and Air Botswana, have to rely on continual government bailouts to remain in operation. These inefficiencies range from outdated infrastructure and bureaucratic red tape to politically influenced decision-making, corruption, and poor service delivery. Air Botswana, marked by controversy, failed deals, political interference, ongoing struggles with competition, high costs, and inefficiencies, remains state-owned.

On the night the Titanic sank, the lights flickered and died as the ship was engulfed by the sea. Today, BPC is in its own midnight hour, descending the nation into both literal and metaphorical darkness. This has left citizens vulnerable in a storm of outrage, the looming rise of electricity costs, and broken trust. Institutions like the Citizen Entrepreneurial Development Agency (CEDA) have faced public criticism for misaligned funding practices that prioritize asset seizure over genuine economic empowerment. Meanwhile, entities like the Botswana Institute of Technology, Research, and Innovation (BITRI) have become instruments of mismanagement and unfulfilled government promises, such as exaggerated local vehicle production.

Navigating Without a Compass: Resistance to Reform

Parastatals act as implementing bodies of government policies, translating ministerial decisions into actual services. They provide the government with political leverage, allowing them to appoint allies and exert influence. Privatization would reduce this control. There is also concern over the loss of jobs due to restructuring, especially when the economy is grappling with unemployment, which could result in political backlash for the government. Furthermore, there is an issue of equity and access, as private companies would prioritize profit over public service, making essential services like water, power, or housing unaffordable for lower-income citizens.

However, pro-privatization advocates argue that such SOEs have changed from their core mandate, becoming cost-heavy, profit-driven institutions at the expense of public welfare. Botswana Housing Corporation has lost its public mandate, as it was first founded to provide low-income earners with affordable housing. In contrast, it has steadily changed its operation to mimic a commercial real estate company, pricing out the very group it was intended to assist. Critics of privatization contend that in order to lessen market bias and restore affordability, BHC should either be restricted or provide its services to competing private actors if housing is to become a commodity.

Lifeboats in Short Supply

Much like the Titanic, which was praised for being unsinkable, Botswana’s parastatal model was confidently constructed yet has flaws in its constitution. In addition to the iceberg, the Titanic’s failure was caused by faulty screws and brittle steel that burst under tension. In Botswana’s case, layers of political meddling and bureaucratic red tape are the screws, while inefficiency is the fragile steel. A sluggish economy and declining diamond income are now causing these inherent flaws, which were neglected for too long, to break. If we do not rethink the structure, whether through privatization or true reform, we run the risk of sinking the ship we once so proudly piloted.

About The Author 

Tshepang Kekonnwe is a second-year Bachelor of Arts student in Social Sciences, specializing in Public Administration and Economics. With a strong analytical foundation in governance, policy analysis, and economic structures, Tshepang is passionate about writing on political affairs and the intersection of politics with social issues. A keen researcher and creative storyteller, Tshepang strives to present complex topics in an engaging and accessible manner. Tshepang is eager to contribute insightful articles to shape public discourse.