Creating the Role Model State Owned Entity

By Kenneth Molosi

Parastatals play an important role in our country in a number of important areas that impact our economy including finance, water, electricity, transport and logistics, communications and services among others. However, a significant number of these entities are riddled with inefficiencies, little innovation and a never-ending tirade of under-performance or mismanagement. As Botswana crawls towards the High-Income Country status, a strong, structured, resilient and innovative parastatal sector is crucial for driving the much-needed productivity and growth of the economy.   

The 2015 PWC study (State-Owned Enterprises Catalysts for public value creation?) indicated that state-owned enterprises (SOEs) appear to be an enduring feature of the economic landscape and will remain an influential force globally for some years to come. This observation buttresses the importance of ensuring that SOEs, which represent the nation’s strategic investments, actually deliver the intended societal and economic value.

A number of challenges limit the impact of state-owned entities in driving economic growth and societal impact. Some of the challenges include lack of financial viability, weak governance structures, lack of leadership, compromised or politically influenced boards, uncompetitive remuneration/incentive schemes and unclear strategic direction. These challenges are well documented and worthy of a remedy, but they do not represent the areas to focus on for value creation and sustainability.

The current parastatal business model needs to be reviewed critically with a keen focus on turning SOEs into innovative entities that move beyond problem obsession to solution focus.

In Botswana, the impending restructuring and rationalization of state-owned entities/parastatals, provides a golden opportunity for a reset. Government’s commitment should be the total transformation of strategic SOEs into role models that drive value creation and sustainability, good governance, innovation and organisational resilience. Botswana can leverage the rationalization of parastatals to fortify its macroeconomics game-plan by implementing the necessary reforms that restructure these entities into key drivers of the national vision and transformation agenda. This is a necessary foundational step towards bringing in private investment as state control reduces over time for carefully identified SOEs.

Effective management of these state-owned enterprises can offer Botswana ammunition for fiscal resilience and sustainability when resources become scarce, due to natural disasters and a challenging economic environment.  This issue is especially relevant for the Botswana economy, which is heavily reliant on diamonds and has been bruised by the COVID-19 pandemic.

It is my considered opinion that the impending SOE reform agenda is pivotal for stimulating economic recovery (post-COVID) and sustained economic development that will drive Botswana’s smooth transition to a High-Income economy. The Government has attempted the rationalisation of parastatals before with limited success in our view.

The success of the new SOE rationalization agenda should therefore be driven by the way in which Government frames its biggest problem/challenge as it embarks on this important exercise.  A possible framing of the problem statement could be:

How might we (Government of Botswana) rethink the parastatal/SOE business model that drives the creation of a new generation SOE that turns problems into human-centred solutions and delivers lasting customer, shareholder and stakeholder value?

In our view, a complete and well-conceived solution to the stated challenge will not only secure the future of SOEs as drivers of societal value, but also add immeasurable shareholder value, which bodes well for the economy and transformation priorities of Botswana.

A highly recommended aspect of the solution could be the development and implementation of an Enterprise Innovation system that places strategic SOEs on a firm pedestal for value creation.

Fortunately, becoming innovative is possible.  At the individual level, employees can learn techniques and practices that enhance their ability to innovate.  Programs, like Design Thinking and Human Centered Design among others, are open source systems for users to gain practice and expertise in innovative solutioning. At the organizational level, especially for larger organizations and enterprises, the process of becoming innovative is much more involved. Depending on the starting point, shifting an organization in this way will require deliberate attention and sustained, committed work.  Shifting to become an innovative, agile SOE, requires planning and often a fair amount of organizational redesign. 

The framework for implementing and sustaining such a change is what we term the Enterprise Innovation System.

Enterprise innovation is defined as the practice of identifying significant/positive changes and introducing them within the the enterprise environment. The following four pillars of Enterprise Innovation (EI) form the basis of an integrated framework for establishing SOEs  as innovative entities: 

  • Innovative People –  instilling innovative mindsets and developing innovation skills;
  • Innovation Culture –   establishing an organizational culture that values and embraces innovation;
  • Innovating Environments  –   providing spaces, tools and systems for innovation; and
  • Innovation-oriented Tasks & Practices –  routinely performing activities critical for innovation.

Key to the success of the rationalisation initiative is ensuring that the requisite new ways of working, leadership and cultural transformation are attained through a robust and structured change management process that gathers the organisational mass, which includes strategy, people, process and culture into a cohesive whole.

Mass in this regard represents resistance to change. If the organisational mass is scattered and not organised into a cohesive focused whole, forward momentum and action would not be possible.

Innovation should be the aspirational goal for all strategic SOEs that have been targeted for rationalisation.  Once an innovation focus is achieved, it becomes a key competitive advantage that leads to distinguished results. The SOE’s  ability to create distinctive solutions, stay ahead of trends, be responsive to shifts, and readily adapt to new economic circumstances can make the difference between success and failure.

If Enterprise Innovation is adopted as the go to organizational cultural trait for our strategic SOEs coupled with the necessary focus on societal and economic value, we could witness the birth of the Role Model SOE/Parastatal in this country.

Finally, an interesting and comprehensive study conducted by the Advanced Performance Institute (More with Less: The New Performance Challenges for the UK Public Sector, 2011) shared the following views on the key performance challenges of SOE in a climate where budgets are tight and how they could be overcome:

  • A need for better planning: Concentrate on the things that matter the most by agreeing a smaller and more focused set of priorities. Once the non-negotiable priorities are identified, SOEs need to ensure that services are delivered in the most effective and efficient manner.
  • A need for better performance management: Better performance management practices hold the key tool to efficiency gains and performance improvement. However, poor performance management practices are holding SOEs back. Public sector leaders need to ensure that more meaningful data is used and analysed to inform evidence-based decision making and performance improvements. The study found that there is a massive skills, practice and leadership gap in UK public sector that prevents them from turning their masses of performance data into usable insights.
  • A need for better alignment: The study found that too many management practices are performed in isolation instead of aligning them to create a comprehensive and integrated management framework. In the new era of financial constraint SOEs can no longer afford not to align performance management processes with budgeting, risk management and project management.

These findings, though based on a study of 400 public sector organisations in the UK is instructive for our parastatals. Given our long consulting history with local SOEs, I can comfortably highlight that we suffer from similar organizational challenges, among others.

Therefore, better planning, performance management and alignment coupled with innovation, good governance and strong leadership should form a critical part of the SOE rationalization blueprint.

January 20, 2021