A review of effectiveness of Development Finance Institutions in Botswana (case study: Botswana Development Corporation and Local Enterprise Authority)

Abstract

Are development finance institutions (DFls) in Botswana effective? To what extent do they contribute to the economic development agenda of the country? And can they be made to work better and more effectively? These pertinent questions form the background of this study. In particular, this study examines whether the DFls are adhering to, and upholding their mandates. Using the performance management theory as the theoretical framework, we assess the common problem across DFls and how they may be addressed. The paper further examines the financial performance and sustainability of these entities together with their impact on the economic growth of the country both individually and collectively as a sector. The study focused on a ten (10) year period between 2006/07 and 2015/16, the researcher was desirous of using current information, and at the time of this decision some of the DFl's were undergoing their Annual financial statement audits for the previous year that is 2017, hence the decision to use 2016 as the cut off year. Furthermore, the time period of the research, ten years was used to capture a full cycle of a typical investment. Lastly, human resource rotate, and records management is a challenge through the DFl's in Botswana, therefore a conclusion was reached that it would be a challenge to look at a period where no current personnel had an impact one way or another and for institutional memory purposes and the records maybe lost or inaccessible. The research revealed that for the period under review the DFls in Botswana were very ineffective. Although they have created employment and sensitised Batswana with regards to the entrepreneurship mentality they have not lived up to or fulfilled their mandates. In spite of the existence of corporate governance structures there has been persistent poor performance, combined with serious concerns around financial sustainability and allegations of corruption and mismanagement. At the time of completing this research two (2) out of the four (4) DFls were going through restructuring and retrenchment process. The recommendations put forward include review of the model frameworks with the view of implementing the framework utilised by successful DFls in developed countries, improving and empowering the supervisory bodies, deliberate linkages between all OFls to promote direct project transfer and co investments, appropriately capacitating the DFls with the requisite skilled human resources and lastly accelerating self-sustenance plans.