Home Letters Public enterprises were doing better until Coalition Govt took over
The Honorable Finance Minister, in his Budget 2018 speech, forecasted a deficit of $12.8 billion in the overall performance of the public enterprises (PEs). He further pointed out that even though GNNL, GRDB, MARDS, GPOC, GUYOIL, GNSC and GNPL had a combined surplus of $2.5 billion, this was effectively eroded by GUYSUCO and GPL. Some of these entities, such as GuySuCo, GRDB, GPL and GPOC, are virtual monopolies, yet they are generating deficits.
However, it was reported in the press — on August 9th, 2017, under the caption, ‘GuyOil earns $18 billion in first half of year’ — that the Finance Minister said GuyOil is expected to post a deficit of $328.4 million from an originally projected surplus of $813.1 million. On the other hand, in May this year, Mr Jordan had said that GuyOil is projected to earn a surplus of $3 billion.
This is not illuminating at all. He should have given more details since earlier. The said minister had boasted that GuyOil stands ‘like a financial beacon in an ocean of economic woes’, while noting that the entity had always enjoyed an operating surplus. It must be noted that it is not very enlightening to have all these entities bundled together in his presentation, since it is difficult to gauge the loss-makers. From all indications, nearly all of these entities made losses.
In another article, dated August 10th, 2017, under the caption, ‘Public Enterprises show mixed performance at end of mid-year’, it was reported that there was an 8.7 % decline in the total revenue of the PEs; and this would have included GPL, GuySuCo, GNNL, GRDB, and GPOC. It was stated that employment costs are more than 40 per cent of total revenue, and there was an increase of operating costs of 12 %.
GPL and GuySuCo were forecasted to record deficits of $5 billion and $8.4 billion respectively. These two PEs alone would have given a total deficit of $13.4 billion, which would be above the $12.8 billion that he forecasted in his Budget speech.
It is important to note that even though the decline of GuySuCo began under the previous Government, this downward slide was greatly accelerated from the time this Government took office. In December 2015, CEO Dr Clive Thomas boasted about the achievement of Skeldon Estate, and GuySuCo as a whole. Skeldon achieved its target of 30,594 tonnes, and exported 1,184,000 kilowatts of electricity to GPL; yet, in 2016, the same person said that it was a ‘ticking time bomb’. Furthermore, the CoI in 2015 never reported that the factory was ‘falling apart’. Now the entire GuySuCo is falling apart, with the lowest output predicted for 2018.
It is quite evident that the other public enterprises are rapidly following in the footsteps of GuySuCo, and it manifests the fact that Governments should not run businesses. All of the entities were doing better until the Coalition Government took over, and this was pointed out by the Finance Minister. There is a strong belief that these losses will increase, since the increased wages and inefficient spending will drain the resources of the Government.
These entities are a dumping ground for rewarding political patronage. Therefore, the Government will have to continue to depend on raising taxes and implementing new tax measures to meet its budgetary allocations, as in evidenced by the 2018 Budget.
Public enterprises must be capable of generating surpluses, and from the evidence submitted by the Finance Minister, deficits are forecasted. Furthermore, it is expected that from these surpluses generated, the Government would have at its disposal fresh capital to invest and improve the production and productivity of these PEs. In addition, this will create employment. However, this is now an elusive dream. It is evident that political interference and political patronage will always take precedence over pragmatic business decisions.
Drastic surgery should be done to these PEs before it’s too late. It simply defies logic that monopolies can fail so miserably but public enterprises have an ingrained political component which acts as a catalyst for failure.
RDC Councillor –