Letter Public Enterprises suffering from political patronage and interference

Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Related’Difficult to see success in anyone of them’- Jordan on State-owned entities performanceApril 16, 2018In “Business”Revenue for State agencies on downward spiral – AliAugust 12, 2018In “Local News”GuyOil records reduced profits for 2017— ReportDecember 24, 2018In “Business” Dear Editor,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 that 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 of 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% 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 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 very disappointing that the clarity of his pronouncements is compromised by his contradictory statements as well as his skeletal report of the PEs performance.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 the 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’ even though the COI team included Mr John Dow who is responsible for Guysuco’s Factory Operations.Now the entire Guysuco is falling apart with the lowest output predicted for 2018. Having given this illustration, I will agree with Mr Gobin Harbhajan who in his very insightful letter concluded that Guysuco’s management from the Board of Directors downwards is responsible for the failure of Guysuco. However, he failed to address the high degree of political interference and direction.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 business. 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.This is not unlike what happened in the 1970s when political interference resulted in the bankruptcy of many PEs. Political considerations impact heavily of these entities. What will eventually happen is that the government will continue to inject monies to keep these entities afloat. 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 will 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.These entities should be divested and the Government should utilize the funds garnered to do investments in infrastructural works to boost private investments. A point to note is that this is also lacking in the 2018 Budget. The 2018 Budget though bigger is showing a reduction in the Public Infrastructure and Agriculture allocations by $5.2 and $1.3 billion respectively. This does not bode well for encouraging private sector investment. Why?Once the divestment is done in a structured manner it is more than likely that it will be successful. Transparency and accountability should be ingrained in the process. It should not be allowed to generate the confusion generated by the Guysuco’s divestment.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 culture which acts as a catalyst for failure.Yours sincerely,Haseef YusufRDC Councilor-Region 6

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