Public enterprises: working for and against the economy

Apr 23, 2017 News

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By Kiana Wilburg
When it comes to the performance of public enterprises in Guyana, one gets the distinct impression that some entities work for the economy, while others do quite the opposite.
In fact, one would not have to pry too deeply into the national statistics provided by the Ministry of Finance to see the worrying disparities.
For the first half of 2016, the nation’s public enterprises displayed rather mixed performances.
There was positive current primary balances recorded by Guyana Power and Light (GPL), Guyana Oil Company (Guyoil), Guyana Rice Development Board (GRDB), Guyana National Newspapers Limited (GNNL), Guyana Post Office Corporation (GPOC), Guyana National Shipping Corporation (GNSC) and Guyana National Printers Limited (GNPL).
On the other hand, the Guyana Sugar Corporation (GuySuCo), MARDS Rice Complex Limited, and National Insurance Scheme (NIS) recorded deficits.

WORKING FOR THE ECONOMY
According to the Ministry of Finance, the Guyana Power and Light realized a current surplus of $5.3 billion, for the first half of 2016 compared to $4.5 billion for the first half of 2015.
Importantly, the Ministry of Finance said that GPL was on target to reverse its budgeted deficit of $6 billion, with the latest forecast for that time being projected at an overall surplus of $1 billion.
Officials at the Ministry noted that customers were able to benefit from a 10 percent net reduction in electricity rates with effect from March 1, 2016, as a result of a 5 percent reduction in the tariff rates and a further 5 percent on top of the 10 percent fuel rebate granted in April 2015.
The Ministry said that this improved performance has also allowed the corporation to keep faith with its promise to commence repayment to Government on a GOG/GPL On-lending Loan, valued at US$43.3 million, which was granted in May 2010.
The amount scheduled for repayment last year was $1.0 billion, of which $0.5 billion was paid in July last.
With respect to Guyoil, 2016 marked the 40th anniversary of the Company operating as a public enterprise, and throughout that time, it has enjoyed an operating surplus.
In the first half of 2016, Guyoil spent $12.8 billion to earn receipts of $16.1 billion, thereby realizing an improved primary balance of $3.2 billion as compared to first half of 2015.
Although the company sold 619,637 barrels of fuel products, compared to 651,730 barrels in the same period of 2015, the average FOB costs to acquire a barrel of gasoline, diesel, and kerosene in 2016 were US$59.69, US$52.41, and US$52.34, respectively, in comparison to the average FOB cost per barrel for gasoline, diesel, and kerosene of US$81.43, US$75.74 and US$78.59, respectively, in 2015.
On February 1, 2016, consumers had benefitted from Guyoil’s reduced retail prices for gasoline to $170/litre from $190/litre, diesel to $150/litre from $161/litre, and kerosene to $90/litre from $120/litre.
However, as the acquisition cost for fuel products increased the company raised the retail price in June 2016. In August, last, Guyoil entered into an agreement with Petrotrin, which will afford lower acquisition costs of diesel and improve its competitiveness. This, in addition to targeting new customers, is expected to allow Guyoil to continue to be in a profitable position.
For the first half of 2016, the Guyana Rice Development Board reported a current primary balance of $67.7 million against the current primary balance of $18.1 million for the same period of 2015.
In the first half of 2016, total receipts were $399.6 million while total current payments were $331.9 million, compared with $486.6 million and $468.5 million, respectively, for the same period in 2015.
According to the Ministry of Finance, rice production fell by 26.2 percent compared to production during the same period in 2015. The El Niño weather phenomenon and delayed payments by millers to farmers were two of the main problems that hampered production in the industry.
To address this situation, the GRDB hosted several meetings during the second half of 2016 to build better relationships between the millers and farmers. In addition, efforts are underway to seek new markets for farmers which have resulted in the commencement of negotiations with the Government of Mexico. The GRDB will also continue to support the industry through the development of more flood resistant high yielding varieties.
Furthermore, for the first half year of 2016, the Guyana National Newspapers Limited reported a current primary balance of $52 million, against a deficit of $9.2 million for the same period of 2015. However, this was still lower than the half year target of $56 million. The company has increased efforts to ensure that its credit policy on sales is rigorously observed by every major customer.
This had a positive impact as collections increased to $171.6 million, compared with $100.9 million in the first half of 2015.
With regard to the Guyana Post Office Corporation, this enterprise reported a current primary surplus of $40.2 million during the first half of 2016 against a current primary deficit of $31.9 million for the same period in 2015.
Total receipts increased by $51.1 million to $531.1 million, compared with the first half of 2015. The GPOC was able to generate $393.2 million in revenues from agency fees, bulk postage, and commissions on money orders, which were $64.9 million higher than the amount received for the corresponding period in 2015.
For the first half of 2016, the Guyana National Shipping Corporation Limited reported a current primary balance of $66.1 million against the current primary balance of $120 million for the same period in 2015.
Total receipts were $513.2 million in the first half of 2016, a decrease of $133.6 million compared with the first half of 2015. This shortfall in revenue resulted from lower volume of fertilizer, cement and general cargo handled by GNSC, which declined from 46,506 tonnes in the first half of 2015 to 27,906 tonnes for the same period of 2016.
In the first half of 2016, the Guyana National Printers Limited (GNPL) realised an overall profit of $1 million from revenues of $143 million.
According to the Finance Ministry, the period was characterized by significant involuntary machinery downtime, which was a major factor in the company not being able to meet projected revenues of $171 million.
Printing of exercise books for the Ministry of Education continues to be a major revenue earner for the enterprise. The company was able to reduce the cost of producing this product by renegotiating the price of the paper stock, which reduced from US$1,100 per tonne to US$905 per tonne.
Furthermore, a new marketing strategy was introduced, targeting public sector agencies. However, GNPL continues to struggle to keep its revenues in line with its expenses and, in some months, has used its cash reserves to cover expenses such as salaries.
The profitability and sustainability of this company are threatened by increases in equipment maintenance costs, involuntary machinery downtime, and building repair costs.

(To be continued next week with Public Enterprises that are working against the economy …)

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