The Tribune

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

A FORMER minister of state for finance has lamented that “there is no political will” to reform loss-making state-owned enterprises (SOEs) and cease throwing taxpayer monies down a “black hole.”

Kwasi Thompson, who held that post during the Minnis administration’s final year, advocated during an Organisation for Responsible Governance (ORG) panel discussions that when it came to SOEs the Government must focus on “privatising them and making them a viable private entity”.

“Or we have to look at reforming the way that those entities do business so that they can raise revenue to be able to meet their expenses,” the east Grand Bahama MP said. “And we have very, very difficult questions like BPL (Bahamas Power & Light) that has legacy debts that have to be taken care of, but also reforms in terms of how do we take care of the legacy debt but also look at finding the necessary capital to upgrade the infrastructure to begin to shift towards renewable energy.

“I think we have to just start so, for example, we have to look at micro grids in certain Family Islands. The Family Islands are actually ideal for a micro grid programme.” The Government commissioned a $5m solar micro grid installation on Ragged Island in August 2022, seeking to use that as the pilot or prototype for a wider roll-out in the Family Islands.

The Davis administration has since unveiled plans to use some $89m, provided by a combination of the Inter-American Development Bank (IDB) and European Union (EU), to finance such a roll-out with islands in the southern Bahamas - as well as Abaco and east Grand Bahama given their post-Dorian needs - targeted for the first installations.

Mr Thompson said: “We also have to look at the difficult questions of how we deal with Bahamasair. We have to look at the difficult questions of how we deal with the Water & Sewerage Corporation. The Government, just recently in its mid-term Budget, is seeking to approve additional funding specifically to go towards the water and sewage bills.

“One of the things that we have not looked at, and I know no government wants to do it, is how do we adjust water rates in order for the Water & Sewerage Corporation to earn more revenue so that it can eventually become self-sufficient. I believe a study needs to be completed in order to see how that can be done, how that can be adjusted. We go through the necessary consultation processes, but those are difficult decisions that eventually we’re going to have to tackle.”

The Government’s 2022- 2023 mid-year Budget, unveiled last week, revealed that subsidies to the likes of the Water & Sewerage Corporation are set to increase by a total $35m, or 7.7 percent, compared to the May Budget estimate, reaching just shy of $500m or half a billion dollars at a total $492.24m.

It reaffirmed that, combined with $588.988m in forecast interest payments to service the Government’s debt, the $492.24m in taxpayer subsidies to keep SOEs afloat will total some $1.08bn - more than one-third, or $1 out of every $3, of the Government’s $3bn recurrent spending.

The Water & Sewerage Corporation is to receive a further $20m subsidy in the 2022-2023 mid-year Budget, taking total taxpayer support for the year to $54m to finance both its capital projects and bills due to its reverse osmosis suppliers. Bahamasair, meanwhile, actually saw its subsidy for the full-year cut, albeit modestly, by $1.3m - taking the full subvention from $32m to $30.7m

Between them, Bahamasair and the Water & Sewerage Corporation will this year cost taxpayers a combined $84.7m. The Public Hospitals Authority (PHA) is the major subsidy consumer, accounting for $232.456m or just over 47 percent of the total, but the likes of the Airport Authority, University of the Bahamas, Nassau Flight Services and the Bahamas Public Parks and Beaches Authority all received additional subsidy allocations in the mid-year Budget.

The Minnis administration, under its first finance minister, K Peter Turnquest, unveiled a target of reducing SOE subsidies by a total $100m over three years. A combination of Hurricane Dorian and COVID delayed that, but the Davis administration’s latest Fiscal Strategy Report pledged to “continue the SOE rationalisation programe”. It gave no details, though, on how it plans to do this, and the increased SOE subsidies appear to be heading in the wrong direction.

An Inter-American Development Bank (IDB) study of key public expenditure areas, dated February 2022 but only recently released, confirmed what has long been known and Mr Thompson reiterated - that both BPL and the Water & Sewerage Corporation are selling their products at prices below the cost of production, resulting in consistent heavy losses. The latter has not seen a tariff rise since 1999 despite the impact of inflation on its input costs.

“Obviously nobody wants to see the water rate go up. Nobody wants to see electricity costs go up. But if we need to put in place those infrastructure upgrades, we are going to have to at some point be able to raise additional capital,” Mr Thompson said on the ORG panel discussion.