The relationship between a state-owned enterprise and the economy is a subject area that constantly requires diligence and prudent action.
Failure to do so and a country can find itself losing billions of dollars that could be otherwise used for national development.
If the gravity of this issue has not sunk in as yet, then ponder upon the relationship that exists between two persons.
In some relationships, one party might exhibit leech-like tendencies, sucking the life out of the other party. Conversely, in a different relationship, there is a division of labour, where one partner actually contributes to the overall development of the other.
As for Guyana, the national economy has a relationship with ten public enterprises. But upon examining the national accounts, a dark and disappointing reality rises to the surface. Some enterprises are money-sucking leeches, only taking billions of dollars away from the national purse so that it can survive. These state-owned enterprises include the Guyana Sugar Corporation (GuySuCo), MARDS Rice Complex Limited and the National Insurance Scheme (NIS).
On the other hand, there are some enterprises which make valuable contributions to the economy. They include; Guyana Power and Light (GPL), the Guyana Oil Company (Guyoil), the 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).
Now let’s examine some hardcore statistics!
REVENUE/ EXPENDITURE
For the first half of 2017, the total revenue from the public enterprises (Pes) declined by 8.7 percent to $54.2 Billion when compared with the same period in 2016, while expenditure increased by 8.9 percent to $59.3 Billion, resulting in a deficit of $5.0 Billion.
Notwithstanding the growth in revenue collection of 12.9 percent for six of the ten PEs, a larger decline in collections for the remaining PEs – GuySuCo, Guyana National Newspapers Limited, Guyana Rice Development Board and Guyana Post Office Corporation – contributed to the resulting deficit.
In addition, at the half year, the $7.0 Billion financing support to GuySuCo from Central Government resulted in a net financial outlay to PEs given the contributions to central and local government through taxes which totaled less than $2.0 Billion.
Total operating expenses increased by 12 percent to $55.7 Billion in the first half of 2017, compared with $49.8 Billion in the same period in 2016. GPOC, GNPL, GuySuCo, and GRDB recorded employment costs above 40 percent of revenue. In the period under review, GuySuCo’s employment cost was 12 percent more than its revenue.
GUYSUCO
At the end of the first half of 2017, the Guyana Sugar Corporation continued to have an operating deficit, recorded at $6.3 Billion. The $7 Billion outlay to GuySuCo by Central Government by the end of the first half is a reflection of the Corporation’s continued inability to reform its cost structure and improve its competitiveness. The revised revenue forecast for 2017 is $27.1 Billion, down from the budgeted $28.9 Billion.
GuySuCo expects to realize increased revenue from land sales, but lower revenue from sugar sales. Expenditure is forecasted to rise to $35.7 Billion, putting the deficit at $8.6 Billion. In 2017, Central Government’s financing to GuySuCo is budgeted at $9 Billion. The closure of Skeldon Energy Inc. during the first crop, weather, strike action and factory maintenance downtime were some of the factors that contributed to the lowering of sugar production targets and revenues.
Furthermore, the industry continues to be plagued by many problems, including an increase in the prices of several inputs such as fertilizers, and these have had a negative impact on the company’s ability to realize sufficient cash to cover its operating costs. The sugar industry employs over 13,000 or over 75 percent of the total employment amongst the PEs. At the half year, GuySuCo’s employment cost was an alarming 111.5 percent of revenue.
GUYANA POWER AND LIGHT
The Guyana Power and Light (GPL) earned revenue of $17.0 Billion in the first half of 2017, up from $14.7 Billion for the same period in 2016, as a result of more timely payments.
Similarly, expenditure increased from $9.3 Billion in the first half of 2016 to $12.6 Billion in the same period of 2017. This increase is driven by higher cost of Heavy Fuel Oil (HFO) for which the weighted average cost rose to US$48.70 for the half year from US$30.50 as at June 30th, 2016.
In addition, GPL repaid the Government $500 Million on the GCRG/GPL On-lending Loans for the first half of the year. The company’s outlook for the year has improved, with the budgeted deficit of $5.0 Billion now expected to improve to a lower deficit of $771 Million.
Notwithstanding the improved cash performance of GPL, the company’s technical performance remains plagued with inefficiencies. Production of electricity increased marginally to 394,832 MWh in the first half of 2017 from 387,864 MWh for the first half of 2016. At the 2017 half year, the twelve-month rolling average of total losses was 29.6 percent, a slight increase from the half year for 2016, when the total losses was 29.3 percent.
THE GUYANA OIL COMPANY
The Guyana Oil Company (Guyoil) Limited earned revenues of $18.0 Billion in the first half of 2017, up 11.8 percent from 2016. The increase in revenues is primarily due to additional receipts from debtors which rose by 23.1 percent to $9.2 Billion. Expenditure also rose in the first half of 2017, and was 28.8 percent higher than the first half of 2016.
This is primarily as a result of increased payments to creditors. As a result, Guyoil recorded an overall deficit of $247.3 Million, a 73.1 percent decline compared to 2016. Anticipated declines in local sales put the revised forecast for revenue at $37.6 Billion, down from an original budget of $38.9 Billion for 2017; while expenditure is projected to decline marginally.
Altogether, Guyoil is expected to post a deficit of $328.4 Million from an originally projected surplus of $813.1 Million.
GUYANA NATIONAL NEWSPAPERS LIMITED
For the first half year of 2017, the Guyana National Newspapers Limited recorded receipts of $264.1 Million, a decline from the $287.5 Million reported for the first half of 2016. However, total payments declined from $249.3 Million in 2016 to $218 Million in 2017, resulting in a surplus of $46.2 Million.
Despite this achievement, local sales were lower than projected, as readers make use of online news. Employment cost, the single largest expenditure item, was $84.8 Million or 32 percent of total revenue. In its latest forecast, the company has revised its revenue projections upwards and its costs downwards, resulting in a projected cash surplus of $74.6 Million, up from the $44.1 Million budgeted for 2017.
GUYANA RICE DEVELOPMENT BOARD
The Guyana Rice Development Board, for the first half of 2017, reported revenues of $233.4 Million, just 58.4 percent of that achieved for the same period in 2016. Total payments were $364.9 Million or $22.3 Million more than was expended in 2016. Employment cost moved from $201.9 Million in 2016 to $215.8 Million in 2017.
The GRDB recorded a cash deficit of $131.5 Million, a significant deterioration from the surplus of $57.1 Million recorded in 2016. For 2017, revenue projections for GRDB have been revised downwards to $672.8 Million from $812.2 Million, largely due to less than anticipated receipts from debtors. On the other hand, expenses have been revised upwards to $745.7 Million from $744.9 Million.
GUYANA POST OFFICE CORPORATION
The Guyana Post Office Corporation reported revenues of $518 Million, a decrease of $13.1 Million over the 2016 half year. This was attributed to a reduction in export sales as well as a decline in the volume of money orders. In addition, mobile phone companies have reduced the commission fee received by third-party vendors, including the Corporation, relating to the provision air time credit.
Further contributing to a worsening overall balance, expenditure increased by $37.7 Million, moving from $500.6 Million in the first half of 2016 to $538.3 Million in the first half of 2017. This increase stemmed from higher transaction costs associated with the government, increase in pension and conveyance of value, as well as the cost of improving security presence.
Declining revenue and increasing expenditure resulted in a deficit of $20.2 Million in the first half of 2017 compared with a primary surplus of $30.5 Million in the first half of 2016. Updated revenue and expenditure forecasts move the Corporation from a minor surplus of $3.2 Million to a similarly small deficit of $10.6 Million for 2017. Going forward, GPOC expects to improve the marketing for its online shopping service coupled with active debt collection with the intention of improving its bottom line.
GUYANA NATIONAL SHIPPING CORPORATION
For the first half of 2017, the Guyana National Shipping Corporation (GNSC) reported an increased surplus of $53.1 Million from $8.7 Million for the same period in 2016. Total receipts in the first half of 2017 increased by $34.2 Million to $547.3 Million compared to the first half of 2016, primarily attributed to receipts from debtors in spite of a decline in local sales.
Total expenditure declined to $494.2 Million from $504.5 Million in the first half of 2016, due to a revision of priorities and rescheduling of activities despite emolument costs rising by 22.8 percent. Given the reality of lower-than-expected container traffic, GNSC will take measures to improve its competitiveness, which includes improving its facilities and venturing into new market segments.
Given the factors that have affected revenue and expenditure for 2017 thus far, GNSC has revised its projected revenue for the entire year upward from $1.10 Billion to $1.15 Billion. In addition, expenditure has been revised downwards, resulting in the improvement in the overall balance to $108.9 Million.
GUYANA NATIONAL PRINTERS LIMITED
At the end of the first half of 2017, the Guyana National Printers Limited (GNPL) realized an improved overall balance of $5.0 Million during a period characterized by the frequent downtime of machinery and equipment. This is an improvement over the recorded balance of $0.8 Million for 2016.
Total revenues increased in the first half of 2017 to $157.8 Million from $143.0 Million in 2016, as a result of an increase in receipts from debtors of $16.1 Million. Revenues for local sales declined slightly by $1.4 Million, due to an apparent reduction in consumer preference for cardboard food boxes.
Expenditure increased by $8.9 Million to $151.1 Million, as a result of added overtime costs necessitated by emergency requests as well as added maintenance of the printing facilities. GNPL will continue to strengthen its partnership with government institutions and intensify the marketing of its services. Despite increased receipts at the half year, the revised forecast for revenue for 2017 declines from $479.4 Million to $406.7 Million, primarily due to an anticipated decline in receipts from debtors.
While employment costs have increased at the half year, expenditure forecasts for 2017 have been revised downwards due to a greater reduction in the purchase of materials and supplies. The overall balance of GNPL has improved from a deficit of $83.1 Million to a deficit of $42.7 Million.
NATIONAL INSURANCE SCHEME
The overall balance of the National Insurance Scheme (NIS) improved from a surplus of $174 Million at the end of the first half of 2016 to $252.5 Million for the same period in 2017. Revenues, as at the end of the first half, rose by $1.0 Billion from $9.3 Billion.
This improvement is largely a reflection of increased compliance, resulting from campaigns by the Scheme targeting informal sectors. While contributions from employers were the main driver in this increase, it is noted that contributions from self-employed individuals increased from $403.1 Million during the first half of 2016 to $417.4 Million in the corresponding period in 2017.
With regards to expenditure, the Scheme’s expenses have also risen from $9.4 Billion to $10.0 Billion, primarily attributed to an increase in benefit payments by $877.6 Million, resulting from a 4.0 percent increase in the NIS Old Age Pension.
The Scheme projects to complete this year with an overall surplus of $373.7 Million, down from an originally budgeted $560.4 Million, owing largely to the mentioned expenditure pressures.
To re-balance its financial position, the NIS will seek to increase overall contributions, including through the establishment of partnerships with professional associations in order to increase compliance of their self-employed members.