A former state minister of finance says public corporations are not performing at minimum standards and rigorous internal audits must be done to bring them into line.
James Smith, who is also a key advisor in the Christie administration, called the current situation “unsustainable”. The government contributes an estimated $60 million to public corporations annually, such as Bahamas Electricity Corporation (BEC), Water and Sewerage Corporation (WSC) and Bahamasair.
That represents a hefty chunk of the government’s $200 million to $250 million annual capital expenditure budget.
Rather than the government imposing cost-cutting measures on these entities, Smith argued that it should be the other way around.
“These corporations are very large. They should stand alone by themselves,” he said. “What ought to happen, is they submit a plan, rather than simply demanding they get rid of $10 million annually.”
The $10 million slash is in reference to recent comments made by BEC’s chairman Leslie Miller, who revealed in a speech to employees that the International Monetary Fund (IMF) has urged the government to slash its assistance to these corporations by that figure annually. The chairman’s sense of urgency was only heightened by BEC’s projection that it would lose more than $16 million for 2012.
Representatives from the IMF arrived in The Bahamas back in October, and until this disclosure, very little was known concerning those meetings. Michael Halkitis, the current state minister of finance, told Guardian Business in September that reducing what it gives to public corporations is indeed becoming a new priority and reality for government.
For his part, Miller appears to be moving in the direction of greater auditing and accountability on BEC.
“We must improve productivity, reduce wastage at every level, improve efficiency across the organization, improve the processes in the supply chain and reduce overtime costs through the implementation of flexible work schedules,” Miller said in his recent speech. “We must introduce a performance management system that is tied to productivity, that will hold each employee accountable for their own bonuses, and their own increments.”
Smith said that slashing these contributions is “critical” to the country’s financial health going forward. He called into question salary increases at these corporations given the current state of affairs.
“I think they all need to undergo some kind of audit to see what is reasonable and what is not. And then you set parameters on what the government can afford,” he told Guardian Business. “I don’t recall that ever being done. I think the time has come where you have to treat those advances as being detrimental to the national budget.”
The former state minister of finance noted that, in the past, the country could take its time on such issues, even though they have been festering for some time. The Bahamas’ deficit and debt-to-GDP ratio were at acceptable levels.
But now, he said that the issue has taken on a “new urgency”.
The message must go to the corporations themselves, he argued, whereby they produce the improvements, whether it be on the top line or by reducing overhead.
Smith told Guardian Business that privatization could be on the table for these entities, although it should not be the primary focus going forward.
“That would be one of the menu of solutions. Improvement of efficiency and delivery of services is the overall objective,” he explained. “Whether it needs restructuring is secondary. The point is, they are not performing to minimum standards.”
Jeffrey Todd
The Nassau Guardian
