National Assembly’s Finance and Public Accounts Committee (FPAC) session   High operating costs, lack of efficiency are challenges for public enterprises |19 April 2022

PEMC officials answering FPAC members’ questions

Members of the Finance and Public Accounts Committee of the National Assembly have learned that among the persistent challenges being faced by a large number of public enterprises are high costs of operations, lack of efficiency and some continue to receive financial assistance from government.

Finance and Public Accounts Committee (FPAC) members received this information during a live public discussion with the Public Enterprise Monitoring Commission (PEMC) which is mandated to monitor the financial results of parastatal companies, ensure they are properly controlled and managed for the purposes of better performance, transparency and accountability, to improve efficiency and competitiveness.

The FPAC wanted an overview of the different public enterprises, an update on current issues and challenges being faced by the public enterprises (PEs) among other pertinent issues.

The live discussion was held on Thursday morning at the National Assembly headquarters, Ile du Port.

The FPAC committee comprises its chairperson, leader of the opposition Hon. Sebastien Pillay, vice chairperson Hon. Terence Mondon, Hon. Churchill Gill, Hon. Conrad Gabriel, Hon. Richard Labrosse. Hon. Georges Romain and Hon. Sandy Arrisol.

Present to answer FPAC’s questions and provide clarifications on different issues raised were PEMC’s chief executive Georges Tirant, its chairperson William Zarine and senior business analyst Collette Jean-Louis.

Hon. Mondon led the questions session and among the first issues that he raised had to do with the biggest challenges PEMC, set up in 2013, is still encountering with PEs, as well as its biggest shortcomings which are continuously posing a risk. Mr Tirant explained that government as owner of the different enterprises sets performance standards for the enterprises and wants to see better quality services, return on investment, efficiency in management and cost reduction.

Among the most popular of the 22 or so public enterprises are Air Seychelles, Seychelles Trading Company (STC), Seychelles Petroleum Company (Seypec), Public Utilities Corporation (PUC), L’Union Estate, 2020 Development, Seychelles Public Transport Corporation (SPTC), Seychelles Civil Aviation Authority (SCAA), Seychelles Fishing Authority (SFA), Housing Finance Company Limited (HFC) and Financial Services Authority (FSA).

With regards to the asset base of these enterprises, Mr Zarine noted that this stands at around R38 billion and their liabilities are around R22 billion.

“Something that worries us a lot is that for some enterprises their liabilities and assets are growing but their net profits are not as big and in proportion with the other indicators,” Mr Zarine highlighted, noting that high costs of operations and lack of efficiency for many years are causing some PEs to run at a loss and this is a big concern for PEMC.

But Mr Zarine indicated that while some public enterprises are in great difficulties to perform as expected, there are others which are performing reasonably well and those which are doing remarkably well based on the dividends they pay to the government and these are the likes of Seypec which made a net profit of R624 million in 2020, FSA that made R143 million profit and IDC which made over R2 million profit.

On the other hand, some other PEs made losses and those include STC (R10.6 million) and PUC (R253 million). Mr Zarine noted that in the case of PUC, the contributing factors towards the loss include the commercial sector’s reduced need for electricity because of Covid-19 and its liabilities in foreign currencies.

Bu what does PEMC plan to do to address the issue of non-performing PEs moving forward?

Mr Tirant explained that efforts are already underway to address the issue and PEMC is receiving the support of a consultant to provide concrete information on each PE to allow for more efficient and cost effective operation of underperforming PEs as well as establish clear guidelines as to whether some PEs will continue to stand on their own or be transferred under a ministry or other entities.

Meanwhile, Mr Zarine informed FPAC members that government’s assistance to several underperforming PEs in 2020 amounted to R563 million which is a significant amount.

“I believe we are at a crossroad and it is time to start a conversation and debate on the issue and a process to decide once and for all which of the PEs are relevant and necessary and those that we can do without,” Mr Zarine highlighted.

On the issue of emolument in PEs, Mr Tirant noted that the sector employs some 6,000 employees and PEMC has no say in the number of people they employ and how they are remunerated. But he said work has started with the support of the United States of America (USA) government to put in place a framework to better review the compensation of senior executives as well as other employees of PEs including their expatriate workers.

Ms Jean-Louis noted that in 2020, PEMC did an exercise to review staff costs across all PEs and at all levels.

But is there a discrepancy? Mr Tirant remarked that there is a disparity and this is why they are working to have a proper framework to address the issue and close the gap and reduce the disparity.

Meanwhile, Mr Tirant highlighted PEMC’s limited manpower to do all the work it is mandated to do. He said the commission has around 16 employees, something Hon. Pillay said has to be addressed.

With regards to recommendations PEMC made in its reports to further improve the performances of PEs which are not necessarily being implemented, Mr Tirant noted that PEMC has stepped up its work with the different boards to ensure recommendations are carried out so that their organisations become more effective.

Other issues that FPAC members raised were related to ownership and dividend policies for PEs and Mr Tirant gave a detailed overview of the two policies. Fiscal risks posed by PEs in relation to the dividend policy as well as in relation to their investments, efforts to prevent PEs from taking more risks, government entities which owe large sums of money to PEs were also discussed.

Mr Pillay said at the end of the discussion, that it was an opportunity for the public to have a better understanding of the significant amount of money moving around within the PEs, adding that is important for PEMC to clarify the financial situation of the public enterprises.

Marie-Anne Lepathy