The International Monetary Fund (IMF) has directed the government to reduce expenses at public corporations by at least $10 million annually. The disclosure, likely to have a major impact on all Bahamians, was contained within a recent speech by Bahamas Electricity Corporation (BEC) Chairman Leslie Miller to employees. He further revealed that the IMF told officials that "no matter what the cost, BEC has to be returned to a profitable entity or the government may be forced to sell BEC to a private entity". Miller's speech provides insight into the IMF's recent visit to The Bahamas back in October.
At that time, the organization declined to offer details on their meetings with government officials and the private sector. However, the mandate by the IMF shouldn't come as too much of a surprise for government. Back in September, State Minister of Finance Michael Halkitis told Guardian Business that the annual expenditure reserved for public corporations should be reduced by $40 million to get the fiscal house in order. He said that the government now spends $250 million in capital expenditures each year. About $60 million is not for building roads or bridges, but to fund public corporations such as BEC, Water and Sewerage Corporation (WSC) and Bahamasair.
"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," said Miller during his 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." The punch line for BEC employees was the announcement that it would lose some $16.3 million for the 2012 fiscal year, ending September 29, 2012. That compares with just a $706,000 loss in 2011 and a profit of $201,000 in 2010.
When contacted by Guardian Business yesterday, Miller said well over $10 million spent in overtime is one of the main reasons for such a dramatically high loss for the 2012 fiscal year. He also said this latest projection will not put the public corporation's plan to spend $300 million on a Clifton Pier revamp in jeopardy, commenting that the upgrades are needed "so Bahamians receive electricity on an ongoing basis". Michael Moss, the previous chairman of BEC, said the overtime bill has been "horrendous" for many years, although he could not recall what it was for the 2011 fiscal year.
He said an effort was made during his chairmanship to bring this area under control by ensuring equipment was up to date. Poor maintenance and frequent breakdowns sucked up major overtime hours, he said, in addition to the lack of "live line" work. While the latter is common practice at most major utility companies, the fact The Bahamas does not perform "live line" work means maintenance must be done on off hours.
He did not wish to speculate on the exact reasons for such a large deficit this year. However, he called it a "huge swing", noting that overtime is likely not the only factor in the $16.3 million loss. Moss told Guardian Business that he remains a strong advocate for privatization, but doubted whether a company would willingly buy BEC in its current state. "Left on the footing as is, someone is more likely to ask for money to take it on. How much are you going to pay me? You can sell it if you project mammoth losses," he explained.
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