Written by on July 3, 2017


Under the three-year Structural Adjustment Programme, 2014-2016, the Government of Grenada committed to undertaking reforms to “secure fiscal discipline” and “improve financial performance” of Statutory Bodies and State Owned Enterprises, noting that these entities represented an important source of contingent liabilities to the central government. The Government of Grenada committed to undertake a review of the state-owned enterprises and statutory bodies with technical assistance from CARTAC and to develop a strategic plan for the sector by October 2014.

During the first half of 2014, prior to the signing of its agreement with the IMF, a review of the operations of the various SOEs was undertaken. The Government of Grenada prioritized the restructuring of the Grenada Postal Corporation and the Gravel and Concrete Emulsion Production Corporation.

1. Gravel and Concrete Emulsion Production Corporation:
The IMF Staff Report of July 2014 identified the GCEPC as one of the SOEs that had defaulted on some of its debt “which had in recent times been taken over by government.”

2. CARTAC Review:
Among the key issues noted by the CARTAC review were the following:-
• Loss-making: GCECP was making a loss and had a high fixed-cost structure.
• Debt Default: It had defaulted on existing debt.
• Valuable Assets: It owned valuable assets, but these were not earning commercial returns
The report also noted that the Corporation carried significant unfunded pension liabilities.

2.1. Reform Options:
The CARTAC team proposed the following reform options:-
• Privatization, via a trade sale of assets;
• Long-term concession arrangements on individual quarries;
• Sub-contracting of quarry services to a private operator
The preferred option proposed by CARTAC was the sale or winding up of the business due to its high fixed cost structure and inability to generate profits.

3. Reform Strategy proposed by Cabinet :
• Public Private Partnership: Cabinet proposed a public private partnership arrangement to facilitate capital development, strengthen management, and restore profitability.
• Restructuring and Downsizing: Cabinet proposed the restructuring of the Corporation with a downsizing of its workforce.
• Severance Costs and Pension Reform: It proposed to seek external funding to finance severance costs and consider pension reform would be considered.

3. IMF Update:
3.1. IMF Fourth Review, May 2016:
The report of the Fourth IMF review, May 2016, provides the following update:-
• Oversight: The policy unit had responsibility for oversight of SOEs and statutory bodies.
• Monitoring Framework: A new monitoring framework was in place and was driving reforms at the enterprise level leading to structural changes in the cost base and a number of improvements in operating performance for some SOEs. Reforms included:-
o Focus on Cost Reductions: Gravel, Concrete & Emulsion Production Corporation (GCEPC) had focused on cost reductions and was now generating cash profits from operations.
o Given the capital intensive nature of the business, private partnerships were planned as a way to raise funds. A PPP arrangement would be pursued to facilitate capital development, strengthen management, and restore profitability.
• Public Private Partnerships: The government was still in negotiations with parties on the final terms of the restructuring, which was expected to take place during the course of 2016.
• Severance Costs: Total severance cost for resolving staff redundancy was currently estimated at EC$5.6m, or about 0.2 percent of GDP. The government would seek external funding to finance severance costs.
• Pension Reform: Pension reform would be considered.

3.2. IMF Sixth Report, May 2017:
The May 2017 Report of the sixth and final IMF review of the structural adjustment programme provides the following update on the Gravel and Concrete Emulsion Plant: – “The restructuring of the Concrete & Emulsion Production Corporation (GCEPC) with private sector participation is expected to be completed by June.”

4. Outstanding Debt:
• 2016 Budget Estimates: The 2016 Budget Estimates records an outstanding debt of EC$7.2 mill. at the end of December 2015 re Fincor Bond Exchange 2015-30. The explanation advises that it represents a GCEPC debt re a syndicated loan at 7 percent that was taken over by the Central government.
• 2017 Budget Estimates: The 2017 Budget Estimates records debt of $4.1 million re GoG/Republic Bank private placement re government bonds $4.4 mill (M 2015-2030). There is an explanation that the loan guarantee for EC$8.5 million was restructured to EC$ a rate of 7 percent.

5. Financial Summary of SOEs and State Bodies:
The information in the following table has been is extracted from the Budget Statements 2016 and 2017 respectively.

One notes the following:-
• The assets of the Corporation have increased significantly from $40.22 million in 2013 to $114.69 mill. in September 2016.
• Equity and total revenues have more than tripled. What is the source of increased equity? What is the source of the increased revenues? Is the source government projects? Foreign direct investment projects?
It is also interesting to note that at 2016, the Corporation was classified as a profit-making, State Owned Enterprise.

5. Observations and Queries:
• Debt Restructuring: The central government has assumed the debt of the Corporation. The debt of EC$7.2 million in respect of a syndicated loan, has been restructured. It would seem that Central Government has benefitted from a 50 percent haircut. It would be interesting to know what this syndicated loan financed in respect of the Corporation
• Partner: Is it reasonable to assume that a private partner was identified and did restructuring take place during 2016? Has this partner already injected significant equity into the company? Who is the private partner and when will the people of Grenada be advised of the identity of the partner?
• Downsizing: Are there plans for downsizing?
• Management: Since this is expected to be a PPP, it is expected that management and control of this entity will be passed to the private entity or has it already passed?
• Transparency: When will the people know what is going on with this valuable public asset and natural resource?

1. Caribbean Regional Technical Assistance Centre
2. Annex V, Grenada Statutory Bodies, IMF Country Report No. 14/196, July 2014, pg. 73
3. May 2016, IMF Country Report No. 16/133, Box 2, Update on the Reform of State-Owned Enterprises and Statutory Bodies, pg. 21
4. Source; 2016 Budget Statement, pg.119
5. Source; 2017 Budget Statement, pg.127

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