By: Kebba AF Touray
The Government of the Gambia, through the Ministry of Finance, has stated that variations of State-Owned Enterprises (SOEs) may warrant the government to intervene.
The government also lamented that the SOEs are exposed to a broad range of fiscal risks from its ownership of SOEs.
These, among other fiscal risks, were unveiled in the recently launched Fiscal Risk Statement for the fiscal year of 2023.
“There are no up-to-date information available as financial reports from SOEs are continuously submitted with huge delays that affect risk monitoring, and due to SOEs’ financial losses, there is a high probability that they may not be able to generate enough cash to service their obligations,” said the government.
“Furthermore, their equity is constantly being eroded which may force the government to intervene and, in the process, strain the Fiscal Authority further.”
Further dwelling on State-Owned Enterprises, the government said the Gambian public finance remains highly exposed to a broad range of fiscal risks from its ownership of SOEs.
The Finance ministry says there have been some slight improvements in terms of SOE financial performance, as highlighted in the 2020 Consolidated SOE Financial Report. However, the report also disclosed that most of the SOEs have been making losses and have high levels of debt.
As reported by the government, net losses incurred by SOEs excluding NAWEC increased by 204 percent between 2019 and 2020 respectively.
“The National Food Security Processing and Marketing Corporation (NFSPMC), Gambia Civil Aviation Authority (GCAA), Gambia Telecommunication Company Ltd (GAMTEL), and Gambia Telecommunication and Cellular Company Ltd (GAMCEL) are technically insolvent,” the government disclosed.
It revealed that the aggregate Return on Equity (ROE) from the SOEs was negative 6.5 in 2020, although the ROE is negative, it is an improvement from the negative ROE of 16 percent in 2019.
The negative ROE, as reported by the government shows that the government’s equity in the SOE is being eroded and can be a major source of fiscal risk, saying “Out of the 13 non-financial commercial SOEs, seven recorded a profit which is 54 percent of the SOEs in Gambia. GCAA has the biggest risk with a negative ROE of 266 percent in 2020”.
As alluded to by the government, the aggregate liquidity position of the SOEs is low, making the aggregate current ratio for 2020 1.39, which is below the minimum level of 2.
The Gambia Civil Aviation Authority (GCAA) and Gambia Ports Authority (GPA) are the biggest contributors to the aggregate liquidity risk, says government.
Government lamented: “GCAA is facing significant liquidity challenges with the lowest current ratio of 0.09 in 2020.”
The government stated that the significant number of creditor days by GCAA, GAMTEL, GAMCEL, GPA, and GPPC indicate that the SOEs are failing to service their financial obligations on time.
“This could be a source of fiscal risk. The aggregate solvency of the SOEs is fair. The aggregate debt to assets according to the 2020 financial figures is 0.67. Thus, in the aggregate, the SOEs are solvents. However, GAMCEL, GCAA, Asset Management and Recovery Corporation (AMRC), and GIA have negative debt-to-earnings ratios which indicate high risk in terms of solvency,” said the Gambia Government.
