Thursday, December 13, 2018

National Assembly imposes an involuntary and inadvertent austerity program on government

National Assembly Building
By a single act of defiance, The Gambia's National Assembly has imposed an involuntary austerity measure on the Transition Government led by Adama Barrow, after successive years of deficit spending that dates back to the dictatorship of Yaya Jammeh whose government was defeated in the December 2016 presidential elections.

In  an apparent response to the shock decision by a National Assembly that appeared to be responding to popular opposition to the D 1.2 billion Supplementary Appropriations, the Minister of Finance appealed to the parliamentary body for reconsideration of the vote that fell on deaf ears. 

The voices of frustration echoed around the National Assembly, from one member of parliament to the next, with historical references to the habitual and unsustainable budget deficits that received  automatic endorsements from all quarters.  Members of the National Assembly decided to stand firm in their decision to hold down public spending to manageable levels.

The Supplementary Appropriation Bill before the National Assembly was for a D1.2 billion spending authorization with less than three weeks before the end of the fiscal year on December 31 "of which an additional D 60 million is for the State House", according to Mr. Sal Taal, an Initiator of the civil society group named #GambiaHasDecided.  The Finance Minister's rationale for the request was considered cosmetic as the emphasis on the desirability of cleaning up the deficit mess that he inherited from his predecessors was largely ignored by the National Assembly.

The Minister of Finance was also unable to convince the National Assembly that government was committed to fiscal prudence when additional resources was being demanded from the public treasury.  In fact, an Assembly Member reminded the Minister and colleagues that during the 2017 Fiscal year, the newly sworn parliamentarians were able to revise the fait accompli budget that was passed by the outgoing National Assembly resulting in a deficit reduction from D 4.7 billion to D 921  million.  It is evident that the National Assembly is determined to maintain the same trajectory moving into the next fiscal year and beyond.

The decision to deny the request - the first time, ever - places both the government and the National Assembly on uncharted territory.  It therefore requires some thought in moving forward to avoid making matters worse.  There appears to be a sequencing problem already.  Because the Budget Speech scheduled for tomorrow (Friday), there is no time for the government representatives and the National Assemble to huddle around the problem to decide what the next steps should be - a necessary and important intermediary step. 

The National Assembly's decision is a genuine attempt to break away from a pattern of deficit financing that is deemed unconstitutional because the amount requested is approximately 6% of the initial budget figure which exceeds the 1% prescribed by law.

The problem posed by the D1.2 billion that has already been spent or committed to the end of the fiscal year on December 31st, 2018 and for which there is no parliamentary authorization and thus constitute an illegal/unconstitutional expenditure.  This is a legal matter that requires the attention of the Attorney General and Minister of Justice.

One obvious and highly desirable option that addresses the D 1.2 billion budget deficit is for the Ministry of Finance to quote savings of similar amount from the 2018 Approved Budget.  We have suggested in a Facebook post that candidates for further pruning include but not limited to the Office of the President (including Office of the First Lady), Ministry of Defense, Meet the People's Tour, presidential and other official travels and so on.  The challenge posed by this option is to save D 1.2 billion and still be within budget i.e. with no supplementary budget request for the entire fiscal year 2019. 

The decision of the National Assembly to deny approval of the Supplementary Appropriation Bill has effectively imposed an involuntarily austerity program for a government that has displayed reluctance to change a system inherited from Jammeh's 22-year dictatorship. 

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Monday, December 10, 2018

Yaya Jammeh, Zainab and two of their children have been barred from entering the U.S. for corruption and gross human rights violation charges

Mr and Mrs. Yahya Jammeh 
The United States Department of State has today announced a 'public designation' of former Gambian president Yahya Jammeh, his wife and two of his children which bars them from entering the United States.

The U.S. Secretary of State under the Foreign Operations and Related Programs Appropriation Act of 2018 is empowered, where credible information exits that foreign officials have been involved in significant corruption or a gross violation of human rights, those individuals and their immediate family members are ineligible to enter the United States.

The State Department's Notice reiterated the U.S. government's continued commitment to combating corruption, increasing respect for human rights and fundamental freedoms and promoting good governance globally. 

The Notice continued "[T]he United States stands with the government of Gambia, its people and civil society in support of the Gambia's transition towards greater transparency, accountability, and democratic governance for the benefit of all Gambians." 

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Friday, December 7, 2018

Lebanese businessman, Kassim Tajideen, tied by the US Treasury Department to Hezbollah pleads guilty to money laundering conspiracy in US District Court

Kassim Tajideen *
Kassim Tajideen, a Lebanese businessman who operate businesses in Lebanon and Africa, including The Gambia, has been found guilty of money laundering conspiracy charge brought against him in March of last year.

He was designated by the US Department of The Treasury as an important financial supporter to the Hezbollah terror organization.

Kassim Tajideen, 63, of Beirut, Lebanon, pleaded guilty before US District Court Judge Reggie B. Walton in the US District Court for the District of Columbia, to launder monetary instruments.

According to the statement of facts signed by Mr. Tajideen in conjunction with his plea, he conspired with at least five other persons to conduct over $50 million in transactions with US businesses that violated these prohibitions.  In addition, he and his co-conspirators knowing engaged in transactions of as much as $1 billion through the United States financial system from places outside the United States.

The plea, which must be approved by the judge, calls for a 60 months in prison and for Tajideen to pay $50 million in advance of his sentencing which is scheduled for January 18, 2019.   Since his extradition to the United  State following his arrest overseas, Mr. Tajideen has been in detention since March 2017.

When we first reported Mr. Tajideen's indictment in March of 2017, we warned the then newly installed Barrow administration about Mr. Tajideen who was being investigated at the time by the United State authorities in connection with his business relations with the Kansas-based giant food producer, Seaboard Corporation.

The Kansas company was at the time partnering with Mohamed Bazzi and Fadi Mazziggi in the establishment of the Gambia Milling Corporation in The Gambia. We further advised that to foster a free market atmosphere, the new government must encourage legitimate foreign businesses and investors to do business in The Gambia.  You can access the relevant blog post here.
                                           
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* A reader pointed out that the initial photo that accompanied this blog post was not the image of Kassim Tajideen.  I hope this is the right photo.  Thanks reader.

Monday, December 3, 2018

ECOMIG is not to be used as an instrument of personal power

Adama Barrow :  A dictator in the making? 
President Adama Barrow has been known to commit unforced political errors with such frequency that even some of the egregious ones have been excused, normalized and ultimately attributed to his lack of requisite experience to lead.

Mr. Barrow came to be elected president through the accident of history.  He was the presidential nominee of a coalition of seven political parties plus an independent candidate to contest the 2016 December presidential elections which he ended up winning, unexpectedly.

And when Jammeh, a dictator of 22 years standing threatened to nullify the election results and, ultimately refused to vacate State House, the international community stepped in to enforce the will of the Gambian people by despatching a contingent of ECOWAS mission in The Gambia - otherwise referred to as ECOMIG - with a specific and unambiguous mission of ensuring the security and protection of the Gambian population.  Eventually, Jammeh was forced to step down and forced into exile allowing Barrow to return to The Gambia from Dakar where he sought sanctuary during the political impasse.

The initial mission was to restore democracy which was later extended to include helping the Barrow government initial reform measures.  In a press interview held in Banjul on the occasion of last year's visit of Jean Claude Brou, president of the ECOWAS Commission, to announce the extension of the ECOMIG mandate was quoted thus " I think the security situation has improved but if does not mean that the challenges are not there.  And that is why the ECOMIG and the Gambian forces are here to ensure the safety of the population."

The United Nations Secretary General's representative in West Africa, Mr. Ibn Chambers who accompanied Mr. Brou on the mission revealed that in addition to regional security issues, their mission engaged the Gambian authorities on how the government plans to make good on the pledges made at the May 2018 Donors' Conference in Brussels.

Mr. Barrow's attention since he assumed the presidency in January 2017 has been focussed on how to perpetuate himself beyond the 3-year mandate imposed on him by a Memorandum of Understanding signed by members of the Coalition of 7 + 1 opposition political parties, in his capacity as president.

Barrow's thirst for power and his determination to retain it at all cost, including the risk of putting the entire security of the country in peril, has led him to focus more on political campaign antics than governing a country emerging from 22-years of one of Africa's longest and most brutal dictatorship; an experience that has weakened the country's institutions and has institutionalized a culture of corruption that is well ingrained in the fabric of Gambian society.

The reforms promised, such as the civil service, state-owned enterprises and security sector - to name a few - have fallen victim of the deliberate and calculated decision of President Barrow to focus on his 're-election' bid at the expense of governing.  The pledges Barrow made in Brussels on behalf of his government have also fallen victim because the policy frameworks, including the additional reform measures that will necessarily accompany the programs and projects proposals submitted during the Brussels Donors' Conference will fall short of expectations.

President Barrow's transgressions as a transitional president has reached such alarming proportions that we must stop and take stock of the political and security situation that threatens the peace and stability of a country.  The Mission of the ECOMIG has not changed since it was last modified to include helping government reform its security forces.

Addressing a group of his supporters purportedly from the West Coast Region at State House over the weekend in mandinka, President Barrow boasted of being in full charge of the army, the police, the state intelligence agencies AND ECOMIG and therefore more powerful than Jammeh ever was.

To use Jammeh's name and system as reference, after the suffering his regime inflicted on a defenseless population, is repugnant and an inappropriate system to use as guidance.  And mission and purpose of the state institutions that President Barrow cited i.e the army, police and intelligence agencies being the protection and their institutions is disquieting to see them projected as instruments of personal power. 

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Friday, November 23, 2018

SSHFC staff loan schemes explained

Sidi Sanneh 
Social Security and Housing Finance Corporation's staff loan schemes are known to have been notoriously mismanaged in the past because they lacked stringent and observable terms and conditions.

The laxity in applying standard loan rules appears to have been deliberate to favor the borrower at the expense of the corporation, and by extension its clients i.e. Gambian pensioners and contributors to its allied Funds.

For the schemes to be viable and sustainable, they must be restructured, including the liquidation, in one form or another, the non-performing loans contracted by former staff who have retired or are no longer in the service of the corporation for whatever reason.

During a recent interview, the Managing Director revealed that the total amount of staff loans outstanding stands at D130 million or approx. $2.6 million.  This amount, according to the MD, is probably more that the combined total of the outstanding staff loans of all the commercial banks. There are about a dozen commercial banks i n The Gambia.

There are three loan categories at SSHFC, Building loan which carries an interest of 3%, Car and Personal both carry a 5% interest.

The car loan scheme for senior staff is subsidized with the cost shared at 50/50 with the corporation after every 5 years, but according to sources, this facility is generally abused.  Senior level staff were accessing the scheme every 3 years instead of 5 years and buying significantly less than the value they claim.

For example, one will take a D400,000 car for which the corporation adds D400,000 for an D800,000 but the staff will instead buy a D300,000 and pocket the half a million dalasi difference knowing that in about 3 years another loan request will be made.

A condition of the housing loan is insurance - fire, allied perils and life - but staff was not taking our cover for any of these.  These were issues that the Managing Director and the Board of Directors were starting to correct which resulted in staff resistance from a handful of them.

There is also what is known as "free deduction months".  These are months when no loan deduction is made such as "Tabaski", "Koriteh", Christmas and other religious or traditional occasions which amounts to 5 to 6 months of the year, the impact of which is the automatic extension of the repayment period.

As consequence of these free deduction months, loan repayment periods are automatically extended by up to 10 years instead of the 5 years the laos was originally contracted.  Effectively, the extension means 10 extra years of low interest benefiting the staff and 10 years of lost interest to the corporation.  Whenever interest is waived, interest is also deliberately or inadvertently waived, in either way, it is the corporation that must absorb a tremendous loss.

There is no commercial bank that will loan amounts of the magnitude and at such liberal terms and condition and still expect to remain in business.  The outstanding loan amounts and the laxity of the rules governing these loans are unsustainable and must be addressed urgently.

The abuse will have to stop if SSHFC is to be saved.  And the micromanagement of the corporation from State House and/or the Ministry of Finance must cease.  The current financial trajectory of the corporation is unsustainable.  A few of the staff, especially those who have been benefited the most in the past would want to maintain the status quo despite the threat posed by the current state of the corporation's financial profile.  We say, the party, using pensioners' money, is over.     

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Monday, November 19, 2018

State House did not seek legal advice before signing the airport/border security tax contract with SECURIPORT and no exit clause in the contract.

The contract signed by the Interior Minister with the Washington-based airport security firm, SECURIPORT, and co-signed by the Director General of Immigration and the Secretary to Cabinet of the Office of The President that became effective on the 21st September, 2018 is already posing additional challenges for the Barrow government.

The $20.00 airport security tax for each airline passenger traveling to and from Banjul International Airport - or $40.00 for each return ticket holder - proposed by government to go into effect next January was immediately opposed by airlines and tour operators alike.  FTI, the German tour operator's letter of October 30th, 2018 addressed to the Secretary General informed government that proposed tax comes with added hidden costs of $15.00 due to VAT and rental commissions to be paid in the destination of origin, increasing the total figure to $55.00 instead of $40.00.

FTI's further informed the government that if it is serious in creating a conducive investment climate, authorities must guarantee that additional costs similar to those currently being contemplated will not be implemented because it will have dire consequences.  In fact, the Board of the FTI has directed that should the tax be implemented, any and all investment will be put on hold, including the $100 million the company plans on investing in The Gambia in the next 5 years.  Its summer plans are also being put on hold until an amicable resolution is found.

The TUI Group has also put the government on notice.  For many years, they have been operating to Banjul and have increased the number of flights substantially since. They operate 5 flights per week from Amsterdam and 2 flights from Brussels which means that over 21,000 seats are allocated to The Gambia this winter.  TUI also plans to operate in the summer, all of which will inevitably cause a reduction in tourism spending and therefore negatively impact the local economy should the proposed tax be allowed to take effect.   

Among the reasons advanced by IATA, the international air transport association, on behalf of member airlines was the lack of consultations with airlines prior to implementation.

The setting of airport and air navigation charges falls under the purview of the International Civil Aviation Organization (ICAO)'s policies on charges (Document 9082) and taxation (Document 8632) and the manner in which the proposed airport/border security tax was handled by the government seemed to have contravened these regulations.  Tour operators such as FTI, the German tour operator, hotel resorts and others in the business followed suit in objecting to the proposed tax.

In addition to the stiff opposition from airlines and tour operators to the new tax because of the threat it poses to the tourism sector that generates 20% of of the country's GDP as well as the second foreign exchange earner, the contract between the government and SECURIPORT was negotiated and signed without the benefit of any legal advice from the Attorney General Chambers.

And as far as it can be ascertained, the project was neither subjected to rigorous appraisal nor publicly tendered  to attract other eligible companies, making the entire transaction susceptible to standard financial and ethical scrutiny. 

To further compound the problems of the government of Adama Barrow, the contract, according to our sources, doesn't have an exit clause that would allow for the contract to be terminated under certain circumstances specified in the clause.  A standard clause in a government contract gives the government the right to unilaterally terminate a contract with or without giving reason or reasons.  The contractor in certain cases is entitled to a negotiated settlement.

In the case of the SECURIPORT contract, the government can only extricate itself from the contract if it is willing to pay the contractor the full amount of the projected profit the company is projected to earn during the entire contract period of 5 years.  Insufficient due diligence was conducted on the company, otherwise it would have shown that the company's Sierra Leone experience would have been a red flag based on local reporting by Standard Times Press of a US$16M that was allegedly fraudulently billed to the Ministry of Internal Affairs.

It goes without saying that such a contract clause is as disadvantageous to the government as it is callous disregard of a fundamental norm of making use of a team of lawyers as an integral part of any contract negotiations for the singular purpose of providing legal advice.

In this case the lawyers were conspicuously absent and so where the ministry of Finance responsible for all fiscal affairs of the government, the Gambia Tourism Board and the Gambia Civil Aviation Authority responsible for managing the Banjul International Airport. 

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Wednesday, November 14, 2018

Border security tax is bad for Gambia's economy, bad for tourism and bad for Barrow's government

Sidi Sanneh 
The persistent and flagrant violations of the open tender process, otherwise designed to encourage and promote competition among prospective bidders, is proving to be the bane of the Barrow administration. 

We have seen recently such tender violations in the SEMLEX case, the CHINA BRIDGE AND ROAD CORPORATION and now with the SECURIPORT contract for the provision of border security services at will impose a $20 security tax on arriving as well as departing airline passengers passing through Banjul International Airport.  This means that every tourist visiting The Gambia will see an additional cost of $40 every time they visit the Gambia.

There is no evidence that the award of the contract to SECURIPORT was tendered.  And if exempted, no proof exists that the rationale for the exemption.  The lack of transparency in the tender process almost always results in the wrong company being selected at greater cost to the public treasury than when the project is tendered in an open and transparent fashion.

The impact of the proposed tax is devastating because the demand for air travel is highly sensitive to air ticket prices as well as incomes.  For instance, a 10% increase in the ticket price can result in a 10% reduction in the demand for travel for international long haul leisure flight (elasticity -1.0).  It is therefore important for government to plan well in advance for a series of consultations and to engage an air travel consultant, if necessary, with stakeholders, airlines, tour operators, hotel owners and local tourism-based enterprises.

Obviously, the process that the government adopted lacked transparency and was deliberately exclusionary.  Not only were tour operators excluded from the process that resulted in the border security tax, even government departments such as the Ministry of Finance responsible for all fiscal matter of the Government, the Ministry of Works which is the line ministry of the Gambia Civil Aviation Authority responsible for managing Banjul International Airport and as far as be ascertained, the Tourism Board.

As we have reported recently, the contract was negotiated and signed by the Minister of Interior, Director General of Immigration and the Cabinet Secretary for Government and The General Manager of SECURIPORT (Gambia).  Conspicuously absent from the tender award and negotiations process were the Ministry of Finance responsible for all fiscal matters of the Government, the Ministry of Transportation, Works and Infrastructure,  Gambia Tourism Board and the Gambia Civil Aviation Authority.  It is evident that government's preferred process lacked transparency and was deliberately exclusionary.

The Head of Operations of Meeting Point, The Gambia, a subsidiary of Germany's FTI one of the world's largest tour operators regrets to confirm that there was no consultations and as far as he can ascertain no one from the industry was involved in the process of assessing the new tax.  According to Meeting Point, "not even Gambia Tourism Board and the Gambia Hotel Association were consulted prior to publishing this [meaning the tax] and as far as I am informed, are adamantly opposed to this border tax."

The subsidiary of FTI believes that the border tax will probably discourage many from travelling to The Gambia for the following reasons: (i) the demand for air travel is price sensitive (ii) for many tourists, especially from new markets, Gambia is often not the first choice and when the price is high, prospective visitors will choose another destination  and (iii) the very existence of what is labeled as a "security tax" gives the feeling of insecurity i.e. the feeling that The Gambia is an insecure place; its a bad PR job. 

FTI finds the introduction of such a huge tax increase in the middle of the season is something unheard of in any of the markets they operate in. Although FTI has not altered its plans for the Gambia, the same cannot be said of some of its partners where the Gambia is a new product.  In such markets, they are seriously considering withdrawing because the manner in which the tax was being introduced suggests that the Gambian market is unpredictable and cost planning difficult.

Imposing such a tax will  affects FTI's plan to promote summer tourism because, unlike winter months, there are many destinations Europeans can select from at that time of the year.   

The mere fact that government is thinking of implementing a security tax "may deter foreign investments because it shows how unpredictable the government can be and gives the impression they focus on short-term potential gain instead of long-term sustainable growth for the benefit of the Gambian economy and its people," the Head of Operations opined. 

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