Friday, September 15, 2017

The IMF, the deficit and the National Assembly

For the record
Four years ago today we wrote about the persistent budget deficit caused by Jammeh's fiscal irresponsibility, encouraged by the complicity of the National Assembly and the Fund's inability to encourage the Jammeh regime to be fiscal responsible.
The maintenance of an aircraft that doesn't belong to the government was being operated and maintained using public funds resulting in huge supplementary budget requests, year in, year out.
The issue took four years but it finally came to the fore at the Commission of Inquiry into Jammeh's illicit wealth. And as Nuha Touray said, whether it takes 100 years or 1,000 years, the day of reckoning will come, in response to a question of why he took meticulous notes of the transactions he conducted on behalf of The Gambia dictator.
Read the piece here:
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Gambia's large fiscal deficits that have been plaguing the economy for over a decade did not occur in a vacuum and neither were they accumulated without the endorsement of the National Assembly.   Therefore, members of the Assembly have helped create the mess, they can help clean up the mess by simply voting down the next Supplementary Budget request which is expected to be submitted by the Ministry of Finance in the next fortnight or so.  This is, of course, and as the saying goes, easier said than done.

The fiscal deficit is financed primarily by domestic borrowing.  The borrowing is done by government from the Central Bank to finance its projects, and pay for other government activities.  Domestic borrowing has exploded under this regime, especially since 2000/2001 starting with the then presidential elections.

Last year, a total supplementary budget request by the Finance Ministry amounted to D471 million which was submitted to the National Assembly and approved near unanimous vote.  D102 million of this amount or approximately 25% of the additional monies requested went to the President's Office, of which D43 million was supposedly for the maintenance of "state aircraft."  Why should we be paying for the operation and maintenance of an aircraft or a fleet of aircrafts where official records do not exist showing that they were purchased by the Government of The Gambia.  If we do not own the aircrafts why are we being asked to pay for their operations and maintenance?

I am using this case to illustrate how the budgetary process is being used increasingly by Yaya Jammeh to conceal dubious expenditures now that Allah's Bank has been placed under receivership.  The Office of the President is not an operational agency, and therefore cannot justifiably have a budget that twice the size of the Ministry of Agriculture or the combined budgets of the Judiciary and the National Assembly.  This is exemplifies the Imperial Presidency of Yaya Jammeh where the rest of us are being asked to go eat cake.

My difference with the International Monetary Fund is how to go about getting the deficits under control. Granted, the Fund has over a number of years warned about the problem, about how it slows down economic growth and development, and consistently urged government to reduce the overspending.  Instead, these deficits have been going up and spiraling out of control.  Jammeh is undisciplined and so is his government and therefore cannot restore fiscal sanity without the application of external pressures.

This brings me to the National Assembly which has been an integral part of the deficit problem because all expenditures must be approved by the parliamentary body which has not been spared of the dictatorial tendencies of the regime.  Their role as representatives of the people has been compromised through the application of governing party's rules.  The APRC selects them to stand as candidates.  They can be expelled not only from the party but from the National Assembly as well if they should fall out of party line.  The party is Jammeh.

The Fund, acting in concert with donor agencies, must start addressing these blatant forms of intimidation by the dictatorship that amounts to usurpation of the power of the electorate to elect their members of parliament who should be answerable to them, and not to a political party or an individual.  Donor support and encouragement of the Assembly Members is necessary to allow them to 'break away' from the grip of Yaya Jammeh.  It is only then that National Assembly can begin to act independently, including saying 'no' to the next supplementary budget request that is due before them shortly.

This approach, of course, raises a series of questions of external interference into the political process and the like.  But one could argue that such interferences already exist anyway, and as long as an independent National Assembly contributes to good governance, and good governance is a necessary ingredient in economic progress, it is worth trying this approach.  The leverage exists within the donor community, and it should be used.

Tuesday, September 12, 2017

Gambia to reform its security apparatus with help from the UN, EU, ECOWAS and AU




Gambia's President, Adama Barrow, has announced the launching of a project aimed at reforming the security apparatus of a country that has just emerged from 22 years of brutal dictatorship which poses a challenge that the EU Ambassador described as "deep-seated" to signal what's ahead for the new administration.

The statement by President Barrow recognizes the fact that he's inherited "a deeply politicized" security apparatus that is "not responsive to the needs of the people."

He expressed the hope that a reformed security force will be "effective and accountable...under democratic control with full respect for human rights, the rule of law and fundamental principles of good governance."

When the reform process is complete and in full implementation phase, he expects the outcome will enable The Gambia to, once more, "take charge of its own security and destiny."

The ECOWAS Ambassador warned the authorities that they cannot afford to fail in the endeavor and that a successful exercise in The Gambia will most certainly be replicated elsewhere in a region has experienced a period of instability in the last couple of decades.

A multidisciplinary task force comprising Defense, Interior, Foreign Affairs, Finance, Justice and key reform partners, namely United Nations, African Union, ECOWAS and the European Union.

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Monday, September 11, 2017

A case for the disaggregation of the G.R.A.


The Gambia Revenue Authority (GRA) was established in 2004 by an Act of Parliament (National Assembly).  It merged the Customs and Excise and the Income Tax Departments.  In a statement posted on the GRA website, the current Director General claims that his agency collects “about 20% of GDP and 80% of government revenue” thus making it the premier revenue collection agency of the government.

The rationalization of government departments, as well all major restructuring exercise in the private sector, is driven by the primary objective of enhancing efficiency and thus increasing the revenue (profit) streams of the operation.   The same concept generally applies to the private sector as well.

In the case of the GRA, the rationale is no different.  But has centralization increased both efficiency of operations and increased revenue?  The jury is still out on both questions.  And we are being charitable on the efficiency question for lack of tangible evidence resulting from unreliable data in the era of Jammeh.  One this can be said is that the rollout of the Value Added Tax did not inspire confidence in the new GRA and was considered a disaster that left great many businessmen and women, especially the petty traders and small businesses, frustrated, confused and felt cheated. 

We have written numerous blog posts for a number of years on the subject and you can find some of them here and here and here.  The efficiency issue is not specific to GRA but it is a civil service-wide problem that the new administration must respond to, perhaps in conjunction with a total review of the Government Statistics Bureau. 

Back to the efficiency and enhanced revenue collection capacity, centralization always concentrates power in the hands of the few.  In the case of the GRA, as we have seen time and time again, in the ear of Yaya Jammeh, the DG of GRA is the focal point of every budgetary intervention demanded by the Office of The President, whether legal or – mostly – illegal demands on the agency.  Either it is transfer of collected revenue that belongs to the Gambian people to the private business entities of Jammeh or for his private use. 

By centralizing the revenue collection capabilities of an entire government into what we now called the GRA,  Jammeh has created a one-stop-shop to satisfy his insatiable thirst for hard cash by issuing the now infamous Executive Orders (EOs) to one man, as opposed to having to deal with two or more individuals - say the Director General of Customs and Commissioner of Income Tax – which increases the chances of one of them proving to be the bulwark that prevents the type of abuse to the system that is being revealed in the Commission of Inquiry into his illicit wealth.

Reverting to the previous status of having a Director General of Customs and Excise and a Commissioner of Income or Domestic Tax would return competitiveness between the revenue collection centers that made the inter-departmental rivalries good for government’s bottom line.  Those old enough to remember, the most anticipated portion of the Annual Budget Speech of the Finance Minister was the section dealing with the revenue and loss column of the parastatals.   Only the Managing Director of NAWEC would dread having a return of this feature of the annual event.

Finally, it is oxymoron to centralize government revenue collection while in the same breath promoting the decentralization of government services which goes hand and clove with power of the purse strings. It is time the Barrow administration consider disaggregating the GRA into smaller manageable agencies which is more consistent and supportive of government’s long-held policy of devolving power from the center to the provincial areas of the country.     
        




Thursday, September 7, 2017

The Central Bank is a threat to the financial system

This blog post was first published May 13th 2014, raising the alarm on the Central Bank of The Gambia with specific reference to its apparent inability or unwillingness or both to perform one of its most important statutory functions - the supervision of commercial banks to protect depositors by ensuring their solvency.   At the time, we are not aware of the extent of the CBG role in managing 22 illicit accounts on behalf of the Office of the President.  These accounts were operated as they would have under a normal commercial banking operations.

Sidi Sanneh

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Perhaps it is time for the Central Bank The Gambia (CBG) to be "taken over" by a competent set of central bankers because it is under-performing under current and previous managements.  It has been so sloppily managed that it were a commercial bank it would have been declared bankrupt.

Not that central banks don't go broke; they do.  The Reserve Bank of Zimbabwe, as its central bank is called, went broke with the bank's balance sheet succumbing to Zimbabwe's 100,000 percent hyper inflation.  But bankrupt central banks, however rare, rely of the public national treasury i.e. the tax payer.

We do not expect the CBG to find itself in a Zimbabwe-like situation, but unless prudence and strict adherence for banking principles are observed, the financial system and the economy they were trying to safe, as they claim, that led them to "take over" Access and Keystone Banks, will come crashing down, and with it the hopes, dreams and aspirations of million and a half Gambians.

Last week Monday, we were greeted by the news that two Nigerian-owned banks were being taking over by the Central Bank for reasons that we have covered on several blogs and Facebook posts.  Exactly a week later, we were greeted with yet another press release from CBG informing us that Access Bank has been returned to its owners but not before they paid US$ 15.2 million (D600 million), and a promise to pay another US$ 4.8 million (D198 million).

These payments could not have been for the minimum capital requirement (MCR) that the CBG raised to D200 million, to be paid in two tranches.  This is so because the payments are huge and besides we were assured back in January 2013 that 12 of the 13 banks operating in The Gambia had fulfilled this requirement. Cronyism and weak management aside, the Central Bank has been caught fudging the books and cooking up up numbers that led to IMF sanctions in the past.  It is only reasonable, to be skeptical about any  figure that they brandish and an explanation they give.   Transparency is lacking in the CBG, and it is that lack of transparency that is the bigger enemy than the critics of the regime and CBG management.

In its May 5th, 2014 press release which the official government newspaper refused to carry for reasons only known to the management of the Daily Observer, Gambians were told that the CBG was stepping in to take over Access and Keystone Banks, and in doing so assures respective clients and the public that "the two banks would continue business as usual, and depositors are assured that the banks have ample liquidity to meet current and future obligations. '

We find the first press release very misleading, coined to conceal the real financial health of the two banks and maybe other banks.  There may be ample liquidity to cater to the needs of the current need of clients, but it is highly questionable whether it can address future obligation which is part of the reason why the CBG stepped in in the first instance.

The return of Access Bank to its owner after a week under CBG supervision and why its owners are required to pay US$15.2 million now and an additional US$4.8 million for a total of US$20 million or approximately D800 million to recapitalize the bank.  This figure reveals that Access Bank was operating underwater for an extended period time and yet no signal or red flags were raised by the CBG, thus exposing depositors to unacceptable risk until last week.

One  plausible explanation is the Access Bank was carrying in its books a huge none performing loans.  It is not surprising that the financial system was exposed to this dangerous level because of the weak supervisory capacity at the CBG as evidenced by one IMF report after another warning about this condition.  What we would like to know, what was the cause of the exposure?  Who were Access Bank's clients who accumulated such huge sums, and for what purposes were they contracted.      

 

Tuesday, September 5, 2017

Mohammed Bazzi requests his appearance before the Commission of Inquiry to be in-camera

Mohammed Bazzi, CEO Euro-Africa Group 
A highly reliable source has just revealed that Muhammed Bazzi, the CEO of the Euro-Africa Group and numerous other companies operating in The Gambia during the 22-year dictatorship of Yaya Jammeh is requesting that his appearance before the Commission of Inquiry into the former dictator's illicit assets be conducted in-camera.

The Lebanese-Syrian businessman is considered by many to have been the most influential businessman in the country who had a stranglehold on the economy with business interests in everything from importation of petroleum to mineral mining.

His substantial holdings and business interest in The Gambia, coupled with the influence he had over a regime that controlled every aspect of the Gambian economy makes him one of the most important witnesses to face the Commission.

The only other person of interest that can rival him is Amadou Samba, his business partner in Euro-African Group that enjoyed the exclusive right to import petroleum products into the country.  They also owned majority shares until Amadou Samba divested his 9.9% share, allowing the government to become majority (52%) shareholder.  They lost their privileged monopoly status after Yaya Jammeh was defeated in last December's elections.

Given their prominent role in the regime of Yaya Jammeh, particularly as it relates to the exploitation of the country's resources, it is an absolute must to invite Mohammed Bazzi and all his business associates to come before the Commission and be questioned in a public setting and in full view of the public just like all other witnesses have been subjected to.  There should be no exception regardless of status.  Gambians look forward to their testimony.  

African Petroleum taking Gambia to arbitration

We reported last week that the African Petroleum Corporation Ltd was contemplating taking the government of President Adama Barrow to court over Blocks A1 and A4.   You can find that report here. 

The CEO of the company said in a statement posted on the company's website that his company has decided to take the Government of the Gambia to court over the exploration rights in two areas suspected to contain over 3 billion barrels of crude oil.

The announcement further states : "It is a matter of regret that it has come to this; however we are confident in our legal position."  Ghe statement continues, "We now believe that in order to protect our historical investment we have no choice but to take this case to arbitration."

According to Reuters news agency reporting from Dakar,  the market reaction to the news has been negative, causing the company's shares to fall by 8.84%

Monday, September 4, 2017

What is at stake at the Commission of Inquiry - Petroleum sub-sector

Commission Of Inquiry into Jammeh's illicit wealth 
Prior to the nationalization in March 2015 of the Gambia National Petroleum Corporation, procurement of petroleum and petroleum products was monopolized by the Euro-African Group.  

The company that is jointly owned by Mohammed Bazzi (30.8%), Social Security and Housing Finance Corporation (31%), also built the Madinari Fuel Depot a company jointly owned by the Lebanese businessman Mohammed Bazzi, Amadou Samba, Faddi Magezzi (10.3%), Amadou Samba (9.9%), GPA (10%), GNPC (7%) and Premier Investment Group (1%). 

For six years, the controlling shares (52%) of this strategic national infrastructure was controlled by private/foreign interests. The products the Bazzi-controlled company imported ranged from petrol, diesel and jet fuel for petrol stations and airport to heavy fuel and lubricants for NAWEC.

The monopoly environment was deliberately created by Jammeh for himself and his business cronies which proved quite lucrative for the very favored few at the expense of the economy and everyone else. 

How lucrative was it?   According to our sources, the cartel bought one metric ton of fuel for US$400 and sold it to NAWEC for US$700 per metric ton, nearly double the price, the profits of which were deposited in offshore accounts.  

This exorbitant price fixing that borders on criminality partly answers the question in the lips of many frustrated energy consumers as to how NAWEC  ended up being in arrears of US$64 million  to the Euro-Africa Group resulting in further costing the government millions more.  

The government was forced to purchase the Brikama power plant which was an IPP owned by Bazzi which he had to surrender to the Standard Chartered Bank because he defaulted on a loan.  The history that led to this default which was costly to the public treasury must be investigated.   

With annual consumption in the tens of thousands of metric tons, hundreds of millions of dollars in profits were realized since the Madinari fuel facility was inaugurated by Jammeh in 2008 at a cost of US$50 million.  We are still investigating whether it was government that guaranteed the loan that built the Mandinari facility.

NAWEC now buys at US$400 per M/T instead of US$700 per M/T unless these economic predators are allowed to bribe their way back into having a stranglehold on the Gambian economy.  For them to succeed, they will have to fight an increasingly restless and highly agitated population that have been exploited for over two decades by Yaya Jammeh and his cronies   NEVER AGAIN.

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Note to our esteemed readers:  To help you focus on what we consider to be the important areas of the Commission of Inquiry's deliberations, we will be highlighting key aspects of the inquiries with special attention paid to details that may have been lost in translation or not covered in detail.   

This is the first of several installments that focuses on one aspect of the petroleum sub-sector which has been dominated by a handful of Lebanese businessmen with Gambian collaborators.  Gambians welcome the breaking up of the monopoly who will insist that those still holding on to their shares must dispose of them as soon as feasible.