Stuart predicts big water management changes

A young economist is predicting that the Barbados Water Authority (BWA) could soon be placed in the hands of a private entity as Government continues to seek ways to cut transfers and subsidies in an effort to continue to meet its obligations under the International Monetary Fund-backed (IMF) austerity programme.

Moreover,  Kemar Stuart, Director of Business Development, Finance and Investment at Stuart and Perkins Caribbean, is warning that should the BWA become a private sector entity, the price of water would increase.

He was responding to a recent article in another section of the press, which reported that Government had established a 20-member National Advisory Committee on Water to advise the administration on matters related to the precious commodity.

“Since Government can’t tax, nor can they continue to borrow in this depressed environment and to live up to its initial agreement with the IMF to cut money transfers to state-owned entities (SOEs), the government is finding it difficult to continue to subsidize water rates.

“Therefore the only option according to actions previously taken, is to cut spending to the water authority and forge private outsourcing of the entity’s operations. The formation and characteristics of the committee is affirming that the BWA is headed in the direction of privatization,” said Stuart.

“This is the first step in a bid to privatize the Barbados Water Authority where government will outsource the operations of the state-owned water service to the respective stakeholders in the business community. On its committee are persons who have a history of benefiting from lucrative government contracts in terms of sale of government assets,” he added.

Insisting that transfers to SOEs are to be cut as per the Barbados Economic Recovery and Transformation (BERT) programme, Stuart said Government’s financial strategy was “to remove” as many SOEs from the books of government and have them under private control.

“This can be referenced in its agreement with the IMF and the survey that the government circulated to determine which SOEs should or should not be privatized which occurred within a couple months of coming to office,” he said.

While not referencing the Garbage and Sewage Contribution (GSC) levy that was introduced in August 2018, Stuart said he believed there will be an increase in the cost of water “via a levy” if the BWA is privatized.

Under the GSC, households pay an equivalent of $1.50 per day, of which $1.25 goes to the Sanitation Services Authority and the remainder to the BWA. Meanwhile, commercial entities pay 50 per cent of their water bills, and this is split evenly between the SSA and the BWA.

Stuart said: “The presence of Dr Clyde Mascoll who is government’s special advisor on public financial issues, Ian Carrington, Director of Finance and Economic Affairs, two union bosses, along with major business players suggests a major overhaul and correction is planned for the water authority in terms of restructuring its business and management model.

“Traditional methods of transfer of water services to private hands will see the establishment of a private water company or statutory board with the signature and transfer of management rights over to these new institutions. This will see the rise in the cost of water to recover the cost of the investment that will be spent to carry out works on the project and a permanent increase to recover the loss of financial input and subsidy from the government,” Stuart argued.

According to the recent newspaper report, the committee is a private/public committee that “revolves around looking at the augmentation programme that the BWA is putting in place to ensure that we have the best practices and that we have a speedy resolution to the numerous water issues that we have across the country”.

However, Stuart said it was simply the financial state of the water utility company that has been hampering its ability to fully deliver due to “mismanagement of its resources” and other structural problems such as cost/price imbalances.

He said that as far back as 2007 the IMF recommended that to achieve savings, adjustment of prices of utilities and public services to reduce the budgetary impact of across-the-board subsidies and costly price imbalances were necessary.

“Automatic adjustments upward in regulated prices for subsidized goods and services such as water will be a point of contention for the public under any privatization plan,” warned Stuart, as he recalled a 75 per cent rise in bus fare to $3.50 in April 2019.
(marlonmadden@barbadostoday.bb)