Berbice Bridge tolls
By Staff Writer On In Editorial
https://www.stabroeknews.com/2...erbice-bridge-tolls/
When Berbicians, in particular, would have heard Tuesday’s announcement by the Berbice Bridge Company Inc. (BBCI), of debilitating increases in tolls to cross the Berbice River from November 12, they must have immediately thought that it would be impossible for such a burden to be imposed on them. Indeed, in a matter of hours the Minister of Public Infrastructure, David Patterson assured them that they wouldn’t be paying any such increases – 265% hikes in tolls for cars, minibuses and even higher for other categories. For the tolls to take effect, the Minister has to issue the relevant toll order. It is unclear how BBCI intends to get around this.
First and foremost, Berbicians and the rest of the population must be able to travel at a reasonable cost and safely over the bridge. From the outset, the tariffs set in 2008 were high because of the need to meet the terms of the investor agreement arrived at by the former PPP/C government. To hike them by 265% and more is unconscionable particularly given the crisis facing communities there from the government’s closing of sugar estates. What needs to be immediately established is whether the pontoons on the bridge are in a safe state or must be repaired immediately. If it is the case that BBCI does not have financing for this, it should accept assistance from the government to ensure that the pontoons are refurbished and that a maintenance schedule is maintained.
Tuesday’s announcement of the swingeing toll hikes by the Chairman of the BBCI, Dr Surendra Persaud will be seen as the opening move in a further engagement by the company with the government. The 2008 financing deal for the Berbice Bridge is one of the much-vaunted, public-private sector partnerships that the former PPP/C government had utilized during its term in office. There had been many doubts in civil society from the inception whether this model and its financing terms were workable. Giving the present impecunious state of BBCI, it would be safe to say that this is one of those agreements that was clearly too optimistic and didn’t attract the volume of traffic across the bridge which would have enabled it to make debt payments and provide the inscribed returns to its investors.
Former President Ramotar in a letter in yesterday’s Sunday Stabroek defended the financing model and the terms of the Berbice Bridge agreement. He then sought to blame APNU and the AFC, while they were on the opposition benches, for the present problem as they had moved a symbolic motion for the lowering of bridge tolls. Mr Ramotar’s defence is not credible.
There had been widespread concerns from the inception among Berbicians that the tolls required by the agreement were too high and the two then opposition groups were well within their right to move a motion in parliament for the lowering of the tolls in response to feedback from their constituents. What is more pertinent to Mr Ramotar’s tenure in office was the fact that the concession agreement required two pivotal increases before a projected decline in tolls: a 6.4% hike in 2014 and a 17.3% rise in 2015. Former President Ramotar did not invoke these increases even though he and his administration and the investors must have known how crucial it was to the projected take and the reduction of BBCI’s growing debt, meeting its financing costs and providing returns to key investors.
It is likely the case that the Ramotar administration calculated that Berbicians would not be able to sustain these increases in 2014 and 2015 and that this would likely result in the PPP/C being punished at scheduled general elections in 2016 and losing further ground to the AFC in the Ancient County. Mr Ramotar’s glancing statement in the letter that when a larger increase was necessary in 2015 “elections deferred all decisions” is also not convincing. If there was any government, elections notwithstanding, that should have stuck to the letter of the concession agreement it was the PPP/C. It clearly determined it couldn’t do this in 2014 and 2015. BBCI should have taken all measures necessary to have the toll agreement implemented or to negotiate a new deal with the PPP/C government in that period but it failed to do this.
It remains the case that BBCI has a valid agreement with the Government of Guyana – not with the PPP/C or some other entity – but with the Government of Guyana. It therefore behoves the APNU+AFC administration given that it is the trustee of last resort for safe travel over the Berbice Bridge to seek an agreement for a way forward that protects the interest of commuters and preserves vital infrastructure. It also behoves the investors to recognise that financial models of this type are fraught with risk and they, too, must be prepared to make concessions on returns and other matters.
Surprisingly, Mr Ramotar’s letter made not a single mention of the National Insurance Scheme (NIS) – the elephant in the room. In 2013, again during the Ramotar administration, the NIS board was likely directed by senior officials in government to acquire a huge block of preference shares which had initially been held by NICIL. The NIS was already in a dire financial condition having had a huge hole gouged in its finances by the ill-advised investment in CLICO paper. The NIS has seen no returns from BBCI on its huge investment even as it continues to record annual deficits. This situation must have also been one of the motivations of the BBCI Chairman – who is also the Chairman of the NIS – in announcing these breathtaking toll increases. The corralling of NIS funds for this risky investment should lead to an internal inquiry at the NIS and those responsible for this decision should be made to account for the zero returns to date as it has jeopardised the national social security system.
Last, it is worth pointing out that BBCI’s plight didn’t materialie overnight. There have been warnings for years from various analysts including columnists Christopher Ram and Anand Goolsarran. It is worth repeating some of what they have had to say about the concession agreement.
Writing in his accountability column in September 2015, Mr Goolsarran referred to the toll dispute between the government and BBCI and suggested two changes to the concession agreement.
“The first is that the financing of the Bridge’s operations is in urgent need of restructuring so as to reduce costs and hence to provide the much-needed relief to commuters. At the moment, the BBCI is too highly geared, meaning that there is too much debt (as opposed to equity) which has to be serviced from the revenues of the Bridge. Second, the Government must be allowed to have a say at the level of BBCI board that is commensurate with its investment. The current Shareholders’ Agreement therefore needs to be scrapped and replaced by a one that reflects proportionality in investment”, he said.
He also addressed the plight of the NIS. He said that it had become the victim of collateral damage from a poorly thought out financing arrangement. He noted that the NIS had invested $80 million in ordinary shares and $950 million in preferred shares out of a total shareholding of $1.350 billion.
“NIS therefore owns 76% of the total shareholding. Yet the Government has little say at the level of (the) BBCI board because control is skewed in favour of two private investors owning a mere 15% of the total shareholding. The concern is even greater when one considers that the Government has contributed an additional $2.571 billion through the IDB loan and the expenditure incurred by NICIL. The whole arrangement involving the mix of financing and control over the composition of the BBCI board is therefore seriously flawed”, Goolsarran had said.
As far back as 2013, Mr Ram had said that the best option for the Berbice Bridge was a government takeover as the concession agreement had failed spectacularly.It is now for the government and BBCI to sit down and arrive at an honourable agreement on the way forward.
