Courtesy CNC 3 News
Director of Public Prosecutions Roger Gaspard SC says the accused men in Marcia Ayers-Caesar’s 53 abandoned cases aren’t the only victims.
When the full blast of the economic downturn lashed the T&T economy in 2016, it left a path of battered bottom lines, workers on the breadline and a rolled-out carpet of uncertainty, ensuring a grim reality faced by most businesses as the curtains come down on the hardest year for the economy in three decades.
Across the business landscape, this year was characterised by three main issues: the shutdown of the ArcelorMittal steel plant in Point. Lisas, the continuing oil and gas shortages and persistent foreign exchange shortages.
In a sense, these issues spilled over from 2015 into 2016 and, to a large extent, remain basically unresolved.
In March 2016, ArcelorMittal permanently closed its steel plant and dismissed 644 workers after losing a judgment at the Industrial Court that had been filed by employees against the company.
The judgment against the company required that it pay the full wages owed to workers who had been laid off in December 2015 by the end of April 2016. ArcelorMittal was also fined $24,000 for “its illegal industrial action” and its failure to treat with the union.
A day after the judgment was delivered, the company announced that it would engage in a “creditors’ voluntary wind-up” and seek to dispose of all its T&T assets. The company said that closing the company had become necessary in light of sustained losses dating back to 2009, proposed major increases in the local price of gas and electricity at a time of falling commodity prices, and proposed increases to port rental fees, announced property taxes and higher business levies.
According to ArcelorMittal, the company listed its liabilities at US$280 million and its assets at US$70 million.
To date, the assets of the company are still up for sale with the liquidator Christopher Kelshall stating that the process of is “ongoing.”
In the first seven months of 2016, about 690 workers were on the breadline according to the Ministry of Labour and Small Enterprises retrenchment data. The CBTT stated: “Unemployment remains low and there are anecdotal reports of shortages in certain specialist skill areas as well as in some low-wage jobs in the distribution sector.”
Looking at the data the bank said: “The labour market data for the fourth quarter of 2015 shows that the rate of unemployment rose to 3.5 per cent from 3.3 per cent in the corresponding year, and of the estimated 22,300 individuals unemployed, 57 per cent were males.
“The number of persons without jobs rose by 400 but the effect on the unemployment rate was attenuated by a fall in the labour force.”
The year 2016 was a challenging one for companies for the energy sector.
As of December 20, West Texas Intermediate (WTI) crude has averaged just over US$43 a barrel for 2016 and global natural gas prices have been significantly lower than the 2010 to 2014 period.
In the case of T&T, the situation has been even grimmer because it has been combined with lower oil and gas production.
According to figures from the Ministry of Energy and Energy Industries, for 2016 crude production averaged 70, 071 compared to 2015 when the average production was 78,656. This represents a more than 10 percent decline in crude production. On the natural gas side, in 2016 natural gas production as of October has averaged 3.335 bcf/d this compares to 3.833 bcf/d or a 500 mmscf/d decline in production.
The combination of lower prices and reduced production impacted all operating companies in the local sector. There has been an increase in unemployment and cuts across the board as the companies have tried to adjust to the reality of a prolonged period of low prices and low production. Several companies in the petrochemical and industrial sector have been forced to operate below capacity as a result of the chronic gas shortages to their operations.
Additionally, in October, Franklyn Khan was appointed the new minister of energy and energy industries, replacing Nicole Olivierre in a cabinet reshuffle.
By July 2016 T&T, along with other energy commodity exporters continued to experience “challenging” times as the gross domestic product (GDP) contracted for another time in the first quarter of 2016.
According to the provisional estimates from the CBTT’s Index of Real Quarterly: “GDP indicates that domestic economic activity declined by 5.2 per cent year-on-year, due to declines in both the energy (9.1 per cent) and non-energy sectors (2.8 per cent).”
The bank stated in that same report, that production in the energy sector was affected by planned maintenance and upgrade-related downtime at the major oil and gas producers, as well as lower output associated with maturing oil fields. The non-energy side of the economy, construction sector slowed in the context of “slower execution of government-related projects. On the other hand, some uptick in activity was observed in the finance sector.”
The hit that the energy sector took as a result of declining oil and natural gas prices in the international market resulted in lower revenues the CBTT reported. “Central government deficit rose to $6.2 billion (annualised 4.6 per cent of GDP) over the first nine months of the fiscal year (October 2015 to June 2016) compared to $2.2 billion in the corresponding year.”
One ray of hope for the local energy sector was the signing of a cross-border gas sharing agreement between T&T and Venezuela in early December. The deal involves T&T taking gas from the Dragon gas field in Venezuela. If all goes as planned, broad estimates suggests that first gas could arrive within 30 months from the signing of the bilateral agreement. The parties involved in the agreement were the NGC, Shell and PDVSA—the state-owned Venezuelan oil company.
The demand for foreign exchange showed no signs of abating in 2016, with local companies voicing their angst about the effect of their inability to acquire the desired amounts of “hard currency” on their respective businesses.
According to Central Bank data, from December 2015 to the end of November 2016 the currency depreciated by 5.44 per cent against the US dollar, moving from TT$6.43 to US$1, to TT$6.78 to US$1.
The country’s foreign reserves position also fell during the same period moving from US$9.78 billion in December 2015, to US$9.54 billion in November 2016. As at November 2016, the country’s import cover was roughly 10.6 months, down from 11.1 months in December 2015.
A number of listed entities on the local stock exchange noted the impact of the foreign exchange situation on their business.
In his half-yearly report for 2016, Massy Group chairman Robert Bermudez said his company had taken aggressive measures to satisfy the group’s demand for forex.
He said: “Given the current challenges in the T&T economy, the group has intensified its attention to managing foreign exchange and continues to find ways to fund its foreign currency requirements through multiple strategies including: greater attention to the balance between receive and send transactions in the money transfer business; daily monitoring of foreign exchange required, generated and requested; pursuit of foreign exchange generating investments, and finding ways to reduce import needs by buying and promoting more local goods.”
Christian Mouttet, chairman of Prestige Holdings Ltd, noted in their half-year results for 2016 that inspite of foreign exchange challenges, the group’s KFC and Pizza Hut brands had performed well.
Managing director of Agostini’s Ltd, Anthony Agostini, in an October 6 article in the Business Guardian, also commented on the persistent foreign exchange challenges in the local economy and his group’s response to the situation.
“Access to US dollars has certainly been a challenge, but we’re no different to many other companies in that regard. We have been able to keep our heads above water as it were and, with some manufacturing coming into the group by way of acquisitions, we expect to generate more foreign exchange through export of those products,” he said.
The Government used overdraft financing at the CBTT but also borrowed on the local and international markets as well as accessed the Heritage and Stabilisation Fund. The CBTT stated that, “during the first nine months of fiscal year 2015/2016, the Government borrowed a total of $4662.9 million in the domestic market.”
In May 2016, the Government had withdrawn US$375 million from the HSF which was the first drawdown since the establishment of the fund in 2007.
Specifically, in August 2016, the Government received the proceeds from a US$1 billion foreign bond, which was the first international issue since 2013. The tenor of the bond is 10 years at a coupon rate of 4.5 per cent. The bond issue brought external debt as a per cent of GDP to 13.6 per cent.”
Referring to monetary conditions, the CBTT said it remained stable for the first seven months of 2016.
“With inflation low and broadly comfortable interest rate differentials against US short-term securities the bank has been able to hold its Repo rate since January in the context of the slowing economy.”
The TT-dollar depreciated against the US-dollar by 4.9 per cent for 2016, with the selling rate moving from TT$6.45 in January 2016 to TT$6.77 on December 21, 2016. The CBTT’s interventions declined to US$906.6 million in the first seven months of 2016 compared with US$1.42 billion in the same period in 2015.
Stating that T&T’s economy is in an even more perilous state than the Government had envisaged, Finance Minister Colm Imbert said during presentation of the 2015/2016 budget statement that the facts about the statement were:
• The economy was far from being strong or on a growth path
• Real output in the energy sector declined again in 2015, making it the fourth annual decline in the last five years
• Activity in the non-energy sector has also weakened with a loss of momentum in construction, distribution and manufacturing
• Total energy exports are estimated at only US$7.5 billion in 2015, a significant decline when compared with an annual average of US$12.7 billion in the period 2010 and 2014
• The sharp decline in export receipts will mean that T&T’s trade balance will be reduced by more than half from US$4.6 million in 2014 to US$1.7 billion in 2015.
Reporting by Curtis Williams, Nadaleen Singh and Andre Worrell ArcelorMittalLabour Troubled energy sector Demand for forex Deficit financing Budget statements