WHEN the chairman of CyTA Stathis Kittis announced that together with the chairmen of the Electricity Authority and Ports Authority they were considering securing loans from abroad to prevent the privatisation of their organisations, most sensible people thought he was joking. The idea was dismissed as just another example of a populist, pipe-dream that would earn the applause of union bosses and then be forgotten.
However Kittis seems determined to pursue this foolish idea, announcing earlier this week that three organisations from abroad had shown an interest in providing the €1.4 billion loan the three semi-governmental organisations were after. Although he did not name the potential creditors – two were UK-based and the other US-based – he said that he would meet his fellow chairmen “with the aim of turning this initial idea into action”.
In a nutshell, the SGOs would offer their assets as collateral to raise the €1.4 billion loan which they would then offer to the government so that it would not have to privatise the three SGOs as agreed in the Memorandum of Understanding. The sad thing is Kittis was being totally serious, in promoting this ludicrous idea that makes no business sense whichever way it is viewed.
Did it occur to him that by lumbering each of three SGOs with an additional debt of half a billion euros, he might prevent their privatisation but ensure their bankruptcy. The EAC, for instance, is having difficulty servicing its existing loans – its chairman said its surplus was not enough to cover its debt repayment obligations – and would have no chance of surviving if it took on a non-productive loan of €500 million. How would it repay it? By tripling the already extortionate rates it charges its subscribers? Would the Port Authority, which charges absurdly high rates for handling shipments of goods, also triple its rates?
There is no way any serious finance company would lend this amount of money, for non-investment purposes, for the very simple reason it would never be repaid if it is not used to generate more business. The SGOs would not invest the money but simply hand it over to the government, which will not be able to repay a cent for at least 10 years.
In other words, the SGOs would borrow €1.4 billion in order to preserve the mismanagement, inefficiency, over-staffing, money-wasting and extortionate pricing that has always marked their operation and was covered by their beleaguered customers. The troika is certain to veto such a stupid idea, even if foreign companies are queuing up in order to lend our SGOs €1.4 billion.