The need for State agencies to avoid investing in non-core business

It beggars disbelief to read of Government agencies using public funds as investments in commercial enterprise that are not part of their core business as an organisation.

The Samoa Airport Authority (SAA) immediately comes to mind, with its investment of $2.7 million tala in the Aggie Grey Beach Resort and Spa at Mulifanua. The Samoa Observer reported on the Authority’s investment in the resort in a story titled “Govt. getting no returns from $2.7 million resort investment” in the May 6, 2019 edition of the newspaper.

But why would a State entity, charged with the responsibility to manage Samoa’s airports, invest in a commercial enterprise that does not directly come under their core business? 

We should revisit the necessary legislation, and the Ministry that has oversight over the Authority, to appreciate the functions and responsibilities of this very important Government entity which plays a critical role in Samoa’s aviation transport sector. 

“The purpose of the Authority as set out in the Airport Authority Act 2012 is to ‘establish, improve, maintain, operate and manage airports which are under the control of the Authority and provide services and facilities in accordance with the Civil Aviation Act 1998, and this Act which relate to the operation of aircraft or aviation-related service’,” states the preamble of the Authority, as highlighted on a page dedicated to the entity on the Ministry for Public Enterprises website.

The preamble explicitly highlights the functions of the Authority to “establish, improve, maintain, operate and manage airports which are under the control of the Authority and provide services and facilities in accordance with the Civil Aviation Act 1998”. 

The decision by the Authority to invest $2.7 million tala in the resort lacks rationale, especially when immediate access to funding is critical to ensuring the Authority continues to deliver on its mandate to ensure Samoa's airports are improved, maintained and continue to operate. In fact coming to think of it, it would perhaps make sense for the Samoa Tourism Authority (S.T.A.) — as a major stakeholder in the country's tourism sector — to make an investment in the resort. 

But then again the bottom line is why should a Government agency charged with the responsibility of maintaining and keeping operational key transport infrastructure assets be investing in a resort?

Therefore, the letter dated April 26, 2019 written by the Ministry of Public Enterprises Chief Executive Officer, Elita To’oala and addressed to the Ministers of Public Enterprises and Finance, Lautafi Selafi Purcell and Sili Epa Tuioti can only be described as a timely intervention to hold the Authority to account.

Ms To’oala advised the two Ministers that the S.A.A. Board and management have been asked to assess the authority's investment in the resort and report back to Cabinet. The correspondence was a cover letter of a "Performance Report for the Quarter Ending 31st December 2018" and also included an executive summary, key issue and recommendations for the two Ministers' consideration.

Under the executive summary section, Ms. To’oala wrote: "The purpose of this report is to provide an overview of Samoa Airport Authority's (SAA) performance for the quarter ending 31st December 2018. It includes an overview of performance, trends from past results, compliance with required guidelines, key issues as well as recommendations going forward."

She said the key issue is "the Authority's $2.7m investment to Aggie Grey's Beach Resort is not yielding any returns". Therefore, as part of her recommendations, she said: "We advise the Board and Management to assess SAA's investment with Aggie Grey's Beach Resort and report to Cabinet no later than 24th May 2019." Copies of the letter were sent to the Prime Minister, Minister of Works Transport and Infrastructure, the S.A.A. Board chairman and the S.A.A. General Manager.

The Minister of Works Transport and Infrastructure, Papali’i Niko Lee Hang, confirmed that the investment by the Authority in the resort and said it was the fourth largest shareholder.The last time the resort paid dividend was in 2012 and nothing had been forthcoming since then.

“The last dividend we received was in 2012 and if I recall correctly, they gave out $100,000 but 2013 onwards nothing. The Airport Authority is the number four investor with the hotel and the National Provident Fund is the major shareholder. The Airport (Authority) invested $2 million and then later on added $500,000 and we have not received any dividends and that tells a story,” he said.

The nonpayment of dividend is a concern for the Minister, as he said the Authority needed funding for an airport project that is currently underway. 

We look forward to the feedback from the S.A.A. Board and management to Ms. To’oala and the Ministry for Public Enterprises. The S.A.A. Board and management should justify the investment and Cabinet should go one step further and query how such a decision by a Government agency — tasked to manage and keep operational Samoa's airports — was made to invest in a commercial enterprise with no direct links to the Authority's functions. 

At the end of the day the Authority's $2.7 million investment in the resort could have been better utilised to cover capital expenditure costs associated with projects, such as the Tiavea airport construction which the Government initially projected to cost $10 million, and due to land compensation expenses now increases to $14 million. 

The matter should also serve as a deterrence to other Government agencies, to avoid investing public funding in non-core business and to channel the funding to key priority areas under their mandate to ensure there is continuity in service delivery to the people. 

Have a lovely Wednesday Samoa and God bless. 

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