Since June, the State Trading Corporation (STC) has had a new managing director in the person of Rajiv Servansingh. Servansingh accepted the position after the controversy surrounding the Emergency Procurement for the purchase of medical equipment and medicines for the government. Le Matinal Media interviewed him and as always, he did not hesitate to answer us like the professional he is.
LM: With the opening of the borders and the end of the year celebrations approaching, will there be enough stock of fuel and jet fuel? When is the next fuel delivery to Mauritius expected? Will the STC be able to maintain stable oil prices in Mauritius with the Automatic Pricing Mechanism?
The STC has a system that has been in place for many years for the supply of petroleum products to the country, as well as for other essential products. Calls for tenders are made on an annual basis and the STC follows up assiduously on the movement of ships with the suppliers to ensure that everything goes as planned. In addition, it should be noted that with the commissioning of the Red Sea Oil …… we have created the possibility of having a “strategic” reserve for the country. The STC is not in a position to guarantee that prices will remain stable when we know that we are supplying ourselves on an extremely volatile market where it is impossible to control prices. Faced with this problem, even the major developed countries are now unable to ensure price stability in their energy markets. The APM is only a mechanism that makes a low calculation on the price trend.
LM: There has been a deterioration in the quality of gasoline on the local market. For example, in Reunion Island, the quality of the gasoline is said to be better. What measures have been taken to ensure good quality gasoline on the local market?
At one point, there were indeed complaints from a number of citizens regarding the quality of gasoline supplied by STC. An investigation is underway to determine the causes but this relates to a contract that dates back some years. Since then, STC has taken steps to ensure that the required criteria and specifications are strictly adhered to. It is not true to say that the quality of the gasoline supplied by STC is of “poor” quality. In fact, the four multinationals of the industry present in Mauritius are stakeholders in the determination of the criteria applied by the STC and are fully satisfied with them.
LM: The rupee has depreciated significantly against the dollar. In addition, the cost of freight is rising. Can you assess the extent to which the rise in import prices has affected the inflation rate in Mauritius? What is the position of the STC’s foreign exchange reserves to ensure the import of essential goods to Mauritius? Are they sufficient?
While it is true that the dollar has appreciated against the rupee in recent months, this is only one of a number of factors that influence the prices of products imported by the Corporation. Mauritians are aware of the major upheavals in the world economy since the global economic activity experienced a near total shutdown, which lasted for almost a year followed by a sudden and robust recovery in demand for products and services that surprised even the most astute forecasters. The disruption of global supply chains marked by a lack of ships and containers to transport goods added to almost insurmountable constraints in the short term in the production capacity of traditional exporting countries make us face an explosive situation in the commodity market and prices of basic commodities explode. It is important to know, for example, that the price of gasoline has reached almost USD800 per ton compared to the reference price of USD650 on which the current selling price is based. It is clear that this is a situation that cannot last. As for the financial situation of the STC, I assure you that it remains healthy for the time being while stressing that corrective measures will have to be taken in the near future so that this situation can continue.
LM: When will the procedures for importing milk powder to Mauritius be finalized?
In addition to its role as an importer of basic commodities for the Mauritian nation by centralizing volumes in order to benefit from the best supply conditions, the STC is also a strategic instrument in the hands of the government to ensure that the markets function normally when it comes to other basic products that it does not normally import. It is in this context that the Corporation has been called upon to intervene in the milk powder and edible oil markets recently. It is important to note that we are on a learning curve and we absolutely do not want to fall back into the traps of the past when we undertook the same exercise. On the milk aspect, we have made good progress, while for oil, we found ourselves in a peculiar situation where all Mauritian importers are sourcing from one country, which in this case is Egypt. It seems to us that this poses a new problem and we will make a report to the authorities concerned on this subject.
LM: STC is like an import machine in Mauritius. But it is also very indebted. How to ensure the profitability of the institution, or even its sustainability?
The STC is not in debt. However, it must be pointed out that we have been drawing heavily on our reserves in recent times so that Mauritian consumers continue to benefit from the very low prices for products subsidized by the government through the STC. I will give you as an example the household gas – when the government had fixed the price of this product at RS180 per 12 KG cylinder, it cost us about RS 325. Today, the same cylinder costs RS 536. The same scenario applies to every subsidized product – rice, flour, household gas. It will be extremely expensive to continue to keep the prices of some commodities at the same prices that were set in 2016! Obviously, the way forward is not determined by the STC but I think that Mauritians are responsible enough to understand that as the English say “there is no such thing as a free lunch” if the government would decide to reduce subsidies a little while keeping in mind the need to preserve the purchasing power of the population.
LM: Let’s move on to the governance of the institution. What mechanisms have been put in place to ensure the independence of the board of directors from decisions made in the public interest? Are you committed to fighting corruption in the country? What is the STC doing in this regard?
Some time after I took office, I was criticized for taking the position that the STC staff had nothing to be ashamed of with respect to the business of procuring commodities under an emergency regime. I am pleased to note that the two audit reports commissioned by the Ministry of Finance and the annual report of the Government Auditors Office came to the same conclusion, giving a clean sheet to the STC, which followed procedures and did not lose money in its transactions. It should be noted that all expenses incurred by the corporation during the “lock down” were reimbursed by the ministries concerned.
