WhatFinger


Saskatchewan's Crown Corporations, SaskTel, SaskPower, SaskEnergy, SGI

No Jewels in Crowns



After years of failed investments across Canada and around the world, Saskatchewan's Crowns are finally pulling out. The province's new "Saskatchewan First" policy for the crowns means SaskTel, SaskPower, SaskEnergy, and SGI will focus on opportunities in their home province. But even though the era of boondoggles abroad has ended, the problems posed by existing Crowns remain, and, in some ways, may even get worse.

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At the cost of $250,000, the Saskatchewan Party government commissioned a KPMG report that examined 26 Crown investments during the 1991 to 2007 NDP era. Though the architects of these schemes mightily predicted a 22 percent return, the result was a 15 percent loss. Leave it to the government to invest $465 million of capital and come back with $245 million. SaskTel is a tell-tale example all by itself. Its only success was its investment in Leicester Cable Ltd. in the U.K. (Why was a Saskatchewan Crown putting cable lines in the U.K. anyway?). Many other investments were complete failures. From 1994-96, SaskTel put $16 million into NST Network services to build fiber optic networks for U.S. cable companies. By 1997, the money was already gone, and the company shut down. In 2000-01, SaskTel bought a 29 percent share in Manitoba's Craig Wireless for $10 million. After two years, the investment was a total loss. Meanwhile, SaskTel also sunk money into RETX Inc., an Atlanta-based company designing software for the energy market. It was a match made in hell. In 2004, SaskTel sold its interest in RETX for less than $150,000 after pouring in nearly $25 million over the previous four years. From now on, Crowns will only operate out of province if it offers a clear benefit to in-province operations. So far, the government has committed to get rid of nine Crown acquisitions, of which DirectWest (publisher of phone books on the prairies) may be the best known. Even so, SGI will continue to operate in five provinces, for a "geographic spread of risk." Sask Energy will continue its Swan Valley operations to spread the cost of its system to Manitoba customers. And SaskTel will continue to offer home security through SecurTek. It's great that the era of Crown boondoggles in Mexico, Chile, Australia, and elsewhere will soon end. But these examples are the symptom rather than the problem. Simply put: government shouldn't be in the business of business. Growing crowns at home--the new focus--means even more lost opportunities for Saskatchewan's private sector. This was something the Saskatchewan Party complained loudly about in Opposition when SecurTek was being formed. A government business that competes with local entrepreneurs has capital, regulatory, and legislative trump cards that can turn this conflict of interest into outright dominance. Worse, local entrepreneurs are forced to fund their competition with their own tax dollars. Besides, maintenance is to government what innovation is to business. What would Potash Corp. and Cameco be if they were still in public hands? Certainly not the successes they are today. Where might SaskTel have been if it had been privatized? Manitoba Telephone Systems was a public utility until its privatization in 1996, and has since outpaced SaskTel in employment, assets, and profits. We need to get into the 21st Century. Where else in the world is there a government minister responsible for telephones, let alone such a terrible track record for investment? It's high time the provincial government focused on roads and schools and left business to our entrepreneurs. Hopefully the "First" in Saskatchewan First represents the initial step in that direction.


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