…says Govt silence has left many questions unanswered
People’s Progressive Party (PPP) General secretary (GS) and Leader of the Opposition Dr Bharrat Jagdeo, in a detailed press statement, has articulated his concerns with the way that the incumbent A Partnership for National Unity/ Alliance for Change (APNU/AFC) Administration is handling the sugar industry.
Moreover, Jagdeo said that their handling of the Guyana Sugar Corporation (GuySuCo) leaves many unanswered questions, especially as it relates to the company’s liabilities.
The Opposition Leader wrote extensively on the $30 billion loan, the power struggle that is currently taking place between GuySuCo and the Special Purpose Unit (SPU) of the National National Industrial & Commercial Investments Limited (NICIL), the unfunded pension liabilities, the stripping of GuySuCo’s assets and Government’s silence, among other highlighted concerns.
According to Jagdeo “It is extremely important to clear up the murkiness and opaqueness surrounding the issues raised.”
See his full statement below:
This Press Release follows on my June 7th Press Conference where I addressed certain issues relating to sugar and undertook to issue a Press Statement documenting some of my concerns:
- $30 billion bond borrowed by NICIL with Sovereign Guarantee
On May 31st, I made mention of $16 billion financing being borrowed for GuySuCo. Three days later, NICIL hurriedly issued a Press Release confirming that $30 billion private bond financing was signed with over $16 billion already disbursed to NICIL. The NICIL Press Release indicated that the remaining funds will be borrowed regionally to complete the $30 billion bond.
The nation needs to know that this money has been borrowed with a sovereign guarantee, making the Treasury responsible for ensuring its’ repayment over 5 years starting next year.
You may recall that the APNU-AFC controlled Parliament recently raised the debt ceiling to guarantee debt to the amount of G$50 billion. Apart from a mere reference to a 30 billion GuySuCo bond, not a single detail was provided.
To date, despite over G$16 billion disbursed, APNU has failed to provide the Parliament or the public, any details on how the NICIL $30B borrowing will be used? Why is NICIL borrowing the money and not the Government? Where will the money to repay the bonds come from?
In the past, funding for projects like the Berbice Bridge or the Marriott Hotel, were accompanied with considerable documentation and studies. Where are the documents and details for this huge US$150 million bond? Why is it a secret when a public guarantee is being issued? The Berbice Bridge and Marriott did not have sovereign guarantees.
Government has a duty to explain why it did not borrow the money itself if a sovereign guarantee was being issued. Government typically borrows at interest rates below 2% and repayment terms over 30-40 years. Why is the NICIL-GuySuCo-SPU borrowing at 4.75% and repaying this over 5years, with a full Government guarantee?
We do not know what assets secure the bonds. We are extremely concerned about the risk of the Treasury having to pay back the investors and have serious concerns on whether investors are simply relying on this guarantee when there are glaring transparency and accountability issues.
- No GuySuCo Board and infighting between GuySuCo and SPU
In recent weeks, we have read reports of GuySuCo management complaining to Minster Holder about the NICIL GuySuCo SPU. Despite this, the Government has remained silent. I have said publicly that the lack of a Board of Directors for GuySuCo since February is a huge problem. We now have the largest employer and state-owned entity operating without a Board of Directors.
This seems to be a recurring theme as another large state company, GPL, is also reported to be without a board since January.
It is critical that the role of the Board of Guysuco, last Chaired by Clive Thomas be clarified for the following matters, given that the Board, management, and various officials of Government, can betaken to task and held responsible:
- Decisions and approvals of the assets (the various estates) vested from Guysuco to NICIL with a vesting date of December 30, 2017 including the transfer of 100% of the Guysuco shares from Government to NICIL.
- All matters relating to the G$30 billion bond and the intended use of the monies
iii. The impact of the above on the settlement of the G$115 billion of liabilities left on the books of Guysuco.
First, the Dec 30th 2017 Vesting Order was likely approved by the Board of GuySuCo, followed by the Government as Shareholder (Cabinet), given that the Board of GuySuCo had not expired on Dec 30th, 2017. Chairman Clive Thomas would likely have played a key role as the head decision maker from the Board and arranging the shareholder approval for such a substantial removal of assets from Guysuco.
Minister Holder and Jordan would also have been involved. One assumes that the NICIL SPU and NICIL Board were also in the loop on the transfer. One assumes there are written agreements between NICIL and Guysuco in respect of the management of the assets vested from GuySuCo to NICIL given that NICIL does not have the staff to secure these assets.
For example, is NICIL now managing the electricity generation (both the Wartsila 10 MW and the bagasse)? But these facts are far from clear and extremely opaque. It is understood that the GuySuCo Board expired in 2018.
Secondly, this murkiness continues in 2018, when the bond is finalized. To what extent did the Board of GuySuCo and Cabinet, approve the details of the NICIL bond. At what point, does the Board of GuySuCo fail to be part of the decision-making process.
Thirdly, flowing from the asset transfer and issuance of the bond, what arrangements were made by the Board and Management of GuySuCo in respect of the G$115 billion of long and short- term liabilities left on the books of Guysuco?
Is there an updated set of financial statements after the vesting? Creditors who have not been paid, are likely to first sue the board of directors and management involved in the assets stripping (Vesting Order transfer), for transferring assets and not making provision for settlement of liabilities.
- Huge unfunded pension liability revealed in 2016 audited accounts
Since my press conference, we saw a resurgence of concerns about the GuySuCo pension scheme. We now see GuySuCo 2016 audited financial statements disclosing a huge unfunded pension liability of over G$30 billion. But no-one in Government is speaking publicly about this or engaging the Unions and the workers. The largest pension plan in the country, the largest employer, a major unfunded pension liability, and no one in Government seems willing to talk about it. Yet they are proceeding at a rapid pace to strip GuySuCo of its assets. Tens of thousands of people could be hurt by this—but APNU seems oblivious to telling the people affected what they plan to do.
GuySuCo audited accounts for 2016 was completed almost one year ago. However, it has not yet been tabled in Parliament. The PPP calls on the APNU-AFC Government to table the audited accounts and come clean to the Parliament on the many important issues.
- Vesting Order strips assets from GuySuCo and fails to address over $115 Billion of its’ liabilities.
At the end of last year, Minister Jordan signed a vesting order transferring to NICIL, the assets of four estates–Skeldon, Rosehall, Wales and Enmore, free and clear of all liabilities and taxes. The vesting order also transferred the shareholding of GuySuCo, 100% owned by Government, into NICIL. There was no press conference or explanation of the strategy.
Without telling the Unions or the workers how the pension liabilities and other employee liabilities will be addressed, or the significant other GuySuCo liabilities, this APNU Government is stripping GuySuCo of its major assets. Why vest assets into NICIL when you are also transferring the shares? It makes no sense.
The Dec 30th, 2017 vesting order signed by Minister Jordan, strips GuySuCo of a substantial portion of its assets. A perusal of the 2016 audited balance sheet of GuySuCo shows total short term and long-term liabilities exceeding G$115 billion. But no one has explained to the creditors who are owed by GuySuCo billions of dollars, how and when they will be paid. After the vesting, the remaining assets are significantly insufficient to discharge its liabilities.
Farmers, suppliers, employees, banks, are just some of the parties owed. The asset stripping of GuySuCo, which may be illegal, further obligates the State to stand behind the liabilities of the Corporation.
- Decisions on policy issues relating to sugar privatisation necessary before divestment GuySuCo has laid off over thousands of sugar workers and closed estates, while at the same time announcing a policy of privatisation sugar.
Yet on privatisation, this APNU Government has not publicly addressed the following;
- What is the privatisation framework and policy? Will it use the PPP privatisation policy or a new policy? What is the role of the existing Privatisation Board? What are the roles of the NICIL Board, the GuySuCo Board, the NICIL GuySuCo SPU, in respect of managing, restructuring and privatizing sugar.
- When will the employee issues be settled and negotiations concluded with the Unions. Just look at the pension issue as one of many issues to be resolved. What is the severance pay package? When will all the outstanding NIS, PAYE, and other employee benefits going to be paid?
iii. What will the legal framework for allocating international and local sugar markets?
Guyana enjoys preference prices and quotas with the EU, the US, Caribbean, and other countries. How will these markets be allocated? Managing competition between estates and between state estates and private estates require considerable preparation and careful decision-making? How will local sugar sales be allocated among different estates and distributors?
- How will private cane farmers be paid given the existing formula enshrined in legislation? The legislation has worked with only one national sugar corporation. Cane farmers don’t know how this will change with private ownership of the estates. In fact, the closure of estates, such as Skeldon is likely creating considerable dislocation in the private cane farmers industry.
- How will the land be treated? Will it be sold or leased? Per the audited accounts, GuySuCo has over 50,000 hectares of land under lease or ownership. Land leases (or land ownership) need to be carefully addressed. Issues relating to drainage and irrigation have not been discussed? What will the standard lease terms be?
- What will the tax regime for the sugar sector consist of? It must be decided for all private (and public) sugar estates and sub-contractors to ensure a level playing field. Legislation may also be required to give effect to this new regime. Given all the new taxes and fees imposed on the economy, any investor will want to have certainty on the tax regime and the risk of changes.
vii. When will the valuation for the estates be completed? It is public information that PWC (Jamaica) is doing a valuation. But what are they valuing? Estates that have been closed! Government should release the PWC Terms of Reference. And how can PWC value the estates, without knowing the answers to the many policy issues. Will the valuation cover the entire GuySuCo?
Unless one was selling at liquidation values, it will take time before the preparatory work is in place to properly privatise GuySuCo. Advertising for buyers of the various estates before the rules of game are defined, is a recipe for failure, unless this is yet another scheme to enrich the friends of APNU. Little wonder there is so much confusion. We already know that the firing of thousands of workers and the closure of estates will prejudice getting the best deal for the estates.
- Urgent need for APNU-AFC to publicly engage on sugar plans
It is clear this Government operates in stealth when it comes to GuySuCo. In fact, this is their standard operating procedure for many important matters.
The lack of consultations and public information is clearly now backfiring. GuySuCo and NICIL GuySuCo SPU infighting has now boiled over to the public. The process of privatisation is yet to be defined along with decisions on all major policy issues.
We predict that the lack of transparency and accountability will further undermine saving the sugar industry and the huge number of persons affected.
The PPP calls on APNU to publicly address all relevant issues on sugar and engage the Unions and employees on all matters impacting their welfare. Failure to do so, could result in much greater financial and economic risks for the country.
It is extremely important to clear up the murkiness and opaqueness surrounding the issues raised in this release.
It is likely that numerous legal actions may be filed by creditors and persons whose contracts were adversely impacted by the GuySuCo restructuring and asset stripping. Identification of all persons involved in the decisions will be critical as these persons may be exposed to wrongdoing for misconduct stemming from acting negligently and recklessly on matters involving tens of billions of dollars.