Rice emerges from debt to brave new world
By Nicosia Smith
Stabroek News
January 15, 2004
Government unmoved by World Bank call to privatise Guysuco
EDITORIAL: A pipedream
Feasibility study key to Berbice bridge investments
Stock Market update
GASCI summary of financials - session 28
US dollar straddles G$200
January 12 session sees stock market give up some of previous gains to close down 1.6%
No excuses on full disclosure
Migration threatens Guyana's future growth
'Snail mail' wakes up to internet challenge
NY Guyanese runs "true" US 99-cent store
Omai output to fall further this year
Investors interested in Globe Trust
No excuses on full disclosure
No excuses on full disclosure
Over 100 rice farmers protested outside the NBIC Water Street building in November 2001 demanding an immediate restructing of their loans.
The rice industry has had its best production in 2003 since 1999 and is beginning to emerge from a $5B mountain of debt but overseas markets remain tough and will only get tougher as globalisation takes hold.
With 18,500 rice farmers and 81 licensed mills employing directly and indirectly an estimated 150,000 workers, the industry is a pillar of the economy; if rice is healthy so is the country.
But the world market price continues to be a huge challenge for developing countries and Guyana, says Dharamkumar Seeraj, general secretary of the Guyana Rice Producers Association (RPA).
"It is not a true reflection of the cost to produce rice. We are efficient. Guyanese rice farmers are producing rice for less than it cost to produce rice in the US," Seeraj said.
Statistics from the Guyana Rice Development Board (GRDB) show that in the past five years rice production has remained steady with over 288,000 metric tones (MT) being produced each year. Last year 354,884 MT was produced and 200,345 MT was exported, raking in US$47M in revenues; US$2M more than 2002.
The gloomy days.
On the international market, rice is sold at an average of US$210 per tonne compared to US$410 in 1995 and in 1996.
As a result of these low prices and other factors, farmers in Guyana are getting $1200 to $1350 per bag for A,B and C grades of paddy and they receive $800 for other grades. Farmers were being paid $1,500 and more for paddy prior to the collapse in rice prices internationally.
Seeraj says once the price per bag of paddy falls below the $1,200 margin, rice farmers are hardly likely to be profitable since it costs between $1,100-$1,300 to produce a bag of paddy.
He feels the international price for rice will only reflect true economic indicators when countries stop subsiding their rice farmers.
In some countries, like the USA, rice farmers are being subsidized at about 125 per cent of their cost of production and Seeraj says this makes it difficult for Guyanese rice farmers to compete with them. However, he feels that the rice industry has great potential as both a foreign exchange earner and an employer.
Radha Krishna Sharma, Chief Executive Officer of the Guyana Bank for Trade & Industry (GBTI) which bears 29-30 per cent of the total rice industry's $5 billion debt, says he does not see the sector failing.
He argues that there may be a 'shake out' in the industry, where those farmers and millers who are not business conscious (efficient) and are not accountable may go under.
But for the industry to be sustainable in the future, he says, realistic prices will have to be established for paddy and the players in the industry will have to be more conscious of their borrowing habits. This, he said, will allow for the industry to return to a realistic level, with price stability for paddy and a realistic number of millers to ensure these paddy prices.
The number of millers in the industry increased in the early 1990s as a result of the lucrative prices for rice on the world market and as much as $1800 were being paid for a bag of paddy.
This led to a $12 billion unbearable debt burden on the rice industry, which has had to be restructured and written off in part.
Sharma says the high level of borrowing in the past showed the confidence commercial banks had in the industry but notes that as a result of the sharp decline in profits, banks will be more demanding and borrowers will have to be more accountable.
Sorting out the debt
To assist the farmers and millers who suffered as a result of the drop in prices, a "White Paper on the Rice Industry" was formulated in 2001, which took into consideration all the stakeholders. After months of negotiations, the banks and the government reached agreement to restructure the loan portfolio to allow for the debt to be reduced and the remaining debt restructured at 10% interest rate per annum over ten years, compared with the 18% to 22% interest charged previously.
Before that crisis, Seeraj recalls that the RPA was calling on the banks to restructure that debt burden but this plea fell on deaf ears.
He says the debt servicing on the loans were negotiated based on the high prices being received for rice on the international market so that when the prices were slashed, this created severe problems for debt servicing.
Initially 1400 farmers with debts below $10 million were identified to benefit from the loan restructuring. However, it was the 100 farmers/ millers who fell outside of this bracket who held the chunk of the $12 billion debt. Agreement has since been reached on fiscal relief for the outstanding stock of debt owed by the larger players but this is not an across-the-board treatment and has to be negotiated individually with creditors.
So far, Sharma says, loans restructured by GBTI are performing well. GBTI has 134 loans under $10M on its books, valued at over $200 million as of 2002. One hundred of these were selected for the restructuring process, which started in February 2002.
The remainder, Sharma says, were not restructured because they did not merit restructuring as some guarantors were unreliable, some owners had migrated, some suffered from irresponsible managementwhile others did not want their loans to be restructured.
For loans over $10M, GBTI holds 15 of these totalling over $1B, of which eight were restructured; two have legal action pending; one owner migrated; three are being processed and the other did not have the ability to handle a restructured debt. These loans were cleared for restructuring in March 2003.
Sharma says the 108 debts that were restructured would allowed debtors to manage their repayments and a special monitoring unit will be closely assessing the loans.
"I am confident [that this year] the restructuring process will be completed," Sharma says, in relation to the rest of GBTI's rice loans yet to be restructured.
Once bitten, millers
are wary of loans
Because of the once heavy emphasis placed on retooling the industry with investments in tractors, combines and rice packaging equipment, several rice farmers now find it difficult to service their loans. Kayman Sankar & Company Limited is one such farmer/miller.
Beni Sankar, chief executive officer of the company says he spent approximately US$1.5M investing in equipment for packaging and parboiling rice but it became very difficult to pay instalments to the bank and as a result he is in receivership. Sankar says his goal now is to enter into a joint venture and to sell off shares from his business to increase his working capital.
For the autumn crop, Sankar only bought 200,000 bags of paddy and produced 5,000 tonnes of rice, which he says is a third of what he usually produces.
Other businesses such as Fairfield Rice Inc., which entered into a joint venture with export company Nidera Inc has managed to weather the storm of lower prices because that company did not have to invest heavily into the sector.
Lax regulation
in Caricom
Sankar contends that the price of rice on the European market is "dirt cheap...I do not think Europe is our salvation."
He says it would be better if Guyana's rice exporters concentrated on the Carib-bean market and start adding value to their products.
In Jamaica, Sankar says, white rice is being sold at US$240 per tonne, parboiled rice at US$375 and packaged rice at US$400.
But capitalising on this lucrative value-added market, Seeraj of the RPA says, may be difficult as 70% of Guyana's rice is exported in bulk, leaving little for value- added treatment.
Seeraj also adds that industries will have to be developed to conform with certain international standards for sanitation and the Bio-Terrorism Act while even in Caricom, hurdles exist.
Sankar also acknowledges that although the Caribbean market presents a viable opportunity, the amount of subsidised and extra-regional rice coming in is affecting the quantity of Guyanese rice exports.
He says countries outside of the region are subject to a 25 per cent Common External Tariff (CET) and many Caricom countries are not implementing this tariff on extra-regional imports.
According to figures given in 2001, it was estimated that Guyana lost US$10.5M and US$11.5M per annum in Trinidad and Jamaica, respectively because the CET was not closely monitored. Figures from 2001 also suggest the wider Caribbean market is capable of consuming in excess of 525,000 metric tonnes annually.
But Harribhajan Persaud, President of the Guyana Rice Millers and Exporters Development Association (GREMDA) says even with the 25 per cent tariff, it would still be difficult for Guyanese rice producers to compete in Caricom since much of the rice coming into the market is subsidised.
"We are not getting any subsidies... and you want us to compete with those countries."
In fact he does not see a future for rice exports in the region, if Guyana has to compete against subsidised rice from Europe and the US.
In order to solve this emerging trend of subsidisation, Seeraj says trade agreements need to be more people-centred.
"The focus has to be on people and the development of people. Until you have people at the centre, it isn't going to be smooth sailing," Seeraj says.
Chief Executive Officer of Fairfield Rice Inc., Dr. Peter deGroot believes that although Europe has a large market, Guyana's focus must be changed to the Caribbean market.
deGroot says his company bought $218M worth of paddy or 367,876 bags and this represents a 232 per cent increase from the past four years so he is more optimistic.
Where else to sell?
"The market situation has improved a little over two or three years ago. Even before the crop started this year (autumn crop), we ... received orders for 55,000 MT of rice. For the past five years this was not an occurrence," Seeraj says.
He says new buyers such as Archer Daniels Midland Group, a huge US grains conglomerate with a branch in Jamaica and the Interbahai Investment South America (based here), Brazil, Haiti, along with traditional buyers in the Caribbean such as Jamaica, Trinidad, Grenada, Dominica and St Lucia offers promise. Guyana can export 10,000 MT of rice to Brazil duty-free with 2000 MT shipped in 2003.
Guyana is set to benefit from approximately 11.7M euros from a 24M-euro programme that the European Union has approved to help improve the competitiveness of the Caribbean's rice industry.
A part of this amount will be used for research into new markets and products as Guyana prepares herself for greater competition in the global market place.
Government unmoved by World Bank call to privatise Guysuco
The World Bank continues to hold to its ideology that there is little reason for the government to own, operate and manage the sugar industry. It has been ten years since the Bank first raised this issue but the government remains unmoved.
"Experience world wide demonstrates unambiguously that private ownership of commercial business has an important and positive influence on productivity, profitability and investment choice, especially in a quickly-evolving and highly-competitive export-oriented sector," the Bank says in its recent finalised report reviewing Guyana's development policy.
The bank fears that as access to preferential market fades, there is a risk that the government's efforts to rescue the sector could hinder the "redeployment" of resources into activities in which Guyana may very well be better off. The Bank also notes that while in the 1990s sugar production and productivity soared, rural poverty stagnated.
"In the long run, if sugarcane development is to be the engine of rural development and poverty reduction, cane producers will need to share in both production risks and returns," the Bank says, noting that Thailand and Malaysia have transformed state owned plantations into smallholder co-operatives and the impact on poverty has been "nothing short of remarkable".
But the Bank's position is just part of the ideology that pervades most developed countries - that is commercial entities are best left in the hands of the private sector and are disasters in the public sector. The Bank's ideology is not part of its structural benchmark target for Guyana. The said ideological position dominates the International Monetary Fund as well. But this is not to say that there are not many efficiently run state-owned enterprises around the world and Guysuco, under the management of Booker Tate, is seen as being an efficiently run public enterprise.
The World Bank is responsible for the structural targets in the IMF-monitored programme for Guyana and the IMF is supportive of the positions adopted by the Bank.
The only time when the Bank and Fund will insist on privatisation is when it is seen that an enterprise is a drain on the treasury. In the case of Guysuco, a modernisation plan is being pursued to reduce costs and make the industry viable, hence there are no real pressures to privatize but the bank maintain its ideology.
EDITORIAL
A pipedream
A bridge across the Berbice River has been on the electoral card for this administration for the last two general elections.
More than eight years after the notion of a bridge across the Berbice River was first mooted, relegated to the backburner, brought to the fore and then sent again to the backburner, President Bharrat Jagdeo has asserted to Berbicians that the river will be bridged, come what may, even if the government has to dispose of assets and shares to do so.
"I am going to do a lot to get the project going and will start in the New Year. We will get it going in the New Year even if we have to dispose of some government assets and shareholding in several companies to fund the project. It is going to happen," the President said to television viewers during the Christmas Holidays.
What is the reality? A feasibility study, funded by the Inter-American Development Bank (IDB) is currently underway to determine whether it makes economic sense to construct a bridge across the Berbice River or whether it will make better sense to make efficient use of the ferry crossing. A traffic study in 2001 did not point to a sufficient traffic load to make a bridge feasible. Additionally, the government courted and entertained more than one potential investor over the years but the project is yet to move beyond the conceptualisation stage.
All of the government's major assets have been disposed of. What is left is Guysuco, which it has stated categorically it will not privatise; the power company (which it says it will reprivatise at some future date); the Guyana Water Inc, the Guyana Oil Company, the state media houses (being restructured), the Guyana National Printers Limited (GNPL) - in the process of being disposed of - and 20% shares in the phone company (which GT&T wants as compensation for giving up its monopoly on land line services).
Where will the resources come from to start a bridge across the Berbice River this year? Is the government contemplating a bond issue to raise financing on the local market to finance this project? And if it is, will the interest rate allow for private investments and will the traffic flow be sufficient to service such a debt? Any financial guarantees by the government for such a massive project will also have implications for the International Monetary Fund (IMF)/World Bank programme in Guyana.
The Minister of Public Works, Anthony Xavier, has asked DYWIDAG International, the current bridge contractor, to put in a proposal to bridge the Berbice river and this is being worked on. Additionally, another person was to come in to make a presentation on constructing a floating bridge across the river.
Until the government comes up with a clear cut position, detailing how it proposes to fund and construct the project, and unless it initiates steps to take the process beyond rhetoric, any statement from any government official on a bridge across the Berbice River will be regarded as just that - a statement of intent.
A permanent bridge (high span) will take about three years to construct so it means if construction is to start sometime this year, the government will immediately have to work on financing for the structure so that by the time the 2006 elections comes, a structure would be in the making and nearing completion.
Or will the bridge be another election promise in 2006?
Feasibility study key to Berbice bridge investments
- investors
By Nicosia Smith
Several institutional inves-tors, including the National Insurance Scheme (NIS) and the Hand-in-Hand Insurance Company say they would consider investing in a bridge across the Berbice River, but the economic model must be sound.
"We have to see what returns we will get," says Patrick Martinborough, NIS's General Manager. NIS holds almost $15B of the estimated $65 billion liquidity in the financial system and is looking for safe investment outlets with good returns.
Keith Evelyn, General Manager of Hand-in-Hand, says once the project is viable, his company will be willing to invest funds behind it. However, he says the government may want to consider some form of incentive to make the project attractive. It has already been mooted that the government can float a bond to finance the project and offer tax-free interest rates tied to inflation.
But whatever financial model the government comes up with, this cannot run counter to the International Monetary Fund and World Bank programme conditions. Once the project is not a call on the treasury now or in future, it is unlikely to hit any snags with the IMF and the Bank.
President Bharrat Jagdeo in a December television interview asserted to Berbice viewers that the government will bridge the Berbice River come what may, even if it has to dispose of some of its assets to raise the money to do so.
"We will get it going in the New Year even if we have to dispose of some government assets and shareholding in several companies to fund the project. It is going to happen... If we can get a floating structure below US$20 million we may be able to go with that. If the fixed structure is around US$40M then it will make sense to go with the fixed structure because of its durability," he explained to viewers.
However, the feasibility study to determine the economic viability of such a bridge is to be concluded this month and it is unlikely that if the findings are positive, a model will be decided upon in the first quarter of this year.
A bridge across the Berbice River has been a promise of this government for several years, especially during the election campaigns. The government had in 2001 invited tenders for a build, own and transfer operation and had engaged Ballast Nedam, a Dutch firm, in negotiations over 22 months before the company walked away from the negotiations because of its own difficulties. The government then engaged the Berbice River Bridge Consortium, which included Group 5 and Mongmotse Capital of South Africa in the first quarter of 2003. However, it halted discussions abruptly as it could not make a decision on how to move forward with the project especially as it related to the financing.
The government's reluctance to move forward was linked to its perceived ability to generate and raise funds locally for the project given the interest by local investors to take part in the project. If the financing can be raised via a government bond for example, then this removes from the equation profits, which would have had to be built into the toll structure for the bridge. A traffic study done in 2001 did not paint a very promising picture for the economic viability of a bridge across the river.
The Inter-American Development Bank (IDB) under the Main Road Rehabilitation Programme is financing the feasibility study for the bridge and if the findings are positive, the bank would release US$11M available under the current bridges project to aid in the construction of the access roads for the bridge. The President is hoping to be able to tap into this US$11M for the project.
Speaking with Stabroek Business, Martinborough says investing in a bridge is not a bad idea for NIS but the scheme has to thoroughly consider the issue. And David Yankana, an NIS director, say the Scheme cannot invest in any project that does not guarantee a certain level of return and the investment has to be determined by the actuary.
He cautions that the NIS board should not be coerced into using NIS funds for a project just because it has a national 'flavour.'
Geeta Singh, CEO of Clico Life and General Insurance Company (SA) Ltd says the company would have to fully assess any proposal by the government before it makes a decision on investing.
Evelyn, on the other hand, says he understands that the government will seek a select group of investors and then negotiate a return with them for their investments.
An official from Citizens Bank says the standard criteria for investments will be the returns on the investments.
"Financing will always be forthcoming if the project is viable," says Dr. Graham Scott, managing director of Guyana Americas Merchant Bank Inc, a merchant bank.
Dr. Scott says having the results of the feasibility study will be key to raising financing for the project. He says the study will show the length of time it would take to construct the bridge as well as the projected profits or losses.
He says the government will first have to decide whether it will be a private sector project or a public sector one as this is not clear at the moment.
Scott sees the project taking a few months to be conceptualized.
Other institutional inves-tors were not available to say whether they would be willing to invest in the project.
On the construction side, Public Works Minister Anthony Xavier had asked German construction firm, DYWIDAG International, to consider submitting a proposal as well as designs for a bridge across the Berbice River. DYWIDAG Inter-national is the contractor for the US$22M IDB funded bridges and culverts project between Mahaica and Rosignol. This proposal is expected anytime soon. (Additional reporting by Johann Earle)
Stock Market update
13.6% drop in trading
For the second session in the New Year 39,759 shares were traded compared to 46,000 in the previous week representing a 13.6% drop. Shares were traded in only three issuers, namely Banks DIH, DDL and GBTI compared to the previous week when shares were traded in five companies.
Only 5,000 shares from Banks DIH were traded at a Mean Weighted Average Price (MWAP) of G$6.0 - a shadow of the previous week when 29,000 shares changed hands at a MWAP of G$6.2.
Compared to the previous week, DDL's trade volume increased from 10,500 to 27,459 and exchanged hands at a Mean Weighted Average Price (MWAP) of G$7.3. DDL dipped to G$7.3 before closing the day unchanged at G$7.5.
The number of shares traded for GBTI has actually increased more than twofold with 7,300 shares traded on the market compared to 3,000 in the previous session with the mean price remaining steady at G$28.
GASCI summary of financials - session 28
Notes
EPS: earnings per share for the, 12-month period to the date the latest financials have been prepared (2003 year end for NBI, 2002 for CCI and the 2003 interim results for the remainder). As such, the majority of these EPS calculations are based on un-audited figures.
P/E Ratio: Price Earnings Ratio = Last trade price / EPS
Dividend yield = dividend / last trade. The dividend proposed or declared in respect of the 12 months to the 2003 interim can be distorted; for example if an interim dividend was declared or proposed in respect of the first half of the 2002 financial year, but not in the first half of the 2003 financial year. Hence, the dividend yield has been calculated with both the 2002 dividend and the dividends declared or proposed in the 12 months to the latest financials to be published in 2003 - the 2003 final for NBIC, 2002 for CCI and 2003 interim for the remainder.
The market information provided here is provided for informational and educational purposes only and is provided on a time-delayed basis. GASCI does not guarantee the accuracy or completeness of any information contained on this page.
US dollar straddles G$200
At least four local banks are selling the United States dollar at $200 and above.
The greenback is being sold at the Bank of Nova Scotia at $201(buying at $189); the Bank of Baroda at $203.25(buying at $193); Demerara Bank at $200(buying at $189.5) and the National Bank of Industry and Commerce at $202(buying at 195).
Swiss House Cambio, one of the leading cambios is also selling at $201 and buying at $199.
The Guyana Bank for Trade and Industry is selling at $195 (buying at $188) and Citizen Bank is selling at $199 and buying at $190. One businesswoman told Stabroek Business that the highest amount of US dollars that the banks were willing to sell her after going to all of them(except Baroda), was US$5,000. Bank officials could not tell her how soon she would be able to get the additional US$10,000 she needs.
Stabroek Business understands that some banks are taking the names of customers and the amount of US dollars they require, if they do not have the exact sums available right then.
Bank officials say the US dollar rate is simply a matter of supply and demand.
January 12 session sees stock market give up some of previous gains to close down 1.6%
January's second trading session saw the stock market as represented by the level of the vBI (pronounced vee-Bee) fall 14.6 index points or 1.57% to close at 910.9. Despite this fall the market is still up 1.29% for the year. The fall in the market was led by DDL and Banks which both closed down some 3% on the previous session. Other stocks remained unchanged:
* Market Average Weighted Price. The average price of trades throughout the day, weighted by the consideration in respect of each trade. Where no trade occurred in a session the MWAP from the last session where there was a trade has been taken. This differs from GASCI closing price which is the last trade.
The market information provided here is provided for informational and educational purposes only and is provided on a time-delayed basis. Caribbean Actuarial & Financial Services does not guarantee the accuracy or completeness of any information contained on this page. Although the information has been obtained by Caribbean Actuarial & Financial Services from sources believed to be reliable, it is provided on an "as is" basis without warranties of any kind.
No excuses on full disclosure
-companies reminded of Securities Act requirements
The Guyana Securities Council (GSC) has forwarded to all 13-reporting issuers on the stock exchange the disclosure requirements contained in the regulations accompanying the Securities Industries Act in order to prevent disclosure lapses in the preparation of their financial statements.
Companies have been using the relative newness of the regulations as an excuse for non-compliance with certain sections of the full disclosure guidelines, and more recently, the deficiencies in the financial statements of one of Guyana's largest public companies, Demerara Distillers Limited (DDL) were highlighted in the Sunday Stabroek's Business Page by accountant, Christopher Ram.
The GSC in an extract of the regulations, reminds the reporting issuers that they have to promptly notify the council, their members and other holders of their securities, of any major new development in the company's sphere of activities which is not public knowledge.
The council restates that issuers have 21 days before an annual general meeting to send to the stock exchange, the council, every member and holder of its security, a copy of its annual accounts, audit report and directors' report for the previous year.
It reaffirms that included in the directors' report should be:
*a description of the principal activities of the issuer and its subsidiaries as well as a statement giving the turnover and operating profit of each of these (Reg. 6a)
*a geographical analysis of the consolidated turnover and the contribution to trading results of trading operations carried on by the issuer and its subsidiaries outside of Guyana (Reg.6b)
*a statement showing the name of each subsidiary, its principal country of operation, its country of incorporation and its main business (Reg 6c-i) and
*the particulars of the issued share capital and debt securities of every subsidiary provided, if in the opinion of the directors of the issuer, the number of subsidiaries would result in particulars of excess length being given, then compliance will not be required except in the case of subsidiaries carrying on a business, the results of which, in the opinion of the directors, materially affect the amount of the profit or loss of the issuer or the amount of the assets of the issuer (Reg 6 c ii).
The council points out that Regulation 6 (d) and (e) require a statement at the end of each financial year detailing the interest of each director and chief executive of the issuer in the equity or debt securities of the issuer, or any subsidiary, and of the associates of such director and chief executive as well as the details of any right to subscribe for equity or debt securities of the issuer granted to any director or chief executive in so far as is known or may be ascertained by reasonable enquiry, and of the exercise of any such right.
In the case of the above, the statement has to distinguish between beneficial and non- beneficial interest and specify the companies in which the securities are held and also stating the class to which those securities belong and the number of securities held.
Among the other requirements of Regulation Six is for issuers to include a statement of explanation where the operating results differ from any published forecast as well as one to state the reasons for any departure from applicable standard accounting practices in Guyana.
This regulation also requires a statement at the end of the financial year showing bank loans, overdrafts and other borrowings of the issuer and subsidiaries and the aggregate amounts repayable over varying periods; of the amount of interest capitalized by the issuer and its subsidiaries during the year; of the unexpired period of any service contract not determinable by the employer within one year without payment of compensation (other than statutory compensation); of any director proposed for election at the forthcoming annual general meeting or if there are no service contracts, a statement of that fact among other issues.
It further requires the summary particulars of any contract of significance subsisting during or at the end of a financial year in which a director of the issuer is or was materially interested, either directly or indirectly, or if there has been no such contract, a statement to that effect and the summary particulars of any contract of significance between the issuer or one of its subsidiary companies by a controlling shareholder or any of its subsidiaries. Regulation six also requires a summary, in the form of a comparative table, of the financial results, and of the assets and liabilities of the issuer and its subsidiaries for the last two financial years.
The GSC reminds of the need for the securities exchange, the council and every member and holder of securities of an issuer to be notified without delay on any acquisition and disposal of assets by the issuer once it is in excess of 15% of the issuer's assets or consolidated assets, and where the assets are disposed of to any of the issuer's or its subsidiaries' director or chief executive or where the assets being disposed of or acquired are an interest in any company of which a substantial shareholder is a director or chief executive of the issuer or any subsidiary, or is any associate of such a director or chief executive.
Regulation Nine mandates that in transactions with related companies where the issuer offers financial assistance or provides security for the discharge of any obligation, the exchange, the council, members and stockholders should be notified.
The issuer is also required to notify all the parties of any substantial shareholdings in the company and to notify the exchange at least 10 days in advance of any meeting of the board of directors at which the annual or half year results are to be announced/ approved and to notify the exchange and council of the approval of dividends, announcement of profits, a change in capital, including redemption of convertible securities or a decision to change the general character or nature of the business of the issuer or its subsidiaries.
The GSC in the circular also reminds that while compliance with the Companies Act of 1991 is not a direct matter for the council, certain provisions have to be kept including the filing of annual returns within 42 days of the annual general meeting; the maintenance of a shareholder register; the preparation and maintenance of a register of debenture holders, as well as a register of conversion privileges, options and rights to acquire shares if such options exists.
The 13 reporting issuers are DDL, Banks DIH, Demerara Tobacco Company Limited, the National Bank of Industry and Commerce Limited, the Guyana Bank for Trade and Industry, Citizens Bank Guyana, Property Holdings Inc and Guyana Stockfeeds Inc, Sterling Products Inc, Demerara Bank Limited, Caribbean Containers (formerly SAPIL), JP Santos, Globe Trust and Investment Company Limited. The Guyana National Cooperative Bank was de-registered upon privatisation.
Migration threatens Guyana's future growth
- World Bank
While rice production over the last eight years has remained pretty steady at above 300,000 MT ,revenues on exports have plummeted from a high of US$93.7M in 1996 to $45M in 2002. This was in part because of the restrictions on preferential exports to Eur
Guyana suffers from one of the highest net migration rates in the world today - with between 20,000 and 50,000 Guyanese leaving annually - and unless this is mitigated, growth prospects for the future look "dim", says the World Bank.
It is estimated that if the current migration trend continues, by 2010, one in every ten Guyanese will be leaving the country. It is further estimated that 77% of Guyanese with a university education migrated to the United States in the mid 1990s and if this trend goes unchecked, the effect on the economy will be devastating.
The World Bank's report reviewing Guyana's development policy notes that recent research (Haque and Kim, 1995) suggests that the exodus of highly skilled and educated workers from a country reduces income levels and long-run growth. "Productivity is reduced in existing businesses and the creation of new businesses may be hindered, as there are fewer entrepreneurs and fewer knowledgeable employees available to staff them," the Bank says.
It points out that currently the government has trouble retaining skilled civil servants, which results in a further deterioration in public services.
"If these migration effects are not mitigated by improving the human development of the existing population, Guyana's growth prospects for the future look dim," the World Bank says. The bank adds that stemming the tide of human capital will only come from improvements in general economic and political conditions in Guyana.
Growth in the economy in 2003 is estimated at below one per cent and has been averaging below one per cent for the last five years, an inadequate level to allow for the living conditions of the population to improve.
Because of the deterioration of economic and social conditions in Guyana over the past decades, Guyanese have been leaving to seek improved opportunities abroad.
The Bank says the estimate is that in one decade alone, migration increased by nearly 150%, with 50,000 persons leaving Guyana in the year 2000 alone.
Many of the persons leaving are trained medical personnel and teachers. The Bank says while remittances can mitigate the effects of migration, they cannot compensate for the skills lost.
"Collectively, the negative effect of this `brain drain' on the economy likely outweighs any benefits. The importance of human capital and knowledge as key factors of production has been stressed in the economic literature," the Bank says. It is estimated that remittances reached over US$90 million in 2001, more than all foreign direct investment and almost as much as official development assistance to Guyana. But the recent household survey, the Bank says, suggests that expatriate remittances are largely for "altruistic rather than investment or precautionary savings purposes."
But because much is not known about emigration, which plays a crucial role in the economy, the Bank suggests that the government commission an in-depth study to learn more about the profile of emigrants and the impact of emigration on the economy so that mechanisms can be designed to improve the net impact of emigration on the economy.
The Bank report notes that retaining qualified workers is a "chronic" problem in all sectors in Guyana and point to the high rate of vacancies in the public service before their abolition as a direct result of low public sector pay and emigration. It was estimated that 40% of the Ministry of Health and 50% of primary education vacancies were as a result of 'brain drain' and low wages. The Bank notes that as a result, today, almost 43% of general secondary school teachers are classified as untrained.
"Unfilled vacancies have clearly compromised the ability of line ministries to operate effectively. The shortage of qualified medical personnel and teachers is felt most acutely in the rural interior regions where poverty is highest. More than 70% of the specialist medical personnel are expatriates, many from Cuba, India and China through technical cooperation programmes," the Bank notes.
That report points to a two initiatives underway to address investment in human resource development at the government level; the Basic Education Access and Management Support project, which is providing in-service training for teachers and will develop teachers' accommodation in remote areas and a US$5 million project to train teachers in the hinterland as well as provide a hardship allowance. The aim of the latter is to improve the retention rate of teachers by 20% by 2015. The national health plan, the report says, also speaks of revising reward and promotion systems to increase and retain skilled health staff.
The Bank says downsizing the government and reducing the public sector wage bill along with a well-designed streamlining of staff positions across the government may allow for significant increases in salaries for the remaining personnel to address the difficulties of noncompetitive wages.
Given the critical nature of the problem, the Bank says the country has to consider innovative approaches to retain staff including the recruitment and training of medical and education personnel from within local communities, particularly in remote regions; the creative use of assignment rotations; hardship stipends; and deferred education and investment benefits among others.
The report notes that migration is not a phenomenon to Guyana alone and regional consultations can be facilitated to deal with the issue as well.
'Snail mail' wakes up to internet challenge
The tradition of writing a letter using ink and paper and sending it to its recipient via envelope and stamps is now called "snail mail". The telephone fax, the internet, email and text messages have revolutionised communication.
To combat this challenge to a centuries-old service, the Guyana Post Office Corporation (GPOC) is now advertising and has increased its stamp rates to ensure its viability.
Howard Lorrimer, public relations officer of GPOC, says, "mail flow has dropped tremendously" by around 25 to 30 per cent and he attributes this in part to private courier services.
Lorrimer says GPOC used income from its other ventures to offset the loss of revenue by the mailing sector and the government was not required to inject funds into the corporation. There has been an increase in other services offered such as money transfers and money orders, an internet café (for internet use and for overseas calls) which is located at the Corporation's Lamaha Street building. The GPOC also garners revenue from renting out the conference room at the Lamaha Street building and from leasing space in and around GPOC's headquarters on Robb Street.
But what the public postal system is now seeking to do to stay alive, private cariers already have in place. "We have had an increase [of customers] every year for the past 15 years ranging from eight to 15 per cent," says Huburn Tinnie, customer services/marketing manager of the carrier service DHL. "We were aware of the challenges from [the] fax and [the] internet before it came," Tinnie says, emphasizing also that plans were already in place to allow DHL to remain competitive.
"The most important thing is to have a network," Tinnie says adding that their networks in Asia, North and South America work together to create an international corporate link.
He added that GPOC does not have this corporate network for its international mail because it was not created to do this. "It is going to be difficult for GPOC [to have an international network because] it is built to service Guyana and not the world."
Courier services are different because they have the capacity to reach the wider world. Tinnie added, "GPOC [will] survive by providing its service as best as it can [at affordable prices]."
And it is clear how most people are now communicating.
A supervisor from a popular computer school in Georgetown says, "everybody wants to know about [computers]. It's a skill that most people want to have." The supervisor said there was an increase in enrollment, but she could not say how much the increase was.
According to a leading local internet service provider (ISP), in 2003 its clientele increased by 25 per cent and it expects this trend to continue. Businesses in Guyana have embraced the technology given that it is reliable and cheap.
While the ISP manager does not think the post office will become obsolete, he believes it must use the latest technology to enhance its service.
But using technologies such as sorting and stamping machines, which cut labour costs, are not so simple.
Lorrimer says the corporation will not be able to pay for these machines if its core mail flow does not increase. He adds that improved technology will also mean a decrease in the staff, and with the state of the job market, the corporation is reluctant to tread this path.
Rate Increases
The mailing rates at GPOC were increased last year and stamps to North America are now $80 from $30, stamps to Europe are $100 from $60 and local stamps are now $20 from $6.
"We have been running in the red all the time," says Post Master General, Noel Phillips. He hopes that with these increases GPOC will be able to break even after years of being heavily subsidised.
Officials at GPOC agree that the increases may pose a strain on some residents, especially pensioners, but say they were unavoidable.
These rate increases are also expected to assist GPOC in its ongoing repairs to the 60 post offices around the country.
Ted Johnson, properties manager at GPOC, says last year the Charlestown and Providence post offices were completed at a total cost of $3.4 million. A number of post offices are still to be repaired and these will be done based on the amount of persons using the post office and the total revenue being earned. Johnson says post offices in Essequibo, Berbice, Ituni and at Mahdia are in urgent need of repair. These renovations may not increase the sale of postal stamps but will improve the environment and comfort of the branches.
NY Guyanese runs "true" US 99-cent store
(New York Times) - Another customer, perusing the odd items of yet another 99-cent store in this city, selects a synthetic black belt from a rack and wonders aloud whether it is long enough to complete the loop around his formidable girth.Yes! And with room to spare.
"How much is this belt?" he asks, his smile suggesting that he already knows. "Ninety-nine," answers the proprietor, Rocko. Yes! The pleased belt sampler calls two aisles over to his wife, who is admiring some 99-cent socks. "Baby," he says with triumph. "I got my belt."
His reaction, in turn, pleases Rocko, who believes in the economic promise of his business, the American 99 store, in the Allerton section of the Bronx. Leave it to others to scoff at the exotic provenance and eclectic selection of his merchandise. He is meeting a community need, he says, and he is doing it straight up.
"This store here is one of the true 99-cent stores," he explains. "When you come here, you know that everything is 99 cents or less. It is what it is. A lot of the others, they sell 99-cent items, but they also sell merchandise that's more than 99 cents. Their signs say 'and up.'"
The stodgy five-and-dime store of the past has been replaced by the wacky 99-cent store of the present. The essential attraction of discounted stuff is the same, but today's 99-cent stores seduce customers with the added allure of cheap mystery. Where does this stuff come from? What new item that I never knew I needed will appear on the shelves this week? And how do the owners squeeze out enough pennies to make a profit?
Rocko, a stocky man tucked into a University of Kentucky sweatshirt, takes a break from unpacking boxes to provide a 99-cent primer. His real name is Kasho Ramdin, he is 33, he moved here from Guyana in 1990 and he has a wife and two young sons whom he rarely sees. That is because he works seven days a week.
He says that he used to work in electronics sales, until his older brother explained the potential in discount stores. Now their family operates three stores in the Bronx, including this one on Burke Avenue, a few steps away from an elevated subway line.
Rocko emphasises that he is not one of those 99-cent magnates who saves pennies by exploiting workers. He is a hands-on boss, he says, one who works every day but New Year's Eve; who believes that "if you put in now, you get back later."
Most of the merchandise comes from distributors who sell the excess of stock intended for other countries; those boxes of Close-Up toothpaste, say, which "verskaf berkerming teen tandbederf" (provides protection against tooth cavities). Some items, like those six-inch ceramic ducks in sailor outfits, come from cheap-labour operations in China. And some things come from wholesale auctions; those cans of Carpet Wizard, for example.
On average, he pays about 65 cents for what he sells for 99 cents. Some products, like laundry detergent, cost him more, but those essential items draw customers to the store. Once they're inside, he reasons, who knows what might catch their eye? Perhaps those 99-cent men's blazers that somehow made their way to the Bronx from England.
"Hi, Sweetie Pie," says a woman, a regular customer. "You got more bath mats?"
Rocko says that he works hard to create an inviting environment for his multi-ethnic clientele, going so far as to rotate the style of music that emanates from the store's sound system. "In the mornings we play religious music for one hour," he says. "Then Spanish. Then reggae. And in the evening, calypso."
"I can't play my own stuff," he adds. "Heavy metal and hard rock."
This attention to customer service paid off during last summer's protracted blackout, he says, which prompted many stores along Burke Avenue to yank down their steel gates. His store remained open, selling flashlights and an inordinate amount of scented candles.
"I had nothing stolen," he says. "Matter of fact, my customers were helping me out."
A woman asks about brooms. A man cannot find the flashlights. Some delivery people are unloading socks and undergarments from a van. Rocko has to get back to work.
"A lot of my customers say, 'Why don't you go up in price?'" he says. "But I maintain, no. I want to be a 99-cent store."
Omai output to fall further this year
- Fennel pit to close in third quarter
Omai Gold Mines Limited produced 271,000 ounces of gold last year, 52% of the total gold output by Cambior, its parent company.
The target production for this year is 234,000 ounces at an estimated operating cost of US$222 per ounce, up from the target of US$216 last year.
Production this year at Omai will only be 33% of the output by Cambior as the Fennel pit will be mined out by the third quarter. However, Cambior's Rosebel mine in Suriname will make up the lack in production.
Omai expects to process 5.71M tonnes of ore this year compared with 5.74M last year as a result of the lower head grade, which will follow the closure of the Fennel pit in the third quarter. Mill feed in the fourth quarter of this year for the company will come from low-grade ore stockpiles accumulated during the initial years of production. The Wennot pit was closed in 2002.
Cambior on its website says Omai will be a "significant generator of free cash flow" in the next three years.
Omai has been Cambior's largest gold mine, with its production in 2002 of 319, 600 ounces representing 56% of the company's consolidated gold production. To date, the Omai mine has produced a total of 3.1 million ounces of gold but even as the mine life nears its end, no taxes have been paid to the government. This comes at a time when gold prices are well over $400 per ounce.
Mineral reserves at Omai have declined with the remaining reserves located mostly in the Fennel pit and calculated to cost US$325 per ounce to mine. So far, exploration for new deposits have not been promising and unless a new ore body is identified, the current mine life will end next year with an estimated closure cost of US$4.5 million.
Omai is again looking at the Eagle Mountain property, some 80 kilometres by road from the Omai mine. Work on this project had stopped in 1999 following the collapse in the price of gold but this will be revisited given the improved prices and the availability of the Omai plant and processing facilities in late 2005.
Cambior expects to increase its gold production target by 35 per cent as a result of the start-up of its Rosebel mine next month. The company plans to produce 705,000 ounces of gold this year at an estimated operating cost of US$221 an ounce.
Cambior was to have reduced its gold hedging commitments - future price contracts - by 42 per cent, or 540,500 ounces, in 2003. As of December 31, the company had total commitments of 746,000 ounces at an average price of US$306 an ounce. However, with gold prices going up, it does not make sense to be involved in hedging.
"Cambior reiterates its objective to eliminate all hedging commitments through accelerated deliveries or buyback by the end of 2004, except for the residual 52,000 ounces remaining under its prepaid gold forward sales agreement at the end of 2004," the company said in a release yesterday.
Last August, the board of directors approved a policy that will allow gold hedging only when required for project financing. Gold hedging has turned out to be unprofitable for producers in the current climate of high prices.
Investors interested in Globe Trust
A number of potential investors have expressed interest in the bankrupt Globe Trust and Investment Company Limited (GTICL) and have been given until the end of February to submit their formal proposals to restructure the organisation.
Conrad Plummer, the administrator of GTICL, is hoping to secure an investment of US$2-3M to recapitalise the institution in return for yielding majority interest (51%) to an investor.
Plummer told Stabroek Business that around six investors have expressed interest in one form or another and he had been in contact with each of them.
"Each has different considerations," Plummer indicated, noting that while one may have financing available readily, another may have to secure financing while yet another may be more interested in Guyana than GTICL.
"We are working on it and are looking to see whether we can go forward."
In September 2001, the Bank of Guyana seized control of GTICL as a result of risks associated with the operations.
Almost a year later, the courts ordered the institution's reorganisation as against its liquidation as was being sought by the regulatory agency. The Bank then named Plummer as the administrator to oversee the reorganisation. The books of the institution have been brought up to date and the administrator is scouting for investors for the institution.
As it stands, there are 57 individuals who hold 24.6% of the interest in GTICL and all of these, with the exception of three persons, hold less than 5% of the shares. The expressions of interest in the institution have come from both local and foreign nationals and the future of GTICL will depend on how this investment phase turns out.
The licences that GTICL hold as a deposit-taking institution is viewed as its most valuable assets. The firm has an outstanding loan portfolio of about $778M and a substantial sum owing to depositors.
Plummer described as "reasonable" the debt collection rate to date noting that the small man was more willing to negotiate a settlement than more prominent figures.
In the case of the former directors, who had borrowed from the institution to meet their obligations to the company, when called in to discuss their indebtedness to the institution, they sent in their lawyer instead.