It is time for better angels to prevail. Tonight, the whole world is watching America. And I believe that at our best, America is the beacon for the globe. We will not only lead by the example of our power but also by the power of our example.
U.S. President Elect Joe Biden
The leasing and disposal of State lands during the period between the 21 December 2018 successful vote of no confidence in the then Government and the swearing in of the new Administration on 2 August 2020 has generated quite a controversy, with the National Industrial and Commercial Investments Ltd. (NICIL), a government-owned company, being in the centre of the controversy. This was at a period when no major decisions should have been made in view of the caretaker status of the Government. The Caribbean Court of Justice (CCJ) had ruled that ‘it is expected that the Government will continue as a caretaker for the affairs of the country but that in light of its caretaker role it should be restrained in the use of its legal authority’.
The Granger Administration accepted the CCJ’s ruling and indicated that it would limit its activities to the routine management of the country. This implies, among others, that no new laws would be passed; no new agreements would be entered into that have the effect of binding the State; and caution would be exercised in implementing the national budget. The Cabinet also agreed to the following:
(a) Avoiding any undertaking considered controversial, such as new policy
initiatives, programmes or projects as well as signing new international agreements or embarking on new major infrastructural projects;
(b) Implementing projects and programmes only approved by the Assembly with respect to signed contracts and for which work had commenced; and
(c) Mechanisms would be put in place to ensure that any projects or programmes
being carried out would not be difficult to reverse or change, if necessary.
Despite these assurances, we can cite several instances where the Government reneged on its commitment, including: (i) the passing of the Natural Resource Fund Act in January 2019 without the presence of the Opposition; (ii) the signing of a US$6 million loan agreement with the Inter-American Development Bank in February 2019 for the establishment of an Electronic Single Window for Trade; and (iii) the award of a contract for $826.7 million in January 2020 for the construction of the Yarrowkabra Secondary School at a time when there was no 2020 budget in place. One may be inclined to argue that the first two events took place before the CCJ ruling. However, good governance practices would dictate that the Administration should have awaited the outcome of the judicial review of the challenge to the no confidence, before proceeding.
In today’s article, we revisit the operations of NICIL in the light of the revelation that it was complicit is the leasing and disposal of State lands during the period of the interim status of the Government. The specific concerns are that:
(a) Eight plots of land with a total acreage of 93.149 were transferred to private entities without full payment of the agreed prices – seven on 11 June 2020 and the other on 28 March 2020. In three cases, no payment was made. Five of these lands have since been returned to the State; and
(b) Leases were issued for State lands in Peters Hall, East Bank Demerara without competitive bidding, valuation and approval from the appropriate authority. Shortly thereafter, two beneficiaries transferred their leases to third parties in exchange for significant sums of money. In one case, there appeared to be a serious conflict of interest.
Much of the information contained in this article was taken from the results of the forensic audit of NICIL undertaken in 2015. The report is to be found at the Ministry of Finance’s website at
https://finance.gov.gy/wp-content/uploads/2017/05/nicil_audit_report.pdf.
NICIL at the time of incorporation
The Public Corporations Act of 1988 dissolved the Guyana State Corporation (GUYSTAC) at a time when the Government was embarking on a major privatization programme to restructure the economy and to reduce State involvement in commercial activities that were best suited for the private sector. As a result, NICIL was incorporated in July 1990 to take over some of the responsibilities of the GUYSTAC Secretariat, mainly to monitor the performance of public corporations and to ensure that all dividends received, privatisation proceeds and other returns, were paid over to the Consolidated Fund.
NICIL’s main objective is ‘subscribing for, taking or otherwise acquiring and holding shares, stocks, debentures or other securities of any company, co-operative society or body corporate’. This is reinforced by its Articles of Association which state that ‘[t]he business of the company shall consist wholly or mainly the holding of shares or securities of companies, co-operative societies and other corporate bodies’. NICIL’s original activities involved: (i) advising the Government on the disposition of shares it held in corporations/companies; (ii) establishing a communication link with all corporations/companies in which the Government had shares; and (iii) acting as watchdog on what is happening to shares owned by the Government, and recommending to the Government steps needed to be taken.
Upon the establishment of the Privatisation Unit of the Ministry of Finance in 1993, NICIL’s role was restricted to supplying to the Unit available information on state-owned enterprises; collecting dividends from corporations/companies in which the Government held shares; and paying such proceeds over to the Treasury. Up to the end of 2001, NICIL operated as a small entity with a staffing of four persons and received a subvention through the National Budget to meet the cost of operations.
Post-2002 NICIL
In December 2001, the Cabinet approved of the Privatisation Unit assuming the additional responsibility of providing management and administrative services to NICIL. The Unit became the authorised agent for the purpose of privatising any of NICIL’s holdings set out in the Privatisation Policy Framework Paper laid in the National Assembly in 1993. It was also made the exclusive manager of NICIL to manage and administer the affairs of NICIL. The Head of the Privatisation Unit assumed the position of Executive Director, and NICIL which became responsible for: (i) collecting and accounting for all privatization proceeds, rents, dividends, and other income of NICIL; and (ii) utilizing and disbursing the income in accordance with the approval of NICIL’s Board. In effect, the operations of the Privatisation Unit and NICIL became merged.
With effect from 1 January 2002, NICIL ceased paying over to the Consolidated Fund dividends received from public corporations, the proceeds from the disposal of State assets and income from other assets vested in it. Instead, NICIL treated such sources of funds as its revenue which, it must be stated, NICIL did not earn and therefore could not have retained. NICIL was merely acting as an agent of the State in the same way that the Guyana Revenue Authority does. Indeed, NICIL’s action was in breach of Article 217 of the Constitution as well as Sections 37-38 of the Fiscal Management and Accountability Act that require all public revenues to be paid over to the Consolidated Fund.
In July 2002, NICIL’s board discussed the new arrangement and advised as follows:
(a) Dividends by any equity holding should be paid over directly to the Treasury;
(b) Privatisation funds should be held by NICIL, and out of these proceeds all
privatisation-related expenses could be met, including repairs and upgrades to
buildings, and the balance transferred to the Treasury; and
(c) All administrative costs relating to the operations of NICIL should be met by way of subvention.
The above advice was supported by the then President Jagdeo and the recently appointed Minister responsible for Finance when he sat on NICIL’s board in his capacity as Director of Budget. At a board meeting of March 2010, the form and content of NICIL’s annual financial statements were discussed. The then Head of the Presidential Secretariat, who was also a member of NICIL’s board, stated that if there was a conflict between company law requirements and the country’s budget laws, the latter should be followed.
Despite the above, during the period 2002-2014, NICIL not only retained amounts totalling $26.858 billion but also used them to carry out various activities, including the construction of the Marriott Hotel and carrying out infrastructure development works at Sparendaam (the ‘Pradoville 2’ Housing Scheme), without parliamentary approval in breach of Article 218 of the Constitution. Based on the results of its operations, NICIL declared is own annual dividend which it paid to its sole shareholder, the Government. The amounts involved corresponded roughly to the dividends it had received from public corporations and other entities, despite windfall profits recorded in NICIL’s books on the disposal of the assets vested in it free of cost. This changed arrangement saw a significant increase in NICIL’s net assets from a negligible amount at the end of 2001 to $14.316 billion at the end of 2014, inclusive of a cash balance of $3.043 billion. NICIL was the mere custodian of these assets, pending further decision by the Government, as opposed to being the owners.
Concerned at the extent of violation of Articles 217 and 218 of the Constitution, the National Assembly passed resolution No. 32 on 17 December 2012 requiring NICIL to pay into the Consolidated Fund all revenues and proceeds from the sale of all State properties and shares of companies belonging to the State and vested in the name of NICIL during the period 1992 to 2012, except for those necessary administrative costs for maintaining its running operations annually. Needless to mention, NICIL chose to ignore the resolution of the highest decision-making body of the State.
NICIL as a ‘parallel’ Treasury
During the period 2007-2012, assumed the role of a ‘parallel’ Treasury, receiving funds totalling $7.320 billion from eleven State agencies and effecting payments for various works undertaken, as follows: (i) hinterland road works – $3.757 billion; (ii) construction of the Marriott Hotel – $1.653 billion; (iii) rehabilitation of 44 High Street property – $679.434 million; (iv) funding of Cricket World Cup – $650 million; (v) construction of Berbice River Bridge – $170.5 million; (vi) hosting of CARIFESTA X – $300 million; and (vii) construction of Hope/Dochfour Canal – $110.369 million).
Except for the last item for which NICIL received payment from the Ministry of Agriculture, this cross-transfer of funds among State institutions to meet public expenditure undermined the authority of Parliament to approve such expenditure. This appeared to have been acknowledged by NICIL’s board in August 2007 where it was stated that there should be no press release in relation to the handing-over of the High Street property ‘as this might draw attention to NICIL’s spending when this ideally should have been the expense of central Government’. Additionally, since the proposed works and the amounts involved were not included in the National Estimates, the related expenditure was not reflected in the public accounts of the country, thereby resulting in a significant under-reporting of expenditure. The expenditure would have also escaped the scrutiny of the Auditor General in his annual report to the Assembly.
NICIL was meant to be the executing agency for the above projects, the monitoring of which required more than the collection of bills and receipts to account for the related expenditure to properly account for the expenditure and to ensure full value was received. Needless to mention, most of the works undertaken were shrouded in controversy and lacked proper accountability. For example, amounts totalling $1.365 billion expended on the hinterland road works were not accounted for at the time of the forensic audit, while the 44 High Street property remained unfinished, and the works had to abandoned because of their defective nature. For more details, please refer to the forensic audit report referred to above.
The question as to why Article 218 of the Constitution was circumvented and why NICIL was chosen as the executing agency to facilitate such circumvention remained unanswered. One possible explanation is that in order to meet the conditionalities set under the Enhanced Highly Indebted Poor Countries (HIPC) Initiative for debt relief, the public sector deficit had to be kept to a minimum, hence the incurrence of extra-budgetary expenditure. If this is true, Guyana would have been in receipt of some amount of debt relief for which it might not have been eligible.
To be continued –
