Where we stand‎ > ‎News & Comment‎ > ‎

DIVESTMENT: RHETORIC VERSUS REALITY by Sylvan Wilson

posted 25 Sep 2013, 08:16 by Gerry Kangalee
There has been much celebration over the First Citizens Bank initial public offering (IPO). It has been hailed as a
resounding success by most; demand outstripped supply by over three to one; some 12,000 new accounts were created indicating new participation of “small” people in the stock market; the price increased by over 33% in its first four days of trading. All of the various business organizations via their Chambers have argued that the capital market is in dire need of such stimulation.

Calls for further dilution of government’s shareholding in FCB are the order of the day, strident demands are made on government that Plipdeco, National Flour Mills, NGC,TTMF/HMB, Exim Bank etc be also “readied” and be put up for sale. The Minister of Finance and other government spokes people have confirmed that they are knocking on an open door as this is in keeping with its stated policy. 
 
As I observe these developments I wonder if government is not missing a crucial step in its stated policy of divestment/privatization. Why are the leaders of the thousands of successful private companies not following their own advice?

If listing on the Trinidad and Tobago Stock Exchange (TTSE) is so good for the capital markets, the economy, “small” people’s ownership and participation in equities etc. why have they refused to put some of their shares on the market up for sale? There are only thirty listed companies on the first schedule of the TTSE with six formerly being State owned. Therefore only twenty-four companies that were privately owned companies have availed themselves of this “good thing”.

What is it that the gurus of the private sector know that government does not? These business leaders run very successful companies that produce billions of dollars in profits; they are the “go to” guys for government, they are the ones offering to lend their expertise to properly spend the $61billion government plans to spend in the 2013-2014 budget.

If FCB’s IPO generated such excitement, can you imagine the pandemonium if the majors in oil and gas production which are mainly dominated by transnational companies were to list on the TTSE; better yet if they were to follow the precedent set by the FCB IPO with its price based on a very generous price/earnings ratio.? What about the petrochemical companies? Why aren’t they allowing “small” people to own a piece of their own God-given heritage? Why hasn’t the Energy Chamber publicly called on its members to divest a portion of their 100% shareholding to citizens of T&T as it frequently does to government? We must be missing something.

What about our local private sector? Why have they also not used the Stock Exchange to raise funds? They steered steadfastly away from listing to raise investment funds even when interest rates were in the double digits. Government is the main client to many of these companies; supplying goods and services to the State is the lifeline to lots of them.

Government over the years has reasoned that a well populated stock exchange that is diversified, with good participation across the various sectors of the economy, with the major players listing so that the TTSE really becomes a market where traders actively buy and sell shares and not simply hoard the few lucrative ones available.

This however is not happening; it is only the State that is selling-off its profitable holdings. What is government’s real intention? Is it the creation of a functional stock exchange or is it to simply transfer profitable, nationally owned resources to an elite minority which has the money to really capitalize on the proceeds of divestment? What efforts have we seen pursued by the government to ensure the creation of such a stock market?

Should the State leverage its financial and fiscal clout to influence that outcome? In the case of companies which seek to do business with the government, should listing on the TTSE be a prerequisite; should such companies be favoured for winning Government contracts? In the case of companies which enjoy the many generous “incentives” provided by government should these be tied to the offering of shares on the TTSE? Why is the government not leveraging its financial and fiscal clout to influence that outcome?

None of the parties which have held office in this country particularly since the 1990’s have demonstrated or even articulated any cohesive plan for their stated objective for the stock exchange. However over the last thirty years, billions of dollars of assets purchased by the State with the blood, sweat and tears of “little people” have been transferred to the hands of the wealthy. What a gap between rhetoric and reality!
Comments