The story of privatisation – Part III

Today, few can appreciate the overweening role the state played in the economy during the era of the People’s National Congress (PNC). By 1984, there were 35 non-financial enterprises in the agricultural, mining, manufacturing, quarrying and services areas. The government controlled 80 per cent of the economy and the private sector was confined to small-time enterprises, paddy cultivation and small-time milling.

But even in rice, the PNC government totally controlled the industry. They did this through several stratagems: all rice milled by the private mills had to be sold to the government board; the government established huge rice milling and processing facilities – dubbed the Guyana Rice Milling and Marketing Authority (GRMMA) in the centre of each rice growing area – Essequibo Coast, Wakenaam, West Demerara, Black Bush Polder and Corriverton, Berbice.
All rice exports were done through the Guyana Rice Export Board (GREB). The low prices offered to farmers for their paddy compared to the high export prices pocketed by the government, drove most farmers into bankruptcy. By 1990, rice production had plummeted to below 90,000 tonnes.
Privatisation of rice: GRMMA
In the first phase of privatisation, the GRMMA complexes were sold. According to historian, Dr Odeen Ismael: “The GRMMA complexes at Black Bush Polder and Corriverton were sold off in August 1991 to the foreign firm, Curacao Investment Trust Company Limited (CITCL), for US$3.8 million. But these companies were valued at US$14.9 million. The same firm had earlier bought other GRMMA complexes at Ruimzight and Wakenaam for US$2.5 million. The value of both complexes, complete with installations and fertile lands, was US$8.5 million.
“At Anna Regina, the GRMMA complex, valued at US$14.2 million, was sold to a St Vincent firm for US$4.2 million and was renamed Caricom Rice Mills Limited.
“The sale of these complexes raised much concern among local investors. The problem was not only the sale price, but the fact that local investors who made higher bids for the entities were ignored. No reasons were given for the rejection of their higher bids.”
The Surinamese company, CITCL, began doing business as ‘Alesie Rice Mills’, and through its familiarity with the Overseas Territories loophole in the European Union trade regime, made huge profits. Since the closure of that loophole, Alesie has been one of the leaders in the exploitation of local farmers by holding back their payments.
Privatisation of Guyana Stores
When the PNC privatised the sugar industry of Guyana in 1976, owned primarily by Bookers, it also expropriated the prestigious Bookers Universal Stores in Georgetown’s prime downtown. This was the number one shopping address in Guyana, with a brand recognition and reputation for quality and service, second to none.
In the second phase of privatisation by the People’s Progressive Party/Civic (PPP/C) government, post-1992, Guyana Stores Limited (GSL) and its adjoining hardware division were placed on the block by 1996. Several bids were received and one from Royal Investments for 70 per cent of the shares was accepted and the deal was signed on October 4, 2000.
According to a report in the Stabroek News of October 6, 2000, the winning bid was for US$6 million, with US$4 million paid up front, and the remaining US$2 million to be paid within two years, with interest accruing at the U.S. prime rate.
The report also stated that the “government was to receive US$1.5 million in a special dividend for 1999 to be paid 2000/1”. The named directors for Royal Investments’ 70 per cent included Tony Yassin and Mohan “Glenn” Lall, publisher of the Kaieteur News. Yassin declared that “$300 million would be injected in the medium term” in the business by him and his investors.
By 2004, none of the promises had been kept, including payment on the US$2 million balance. Guyana Stores was allowed to degenerate into further disrepair and it was obvious that not a penny had been invested to rehabilitate the store.  According to a Stabroek News Business report then, “The 1561 shareholders of GSL, which has yet to turn a profit in the four years since it was privatised and has not been issuing annual reports or holding annual general meetings, are unable to trade their stocks.”
In June 2004, the National Industrial and Commercial Investments Limited (NICIL) had moved to the Courts to recover the US$2 million, and according to the Stabroek News report, Yassin complained that “doing business in Guyana is rough”, he could not paint the store as promised and the court case was the “problem”. Further: “Yassin says the fortunes of the company were predicated on government agencies continuing to make purchases, which has not been the case.” At no time did he complain about the dividend.
However, eight years later, with the case still dragging on, Yassin still has not paid the US$2 million balance (plus interest) and is now claiming that he was unaware of the dividend and the executive order to take a loan to pay it, even though it was in the press.
In the meantime, the store is still unpainted, understocked, undermanaged and under stress and losing money, while other newcomers have seized the initiative and developed other less central locations into burgeoning, upscale shopping plazas and stores. This is the perfect example of a failed privatisation.
Look out next week for the conclusion, ‘A Successful Privatisation’.