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| Leader of PAM, Lindsay Grant |
Good day Fellow Citizens. The recent announcement of the proposed acquisition of the controlling interest in S.L. Horsfords by the Social Security Board should be a matter of concern to all civic minded persons. Let me first begin by saying that the shareholders have a right to dispose of their interest in their shares to whomsoever they choose. It is not for them to enquire of the purchaser the efficacy of the decision but rather it is for them to maximize their earnings.
The Social Security fund belongs to all workers, who are made to contribute throughout their working lives. We have been promised that the fund is invested to ensure the best possible returns in order for all contributors to be able to receive an adequate pension upon retirement. It is therefore in the public interest that any investment of the fund be subject to public scrutiny and be shown to be fiscally sound. It is enough that workers are required to trust the Government to ensure their financial security they should not also be required to trust that any investment made with the fund is de facto well thought out or profitable.
With these considerations in mind it is necessary to enquire critically into the issues that are raised by such an investment.
The first concern to come to mind is the fact that this move directly contradicts the recent thrust of Government policy with regard to divestment, which has been to liquidate its holdings in certain statutory bodies and several companies. Within the last two years the Government has expressed its intent to sell or advertised for sale its interest in The Cable, Cable & Wireless, CEMACO, the Factory Houses and publicly owned residential dwellings in Bird rock and Fortlands.
This move to control what is essentially a private company thus raises many reasonable questions about the possible motives behind it.
Suspicions are further raised by the dual positions of Mr. Halva Hendrickson who is the head of the Privatization Unit and sits on the Social Security Board. He has been the facilitator of the Government decisions to divest from the above mentioned companies and now sits in a position to oversee this acquisition. Such a position raises serious questions about conflict of interests. Mr. Hendrickson has a well known track record for legendry incompetence.
He has been responsible for the mis-management of the Electricity Department and the Ministry of Finance. Why is he being allowed to influence the Investment Committee of the Social Security Board? This Administration is showing gross disregard for the hard work of the poor people who have to contribute to the Social Security fund.
Additionally, the position of Mr. Kris Astaphan, the brother of the Minister of National Security, as the person brokering this deal is highly problematic. The significant personal gain he stands to make of nearly one million dollars accompanied by the fact that this information is not in the public square only invites questions about nepotism and cronyism. It is also important to note that S. L. Horsford is listed on the Eastern Caribbean Securities Exchange and the authorized ECSE brokers in the Federation are National Bank and the Bank of Nevis.
Why were these institutions not used? It is also significant that National Bank has set guidelines outlining the commission to be paid for brokering deals such as this one and for deals valued over $10 million dollars the commission should be 0.25%. Thinking citizens should demand to know why Mr. Astaphan is being paid above this rate.
This Administration has indicated an intention to implement legislation underscoring the need for integrity in public life. A public accounting for the positions of these two persons is a good place to start.
The Social Security fund is not a source of free money for Government to spend. It is being held in trust for the people to access when they retire. The poorest are the most in need of it because they are less likely to have other sources to rely on. This Government claims to care about poor people and yet is willing to put their future at risk. The Social Security fund is already very vulnerable and at current strength will default in 2040.
The Actuary employed by the Social Security Board has recommended that the retirement age be raised form 62 to 65 years old. It has also been recommended that the contributions of both employers and workers be increased. In addition to this the IMF report on the Federation in 2003 stated, and I quote, "directors viewed the acceleration of structural reforms, including the privatization of some state owned companies as essential for reinvigorating growth and enhancing competitiveness." Additionally it continued "the directors urged the authorities to give the Social Security Board greater independence in selecting its investments." Why is the Government making this move now, when it knows what is at stake?
~~Adz:Right~~This proposed acquisition also raises questions based on the analysis by Mrs. Lawrence and Mrs. Johnson dated 21st August 2006 whether these shares are being purchased for ultimate sale to persons associated with government officials for the purpose of eventual control of this company and its associated companies.
The Director of the Social Security Board has produced an analysis of the possible benefits and detriments of the acquisition and it is important to note that the general tenor of this analysis is that such a move would be ill advised. It is highly unusual for any entity to purchase shares in a company at 22% above the prevailing market value for those shares therefore making an initial loss, yet this is precisely what the Social Security Board is considering. Who is to gain by the spread of some $4 million? The very fact that the Board is considering such a significant investment in equities, a 43% holding, is problematic. Equities are risky investment options even in the short term and certainly not a responsible choice for a public corporation spending public contributions.
This fact is well known to the experienced professionals administering the Social Security fund and, as such, in Mrs. Lawrence's own words, and I quote from page 11 of the document where she says, "never have we been exposed to this extent to one security" end quote. The public should be aware of the fact that just last month the Social Security Board voted to sell the small interest of 1.4% it owned in S.L. Horsfords.
In Mrs. Lawrence's own words she says and I quote "Last month, the Investment Committee made a decision which was ratified by the Board of Directors to offer the S.L Horsford shares for sale as a result of the unsatisfactory dividend payout," end of quote. How can it then explain this about face? To quote Mrs. Lawrence again, on page 11 of the document she states, and I quote "this conflicts with our well promulgated capital preservation and risk averse policy."
The other important issue to consider is the suitability of the Social Security Board to manage its proposed holdings. The expertise of managing a profit making enterprise in a very competitive market place is not in the purview of the Social Security Board. The potential for loss is staggering and should be enough to give considerable pause.
As a statutory entity the chances of hiring practices based on political patronage rather than actual experience and qualification are just too high for the public fund to be put at such a risk. It is simply not the function of Government to run a business especially one with such diversity since bureaucracy is so notoriously inefficient.
In an address to the Caribbean Corporate Governance Forum, held at the ECCB on March 8 2005, the Prime Minister said, and I quote, "Obviously, serious changes in the way that the private and public sectors do business will have to be effected. In both sectors, all activities and decision " making must be guided by principles of fairness, integrity, morality and responsibility. Accountability issues must be systematic " regular and accessible " to both shareholders and taxpayers, so that they could be satisfied, and have the opportunity for input for their best interest. New and enhanced corporate Governance processes must become enshrined in the policies and practices of both governmental institutions and private sector companies and institutions to avert the debilitating fallout resulting from scandals of mis-management and unethical corporate practices."
Again Prime Minister is making nice sounding pronouncements in a public forum but is not living up to his words or advice in practice.
In the final analysis, the public needs to demand that the Government make a full disclosure of all the considerations involved in this proposal. We need to know why such an acquisition makes sense at this time when other corporate shareholders such as the Sabga Group and Sagicor are negotiating the liquidation of their holdings. We need to know why this makes sense when the history of dividend payout by S.L. Horsford & Co. Ltd shows that the funds can attract a higher earning than 6%. Also the Government should clarify its position with regards to foreign ownership of local companies in light of the CSME.
Thinking citizens want a detailed breakdown of the plans in place at the Social Security Board to maximize the returns from this proposed acquisition. I call on the Social Security Board and the Government to come to the people in the interest of transparency and public accountability.
