Who can’t hear will feel.
During our first and second terms (1995-2004) in office, efforts were made to persuade the Prime Minister to manage and control the Government’s debt.
The recommendations were ignored, and the debt grew. And as that happened, the warning sounds of an impending economic, financial and fiscal earthquake became increasingly audible.
Yet it seemed that few were listening, and that even less cared. Even today, look how many of us still aren’t acting as if the earthquake happened, although we’re buried under its rubble. Look how many of us are claiming ‘full confidence’ but we can’t get a job, a piece of land, a house, or we’re up and down begging people to help us pay our electricity bills, our food bills, our rent, our debts to Courts, TDC or Horsfords, or to help keep us out of Debtors’ Jail.
The national debt was $212 million in 1995 and exploded to over $2 billion by 2006, by which time the Government had already mortgaged 4,700 acres of sugar lands (or nearly 8 square miles of St. Kitts) to the Bank. A bad move for the Government and for the Bank.
These facts, frightening as they should’ve been, were not frightening enough to steer the people of this land into remedial action. The deafness and the stifling of consciences, both inside and outside the Labour Party, have been incredible, and shameful.
And when the history of these times is recorded, special attention will be given to:
(i) 1975, when Mr. Bradshaw acquired the sugar lands;
(ii) 1981-2, when Dr. Simmonds paid for the lands;
(iii) 2004, when Dr. Douglas said that the sugar industry would be closed over his dead body;
(iv) just months later, in 2005, when he closed down the same sugar industry;
(v) 2006, when the debt crossed the $2 billion mark and the 8 square miles were given up;
(vi) 2008, when the Government began defaulting on its debt payments and the economy fell into recession;
(vii) Dr. Douglas’ Budget Address in December, 2009, when he boasted that, as a result of his prudent, capable and disciplined fiscal leadership, the Federation had escaped the brunt of the global financial crisis, although the economy had already been in default and in recession since the year before;
(viii) 2011 when the debt reached $3 billion and the Government began to restructure its debt and to prepare investors in Government securities for a ‘haircut’, including SSB (which will lose over $30 million), and the Bank (which will lose about $50 million); and
(ix) 2012, the fifth straight year of recession in St. Kitts & Nevis.
And while Douglas’ legacy will not be pretty, it’s the people of this country who’ll take the biggest rap from history for our prolonged deafness, and our stifling of our consciences, to the rumblings of the earthquake that Douglas has visited upon this land, the after-shocks of which will trouble Kittitians and Nevisians for generations to come.
Note that the losses to SSB and the Bank which I just mentioned are only from the ‘haircut’. SSB is already in the red for nearly $100 million on the Beacon Heights Project, while the Bank is yet to recover one penny of the Government’s $1 billion debt to it in this degrading land-for-debt swap which must be reversed after Douglas is removed.
In an article dated May 21, 2009, I asked, if all was going well with the Bank, why was it looking to raise money by increasing its share capital. And I put this question: “Might the Bank also be measuring matters in terms of the Government’s large debt to it?”
Even then, indications were that the Bank was selling off some of its securities, suggesting the possibility of more than a little concern by Management about the massive Government debt to it, and the possibility that the Bank might be looking to paint as pretty a picture as possible in its Financial Reports.
Now it’s true that the growth, and the sheer size, of the Bank have caused it to look for profits beyond the narrow confines of the economy of St. Kitts & Nevis, so buying and selling securities on the international markets, and going international generally, are perfectly okay. In fact, I wish there could be branches of the Bank in places like London, Manchester, Leeds, Birmingham, New York, Toronto, Phillipsburg and Charlotte Amalie.
Meanwhile, the record will show that over the past few years, revenues from the sale of some of those securities have indeed helped to bring profitability to the Bank. But if these are good securities with potential for solid and sustainable returns for some time to come, why sell them right now?
It’s no secret that apart from the fact that the Bank has been a major success story for the people of this country, and that it’s a critical lifeline for us all, it’s also operated with more politics than a bank should. Its Board is populated by persons who generally qualify more on politics than on merit, and for a multibillion dollar financial institution’s Board Room to be used as a haven for sinecure and political favour is not just bad business, it’s downright reckless and dangerous. And awfully disrespectful to minor shareholders.
And there’s absolutely no doubt that the Bank has been used to prop up a profligate and incompetent Prime Minister. Indeed, one director was injudicious enough to admit that his/her sole purpose on the Bank’s Board was to carry out Dr. Douglas’ bidding.
Manipulation for so!
And as if that’s not bad enough, I’ve even heard that there’s an electronic setup at Government House which allows the former CEO of the Bank to stay hooked into and to monitor certain activities down there. I hope this isn’t true.
Meanwhile, although some persons, in their bliss, may see the Bank’s Financial Reports as little more than glossy souvenirs, others take the time to dissect and study them in an effort to reach an understanding of how things are going, because they understand how critically important the Bank is to this country.
In an article dated December 19, 2010, in warning about the ‘haircut’ that was to come, I stated with concern that “there is a very critical and delicate relationship between these three most critical institutions in the country” (Government, SSB and the Bank).
But I’m even more concerned today about SSB and the Bank than I was in 2009 and 2010. And for good reason.
The latest actuarial report for SSB is ready, but for some reason it’s not being put on SSB’s website. And sales at Beacon Heights are sluggish, to put it mildly, so how and when will the nearly $100 million investment be recouped?
Meanwhile, the Bank’s Financial Report for 2012 is to be presented at its Annual General Meeting (AGM) today. And it doesn’t make for happy reading.
But even before the 5pm start of the AGM today, the politics has already begun.
The Government will look to remove Mrs. Jeanne Byron-Condor from the Board.
In 2011, the Bank’s assets exceeded its liabilities by $536 million, while this year the figure is $450 million, an $86 million decline. Further, it suffered a total comprehensive loss of income of $55.88 million for 2012, in contrast with a gain of $48.23 million for the year before. And net profit after taxes in 2012 was $13.97 million compared with $48.61 million in 2011.
The Bank lost $47.39 million in the ’haircut’ from the Government (and that’s so far). And it wrote off a debt of $51.36 million from a $59 million credit card deal when only a year ago shareholders were told that it was “the opinion of management that the ePassport Software Collateral has a value in excess of” the value of the receivable as recorded in the Bank’s books.
In other words, just a year ago, the Bank claimed that the collateral was good, yet today it’s saying that it has written off $51.36 million of it. What caused such a quick and dramatic turnaround from full confidence in the collateral to no confidence at all in it? What happened? I fear that this ePassport credit card software story could turn out to be ugly. Indeed, it already is, as shareholders are forced to take such a massive loss on it.
What are the chances that the Bank has now sold off all or most of its good securities investments and is now left only with duds? I hope this isn’t the case.
And another issue worthy of discussion is the fact that loans which are past due but regarded as not being impaired mushroomed to $171 million in 2012 from $18 million in 2011. This is startling, and perhaps a true indication of the hardship that our people are experiencing in paying their debts.
The situation is not a happy one. And the difficulties which the Bank, its customers, and the people of this country are experiencing are nothing but ongoing rumblings, tremors and aftershocks of the economic, financial and fiscal earthquake to which I referred earlier.
Here’s what Moody’s, one of the world’s leading credit rating agencies, had to say on May 20,2013: “The Caribbean’s debt crisis is the result of a combination of poor fiscal discipline and unproductive investment that failed to raise potential growth rates”, and “we expect sovereign (Government) credit quality to continue deteriorating in the region…”. All of which could lead to further haircuts.
The cautions about possible further ‘haircuts’ are not to be ignored, especially if there’s no fiscal consolidation and substantial and sustained economic growth.
And this combination of consolidation and growth will become increasingly unrealistic unless there’s a new leadership mentality and a new national mindset, which, for our Federation, means that the perpetrator of the fiscal indiscipline will have to go, and Kittitians and Nevisians will have to get over our deafness.
Meanwhile, not to be outdone, Bloomberg Network quotes Arturo Porzecanski, a professor of international finance at the American University in Washington, as saying that the Caribbean may be emerging as a ”region of serial defaulters”.
What an embarrassment! And the fact that the disease is regional doesn’t excuse Denzil Douglas. It merely indicates that he isn’t the only perpetrator of fiscal indiscipline in the Caribbean.
And while our brothers and sisters elsewhere in the region must do their jobs and reject their failed leaders, we have to do our job here. You see, when some of us were saying, years ago, that the terrible leadership of Denzil Douglas was plunging our country into a crisis, and putting our precious financial, social and other institutions, and our people in grave jeopardy, we were accused of ‘grudging’ Douglas and of trying to destabilize those institutions and the country.
Today, the report from Moody’s, the report from Bloomberg, as well as repeated reports from the IMF and other institutions, and now the 2012 Financial Report from the Bank, have validated our call to attention, and have more than amply sealed the case against Douglas.
The earthquake has long come and all of us are under the rubble.
Deafness and foolishness can’t fix this problem. We have to clear the rubble and free ourselves. We have to, because if Douglas remains, the Bank, and SSB, along with our land, our beaches, our constitution and our constitutional rights could all go ‘poof’ and disappear in ten years time.
Who can’t hear will feel. Even who can hear will feel. In fact, we’re already feeling it…toot, moon and Sam.
