Peeping Tom – Sanata Clause In April

May 24, 2008 Peeping Tom

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I heard that the government is producing a bestseller. It is entitled, “OPPROBRIUM- HOW TO DIVEST WITHOUT COMPETIVE BIDDING” with a preface jointly scripted by the Privatization Unit and GOINVEST. Who knows there may even be a chapter where every line begins, “Even though…”

I believe that what we have with this Sanata deal is a constructive sale. Even before the stunning revelations of this week’s press conference, I had pointed out that a ninety-nine year lease amounts to a defacto transport. At the time, I was unaware there was also an option for the investor to purchase the property at a set price of G$700M.

This makes the deal even more intricate. What we have in effect is a foolproof sale of an extremely valuable piece of real estate to the investor, an absolute divestment of the complex without a process of competitive bidding.

This is how it works: The investor is rented the property, but is given a ninety-nine year lease which is a virtual transport. Therefore unless the claw back provisions (which have not been made public) are activated, the investor sits secure in the knowledge that through this extended lease it has virtual transported rights to the property. However, the investor also has the right to purchase the property within three years for a fixed price of $700M. So the ninety-nine year lease or the claw back provisions are of no real significance because the investor has the option of purchasing the property within three years time anyway.

A ninety-nine year lease is a virtual transport. A ninety-nine year lease, with an option to buy, amounts to a constructive sale.

If the investors decide not to purchase, they still have lifetime rights through the ninety-nine year lease. If on the other hand the investor decides to purchase, which is most likely given the price at which the facility is being offered, the investor does not have to worry about winning any bid. There is a clause in the lease contract giving them the right to purchase the property. Thus what started out as a lease can become an outright sale, at the sole discretion of the investor.

Public property is not supposed to be disposed of in such a manner If you are leasing a state enterprise, the Privatization Policy Framework Paper (PPFP) provides that both lease and sale should be through a process of competitive bidding. Even if the government could be excused – and they cannot – for leasing out the facility to Queens Atlantic Investments Inc., it is unbelievable that they should insert within the lease agreement, a provision to sell within three years the facility at a fixed price.
All of this is taking place amidst deafening silence within our society. Even the PNC is not saying anything.

I am not surprised that the main opposition has not come out against this deal. The President himself at a press conference when asked about the lease was astute enough to take the line that the deals made by the PPP were far better than those made under the PNCR. He is right. If and when the PNCR raises their voice against this giveaway of the former Sanata Textile Mills complex, the government will be sure to counter by pointing out the terrible deals made under the PNC.
The President did in fact go down this road in one of his press conferences. He spoke about how we were getting $50M from the lease of the Sanata Complex. (He did not mention the option to buy; that came later thanks to the revelations made by Brassington and Da Silva and their press briefing this past week.). He mentioned claw back provision in cases where the lands were not used for the purposes designated, unlike what the PNC did when they gave away lands which were left abandoned by the investors. Thus for him the PPP land deals were far superior.
I will in a subsequent column deal with the PPP land deals, especially the thousands of acres given out in the Intermediate Savannahs; for now I wish to address the issue of the sale of a public enterprise listed in the PPFP, and not just a piece of land.
The Sanata Complex was not a piece of land. It was a massive developed facility worth in my estimation billions, not only because of its size and the buildings within the complex but also because of its location, near to port and its proximity to a sizeable labour force.
The excuse that it was rundown does not hold water with me. I have passed many times by that facility. I have been within the compound when an auction of vehicles was held there and I know that the facility while not in pristine condition was not in a dilapidated state even though there was some vandalism.
Even if it were rundown, it is the government’s responsibility to upkeep the facility and its failure to do so is another glaring example of the level of mismanagement that is taking place in Guyana, another chapter to add to this latest bestseller of disgrace that is soon to hit our streets.
To be continued

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