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Previous privatisation policies created ad hoc accounting process – Brassington
…proceeds from sale to JFL yet to be placed in Consolidated Fund
Previous privatization processes have created ad hoc accounting processes in Guyana. This is according to Head of the Privatization Unit, Winston Brassington, during the recently held privatisation and taxation seminar.
At the time of making this statement, Brassington was responding to questions as to whether proceeds from privatization transactions ended up in the Consolidated Fund.
An example of such a transaction is the sale of some six acres of land at Industrial Site, Ruimveldt, for which the monies ($350M) is yet to be deposited in the Consolidated Fund. Rather, it currently sits with the National Industrial and Commercial Investment Ltd (NICIL).
According to Brassington, previous accounting processes have seen some proceeds being deposited in consolidated and divestment accounts, but he noted there was a deficiency. “What you did not have was adherence under the law of how you distribute a company’s assets.”
According to Brassington, proper accounting requirements dictate that money from the sale of assets should first be placed in the company account, providing that it can adequately discharge of all of its liabilities
“With the Company’s Act, the company would then do a distribution by way of dividends, with all of its shareholders…That process happened in earlier years, and was very ad hoc because it did not adhere to principles.”
Using current accounting principles for monies from privatization deals to be placed in the Consolidated Fund requires the completion of the accounting process.
Proceeds from the sale of some six acres of land to John Fernandes Limited went to NICIL rather than the Consolidated Fund, according to Brassington.
The Head of the Privatization Unit also admitted tardiness on the part of NICIL as it relates to submitting annual returns since, according to him, the entity has not received audited reports from the Auditor General.
“The completion of NICIL as a holding company requires the completion of the audit of all of its subsidies…That has been taking a long time…Without declaring dividends and having accounts, it would be violating the Companies Act”.
Between 1994 and 2007, in excess of $23 billion was realized from the privatisation of public companies and real estate. But not all of the monies came directly into the revenue coffers.
Winston Brassington, when asked about the deposit of the $360 million accrued from the sale of a plot of land to John Fernandes Limited, said that the money went to NICIL, a Government holding company.
When monies go to the Consolidated Fund, the National Assembly must decide on its release.
However, when it goes to other funds, such as a holdings firm, there is no need for Parliamentary intervention.
Up to 2002, some 14 companies were either partially or totally divested, while from 2003, in the second phase of privatization, 26 entities were privatized.
According to a Privatisation Unit report, from 2003, there were 99 transactions from 29 Government entities. These were broken down into 26 privatization deals, 46 real estate transactions, and 27 restructuring/wind-up deals.
Of the 26 privatisation transactions, four were not advertised, with two of these ending up in an employee sale in the case of Guyana National Newspapers Limited and an employee/management buyout in the case of Surapana Farms.
Of the remaining 22, three were negotiated and finalized after inadequate responses from advertising. These include Linmine and Aroaima Mining Company/Bermine.
Queens Atlantic Investment Inc is a fourth such company, but the seminar made no mention of the QAII deals in the initial presentations.
According to the Privatisation Unit, while proceeds from Phase One were more than $1.1 billion, gross proceeds from Phase
Two exceeded $23 billion from privatization/real estate transactions between the period 1994 and 2007.
“Overall, the Phase Two privatisation has been done in a transparent and open manner. The modes employed emphasized the continuation of the business, in most cases. Considerable attention was given to optimizing value, investment, and employment.”
According to the Privatization Unit, difficult businesses which could easily have been liquidated have been privatized, saving thousands of jobs.
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