Noel Garica

HOPEFUL: Noel Garica

The Housing Development Corporation (HDC) still owes contractors $588 million for outstanding work prior to 2015, HDC chairman Noel Garcia confirmed yesterday.

Of that sum, only $7 million is owed to small contractors, he said.

He told the Sunday Express the HDC hopes to pay off the small contractors by February 2021, from a fund it set up specially to meet arrears to them.

Garcia said the remaining sum is owed to bigger contractors and the HDC will honour its legal commitments to its contractors and service providers.

In July 2019, the HDC had quantified the debt owed to contractors at $698,516,843 after making 271 payments to contractors for the sum of $139,853,660 in June 2019.

Garcia explained that before the onset of the Covid-19 pandemic in March, the HDC had projected it would sell houses valued at $1.2 billion this year.

However, the State housing company has only managed to sell $300 million in houses so far in 2020.

“The problem is that HDC has $3.4 billion worth of homes that need to be sold,” he said,

Further, the HDC’s ability to earn revenue in 2020 was stymied by the moratorium on mortgages, which was one of the measures instituted by the Government to manage the fallout of the pandemic on the country’s most vulnerable people.

For now, the company is focused on converting and preparing its existing house stock, with many in various stages of completion.

Conversely, Garcia observed that the other State company he chairs, the Urban Development Company of Trinidad and Tobago (Udecott) owes “nobody” except for variations and funds in contention.

According to the Central Bank’s July 2020 Economic Bulletin, the construction sector slowed in the first quarter of 2020, bought on by the Covid-19 pandemic.

“The construction sector slowed, based on evidence of a drop in local sales of cement, as work on several public infrastructural projects including the Curepe Interchange, the Valsayn Pedestrian Walkover and Bridge B1/4 at Mamoral Road, neared completion,” it said.

In its bid to reset the economy, the Government’s policy for the construction sector is to get smaller companies working again.

In presenting the 2021 budget last Monday, Finance Minister Colm Imbert said 20 per cent of all State housing construction projects would be reserved for small and medium-sized contractors.

“Over the next two years, we will incentivise the construction sector through a number of fiscal incentives, including tax relief, which will be granted for approved development projects, such as approved housing and commercial and industrial building development, along similar lines to the fiscal incentives already available under the law for approved tourism and hotel projects,” he said.

 Timely payments

Contractor Emile Elias said the State needs to ensure timely payments for work.

He acknowledged that construction can stimulate the economy by creating employment but that governments “have no intention of paying for work done.”

He said legitimate invoices should be met with timely payments.

Elias had represented the Joint Consultative Council for the construction industry (JCC) on a committee appointed by Prime Minister Dr Keith Rowley to tabulate the outstanding debt to the construction industry in 2018.

Then Rowley, in an address to the JCC had noted that there were outstanding payments to contractors.

“This Government acknowledges that significant monies are owed to contractors and payments are continuously being made on these accounts, albeit late, sometimes, even as new work is awarded to some of the same contractors thereby incurring additional debt.

“In 2015/ 2016, at the height of the Government revenue collapse, $589.9m was paid to contractors for outstanding amounts owed to them at the Ministry of Works alone. Other payments were also made elsewhere. The point I am making is that it is a continuous process of payments and awards and the Government undertakes to pay as much as we can without stopping the development programmes, which in themselves continue to provide ongoing opportunities for service providers, even as they are owed money,” he had said.

Rowley had said the Government was committed to paying contractors who have legitimate claims.

Elias, at the time, said that while some outstanding claims submitted to the Government amounted to about $676 million, that figure will probably be revised downward to about $500 million compared to the sum of $4 billion which was floated at the time.

“The total figure that we received from members of the JCC who wish to participate in this process was appropriately $676 million. This is now subject to some refinements. I am expecting the figure to be between some $400-$500 million. This is only to emphasise; these sums are owed to the members of the JCC who want to participate in this process and that the JCC is engineering this reconciliation. We hope that within the very short while the fully reconciled figures would be agreed and the process of payment would begin,” Elias had said.

Yesterday, he explained that those figures were sent to the various permanent secretaries in 2019 and they were all certified claims.

“The amounts are all overdue. The State has the habit of paying late or not at all. These State agencies are not honouring their own contracts,” he said.

Elias said the onus is on the Minister of Finance, when the consent is given for certain projects, to release money to pay the contractors in a timely fashion.

He said even at the Education Facilities Company Limited (EFCL) there remained certified claims to be repaid.

Contractors, at that time, said Elias, who agreed to have their claims reviewed by the Committee, had all agreed to accept bonds as payments from the Government.

 Budget 2021

In fiscal 2017 and 2018 the Government attempted to encourage public private partnerships (PPPs) by offering a 50 per cent tax relief to investors willing to contribute capital for public infrastructure etc and a $100,000 premium to be paid to contractors who successfully constructed and sold HDC units to applicants.

Those incentives did not attract mass investment.

In the 2019 budget, Imbert indicated that 437 homes were constructed through PPPs and soon, the Government would issue a $1 billion housing bond to finance the construction of thousands of units.

Imbert had said the housing bond initiative (which will offer financing support for the development, construction, and sale of houses) was a tremendous game changer for the construction sector and home-ownership in T&T.

The housing bonds, he had said, can be used as part payment for State housing constructed by the HDC and it would have provided the HDC with critical and urgent cash.

The housing bond did not materialise.

But in the 2021 budget presentation, Imbert said the Ministry of Finance would facilitate a Government-guaranteed loan facility of $1 billion for the HDC in 2021, to finance HDC’s construction of houses for low and middle-income families. The Minister of Finance added that after HDC receives the $1 billion, the Government expects it “to accelerate the finalisation of mortgages for already completed houses, to assist in financing new construction”.

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MASSY Group president Gervase Warner says the issue of whether Caribbean countries should have a fixed or floating exchange rate is “a bit of a red herring”.

But he told a conference organised by the Central Bank of Barbados last week that one of the reasons the group has applied to cross-list its shares on the Jamaica Stock Exchange is because of T&T’s foreign exchange regime.

Warner was one of the panellists at the keynote discussion of the Central Bank of Barbados’ 41st Annual Review Seminar last Tuesday on “Rebuilding Economies for the Future: Opportunities for Resilience through Diversification”. The other panellists were Ian Durant, director of economics department of the Caribbean Development Bank; and Michelle Doyle, adviser to the Governor, Central Bank of Barbados.

Responding to a question on whether resilient and competitive economies can be built in the Caribbean with fixed exchange rate regimes, “I think yes, we can build resilient economies. Fixed or floating foreign exchange; that’s a bit of a red herring. It very much depends on the structure of each economy.

“We should be much more focused on the things that can make us more efficient and more competitive. Unfortunately, some of those things are often not popular.”

Earlier in his response to the question, Warner said: “I don’t know that fixing a foreign exchange rate or floating an exchange rate is really the determinant to the economic success and growth of our economies; whether it makes us more or less resilient.

“It is the fundamental, underlying performance of our economies is really what matters. If you are going to be an export earner and are blessed with some natural resource—whether it is sunny beaches and beautiful waters or petroleum or other minerals—you are going to have to work for it. You are going to have to find a way to make yourself efficient.

“Trying to get efficiencies just by adjusting a foreign exchange rate, you are always going to be in a race to the bottom, as opposed to building strong institutions and strong enterprises.

“I am much more in favour of having greater competitiveness by developing economies of scale in operations.”

He said that involves looking beyond individual island markets and treating the entire Caricom region as a domestic market.

Warner advocated making the entire Caricom region accessible as a domestic market “to any and every one of us individually”.

He said the Caricom Single Market and Economy (CSME) is not delivering on the promise and vision of 20 or 40 years ago.

Why Massy is cross-listing

On the question of whether the Massy Group’s proposed listing on the Jamaica Stock Exchange would improve its competitiveness and resilience, Warner said: “We have found, partly driven by the foreign exchange regime in Trinidad and Tobago, that the Trinidad and Tobago Stock Exchange is not as attractive as it has been in the past for international investors.”

Warner added: “You are very familiar with international investors being unable to repatriate the proceeds of a sale of locally listed shares in Trinidad and Tobago. This is a great nuisance to any sophisticated financial institution that is moving money back and forth.”

Warner said the inability of international investors to repatriate the proceeds from share sales “is a good example of a breakdown that makes Trinidad and Tobago less competitive”.

In a notice to shareholders on May 9, 2021, Massy advised that its board took a decision to apply to cross-list the company’s shares on the Jamaica Stock Exchange. The group said: “The board considered the market sophistication and growth opportunities evident in the Jamaican securities market, which has become increasingly more ­dynamic over the past few years.”

The Massy Group president said the Jamaica Stock Exchange is attractive to international investors “like the Trinidad and Tobago Stock Exchange once was”.

He said the Massy Group sees the Jamaica Stock Exchange as “a place that we see we can invite more shareholders, more institutional investors, more traders to participate in the Massy Holdings share.

“For us, it represents another step in this integration of the Caribbean in the mindset of what we created in Caricom.”

The Massy Group president said all publicly traded entities that operate in multiple jurisdictions across the region would prefer to have one stock exchange where the shares of these companies could all be traded with economies of scale on a platform that is more robust than the multiple, small stock exchanges across the region.

“If you were to ask any of us would we like to have one financial services regulator for banks and insurance companies, (the answer would be) absolutely. It is a great nuisance to deal with 14 different regulators, particularly with all of the new regulations that are coming out that are internationally driven and affect us as small entities.

Warner said: “Small entities having to manage relationships with multiple regulators is a cost, which then makes us uncompetitive. And we do not understand that there is a reason that we make ourselves uncompetitive.

“That’s why the Canadian banks are withdrawing from the Caribbean because it is just not worth it to operate in all of these small, little islands with different regulators. “It just does not make a lot of sense.”

Massy in Jamaica

In its 2020 annual report, Massy Holdings Ltd stated that it received seven per cent of its profit before tax and four per cent of its revenue from its Jamaican operations. The group indicated it operates two businesses in Jamaica: Massy Gas Products (Jamaica) and Massy Distribution (Jamaica).

Massy Gas Products (Jamaica) “is the market leader of Liquefied Petroleum Gas (LPG) distribution in Jamaica which is used as a fuel source for cooking, heating, power generation and manufacturing. MGPJ imports and ­markets its product under the brand name ‘Gas Pro’ and supplies LPG to both the commercial (bulk) and domestic (packed) markets”, according to the annual report.

As part of a strategy to focus on three main portfolios of business—integrated retail, motors and machines and gas products—Massy Holdings divested Massy Technologies to a Jamaican company last year for about US$50 million.

“The combined businesses will have over US$250 million of annual revenue, operate in 19 countries, and have over 2,100 information technology professionals,” according to the annual report.

The 2020 annual report indicates that Massy received about US$50 million for the sale of the companies.

Group’s shareholders

Massy’s single largest shareholder is the National Insurance Board of T&T, according to the group’s 2020 annual report. NIBTT owned 19,801,051 million of the 98,342,382 shares issued by Massy, accounting for 20.13 per cent of the company, as at September 30, 2020.

Other significant shareholders of Massy Holdings include:

• RBC/RBTT Nominee Services Ltd

—10,246,075;

• RBC/RBTT Trust Ltd

—9,410,305

• Republic Financial Holdings Ltd

—7,198,348

• Barbados Central Securities

Depositary—5,909,175

Of the directors and senior officers of the company, Massy Holdings chairman Robert Bermudez holds the largest block. As at September 30, 2020, Bermudez owned 14,820 shares in his name and 1,901,393 shares in what is described in the annual report as associates’ shareholdings. This suggests that a shareholder associated with Bermudez acquired 1,111,489 Massy Holdings shares between October 1, 2019, and September 30, 2020.

The Massy share price closed at $80.50 a share on Friday, putting its market capitalisation at $7.91 billion. On the day after the Massy board decided to cross-list the company’s shares on the Jamaica Stock Exchange, May 7, Massy traded at $65 a share.

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