Gervase Warner

MANY FACTORS TO CONSIDER: Massy Group president: Gervase Warner.

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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