Fri | Dec 9, 2016

OUTAMENI PURCHASE: Raiding many poor to enrich a few?

Published:Friday | November 7, 2014 | 12:00 AM
Chairman of the National Housing Trust, Easton Douglas. File photos
Former owner of Outameni Experience, Lenbert 'Lennie' Little-White.
Outameni Experience
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Prime Minister Portia Simpson Miller loves to be called and seen as the champion of the poor.

The National Housing Trust (NHT), which was established by her mentor, Michael Manley, was established to provide housing primarily for the poor by using taxes collected for that specific purpose to finance the less well-to-do in our society.

It would seem to be a perfect fit.

The prime minister, who states often and publicly to be a friend and champion of the poor, took into her prime ministerial portfolio the institution that was designed and created to supply housing for the constituents she most loves to talk about as championing - the poor.

Regrettably, in the three years since her party won at the polls and she took the reins of Government, she has made at least two major financial assaults on the NHT. These raids have served to reduce significantly the Trust's ability to provide housing benefits for the poor. One result is the funds have been used to protect or enrich a few persons and even fewer companies.

The first assault, many will recall, happened in early 2013 when $44 billion was expropriated from the NHT - for distribution annually over four years - to satisfy the requirements of the International Monetary Fund (IMF) in relation to the fiscal consolidation plan that it was negotiating with Jamaica at the time.

While the raid on the NHT coffers was sold as an action with no alternative, it was also one that saved the government from going to our lenders with a bigger National Debt Exchange figure.

This means that poor persons who have been denied new NHT homes after many years of making contributions by them and their employers, saw their National Housing Trust give up $44 billion - which the NHT ought to have held in sacred trust - to the Government in order to save rich financial institutions from a deeper 'haircut' in their government bond portfolio.

The poor were 'fiscally consolidated'.

These were the same lenders who were willing to lend to profligate governments in a country that one very prominent banker in the early 2000s called a failed state.

Many poor NHT contributors watched their hard-earned contributions go to stave off pain from big and rich institutions, and their often much better-off shareholders, after these firms continued to lend into a Government of Jamaica (GOJ) debt mountain that was clearly unsustainable.

NHT HAS LOST ITS WAY

The Outameni purchase is baffling given what is known. The NHT cannot build enough houses but it has taken funds to "invest" in a failed entertainment property.

Many are saying that this $180-million purchase is a bailout and they are wondering why.

Why would 10 acres of land in this relatively remote area carry such a high market value? A good investment analyst would fully, or almost fully, discount the value of the business given that the NHT mandate is to acquire land to build starter or near-starter houses for its tax contributors; it has no known expertise in managing entertainment facilities, and the business was put up to auction because it could not make any profit by its few private-sector owners and managers.

As a very successful businessman, Patrick Casserly, said over the weekend: "If the attraction was profitable, Government would not have been given the opportunity to buy it". That is so true.

Also, it is fair to state from my experience that when a business fails, private-party purchasers will invariably take little notice of any valuation but will seek to buy the business based on its projected positive cash flows in a reasonable time frame. In other words, the purchasers will do proper due diligence and test projections before purchasing the asset - providing they have the managerial expertise to run the failed business.

On the face of it, the NHT, being government-run with a board that is appointed by the Government, does not have the depth of investment experience to make the assessment, and is going to find it hard to convince the public that this was a wise purchase.

CHARTER COMMITS TO TRANSPARENCY

The citizens charter of the NHT says: "Our Charter aims to detail our administrative accountability, providing you with transparency and access to information all in a very warm and friendly manner".

Given the rather public questioning of the Outameni purchase for $180 million, plus another reported $111 million to be spent on improving the property, let us see how 'accountable' and with what level of 'transparency' and 'access' the NHT board members - packed with trade unionists who represent a lot of ordinary working-class people - will make themselves.

Already, some have defaulted into silence mode and are hiding behind the 'collective responsibility' smokescreen.

We need to know names of, possibly, the few who will benefit from the almost $300 million emanating from many millions of small but regular contributors to the NHT funds which should be held in trust for them.

Who led the negotiations for the NHT? What cash flow projections were secured and assessed to justify the purchase and define a reasonable payback period?

Who prepared the financial projections? What led the board to deviate from its specific house-providing mandate? Who was the elected person and or minister, if any, who approved the policy variation and purchase?

I hope the Trust's responses will be very transparent and delivered in a timely and "very warm and friendly manner".

Aubyn Hill is CEO of Corporate Strategies Ltd and chairman of the opposition leader's Economic Advisory Council.Email: writerhill@gmail.comTwitter: @hillaubynFacebook: facebook.com/corporate.strategies