Wrong debate on NHT
Wrong debate NHT purchase
We previously declared our unease with the purchase by the National Housing Trust (NHT)
of the Outameni Experience tourism and cultural facility in the parish of Trelawny,
but the fundamental reason for our concern
is at odds with the basis of the criticisms that
have been heaped on the firm since the deal became public.
We are disturbed not by the fact that the NHT made an investment. Rather, we are not convinced that the Trust has the expertise - nor do we think it advisable - to take on a going concern, especially one that has struggled to make money and operates in such a specialised and competitive sector as tourism.
In this respect, much of the debate about the acquisition, including the interventions by the parliamentary Opposition and its leader, Andrew Holness, misses the point. The question is not whether the Outameni investment impairs the NHT's ability to meet its mandate of investing in shelter for Jamaicans, but how it achieves the best returns on the assets it owns.
The NHT is funded by a payroll tax of five per cent - two per cent by workers and three per cent by employers. Inflows from contributors have, in recent years, averaged around J$11 billion, while it earns a similar amount from mortgages. The Trust also earns a profit from other elements of its operations. In 2013, the NHT had a net surplus/profit of J$4.2 billion and had accumulated assets of J$194.5 billion. It spends around J$20 billion on housing, the bulk of it in mortgages.
But given the NHT does not spend its cash, whether on housing or to pay for other services, it has to invest that money, the return on which contributed to its accumulated surplus of J$121 billion. The issue is where and how should the NHT invest this money.
Sections 4 (2) (b) and 7 (c) of the NHT Act, which address the issue of the right of the board to invest the Trust's resources, place no limitation on where this cash can go. We are, however, wary of the foray into an enterprise like Outameni, but primarily from an operational standpoint.
MANAGE INVESTMENT RISK
The NHT's responsibility is to ensure that it invests its money safely and gets the best returns possible so as to provide benefits to its contributors on a sustained basis at the least cost to them. The Trust has to carefully assess and manage its investment risks, for which it has substantial expertise and evolved an operational culture.
But those skills, we do not believe, extend to the day-to-day management of a business that never has money, and which, beyond its J$180 million acquisition cost, will require more capital for upgrading and serious management if it is to be profitable, unless the controversy has caused a shift in strategy.
The latter point may be behind the late emphasis by board member Lambert Brown that what the Trust has purchased was 10 acres of land, while his chairman, Easton Douglas, had spoken to the idea of operating a profitable business. In this circumstance, the NHT is faced with an unnecessary distraction and a controversy that has been exacerbated because of poor communication.