Tue | Jun 18, 2019

Daniel Thwaites | Wigton is a big deal

Published:Sunday | May 26, 2019 | 12:22 AM

I spend many column inches pointing at things I dislike or that irritate me. And that’s how it is supposed to be. Embedded in the idea of offering opinions and being a critic is the idea of complaint. And there’s certainly enough to complain about … . I’ll get right back to it next week.

But it’s important to stop every now and again and acknowledge when there’s something good going on. And this week that’s easy to do, since something quite remarkable has been taking place: regular people all over the country are talking about the stock market.

When taxi men and bus drivers are making investments in the stock market, that’s a qualitative change in the social and economic environment worth noting.

It matters that the whole Government seems to have got behind the effort. Also, a lot of the buzz may be attributed to the Mayberry team who shepherded this Wigton Wind Farm Initial Public Offering to successful completion, and who have become quite expert at grass-roots marketing.

But even accounting for all that, the IPO is a big deal. I’ve never seen anything like it. It’s unprecedented, bizarre, and encouraging.

It’s a big deal in size, a big deal in concept, a big deal for introducing large numbers of people to stock market investing, and a big deal in terms of symbolism.

Policy Continuity

It represents policy continuity. I’ve seen where Dr Peter Phillips, then finance minister, announced the previous administration’s intention to privatise some government entities by way of listing them from back in early 2016. The idea of divesting Wigton, and in this way, seems to have been hatched and initially nurtured by then energy minister, Phillip Paulwell. The current administration not only took that policy on board, but has gone the monumental further step of actually executing.

It’s been a few decades since a Jamaican government has been able to proceed with a divestment by way of listing on the stock market. There’s always been plenty talk, but no delivery. This changes that.

To get it accomplished would have taken a fair deal of prioritisation and stubborn focus, particularly as it’s the first one in a very long time.

Plus, I’ve learned through the grapevine that this divestment faced its fair share of headwinds. When people talk about government bureaucracy and excessive red tape being a hindrance to progress, it’s no joke.

My understanding is that there was no way that this IPO could have got off the ground if the PM hadn’t himself chaired a Cabinet sub-committee to make sure it happened. That’s impressive. And in that way Mr Holness is entitled to see it as a personal triumph.

So what has this transaction achieved? A lot.

An asset that in Government’s hands was valued at $5.5 billion saw its valuation jump around 30 per cent within the first day of trading. And as I write, the stock is up over 60 per cent.

A bottom-up share allocation ensured that smaller investors had their orders filled before larger ones and means that a big pool of investors got allocated all the shares they asked for. There were 31,000 investors in total, 11,000 of whom were new accounts.

These folk have seen their investment grow quickly. And this happened in an environment where customers with small amounts at a commercial bank are getting less than one per cent on their deposits. You really couldn’t ask for a better introduction to investing or a better way of encouraging saving and investing more generally.

So a sort of glass ceiling in value creation has been properly shattered.

HOW ABOUT PETROJAM?

Meanwhile, the Government will be able to pay down the principle of some debt, which will in turn lower the annual interest payments, freeing up money for capital spending or tax reduction. There are some health centres and some water systems across the island that could benefit enormously from a little attention.

Speaking of which, the National Water Commission could certainly use some help round about now, and tapping the capital markets mightn’t be the worst idea in the world. Naturally, this is an idea that has strong political ramifications attached, but it’s worth considering.

Let’s hope this is only the beginning of more such divestments to come. A few other state-owned entities could use a similar treatment. Factories Corporation of Jamaica, Ethanol Jamaica, Things Jamaica, Jamaica Mortgage Bank, National Rums of Jamaica, Central Wastewater Management, Jamaica Public Service, and the aforementioned National Water Commission.

Or how about Petrojam? The PM himself spoke to corruption risk being lowered by privatisation. Good point. But that’s not my focus today.

I think this specific economic positive, which follows a growing list of others, is worth remarking upon. Plus, it’s always worth remembering that the gradual painful maturation of the country’s political landscape to this point, where both sides are in agreement that fiscal stability and predictability are of exquisite importance, is nothing to be sneezed at.

Broad-based ownership of the country by its citizens, where everyone, or at least very many, feel that they have a stake in its success, is the only reasonable way forward for us. And we, thereby, can hopefully avoid some of the extreme ideologies that have pockmarked and disfigured us throughout even recent history.

- Daniel Thwaites is an attorney-at-law. Email feedback to columns@gleanerjm.com.