The funds held by NICIL are not required to be placed into the Consolidated Fund
No doubt with the intention of diverting attention from its unpardonable cuts to the 2012 Budget, the Alliance for Change (AFC) in full theatrical mood is attempting to shift the blame for its anti-development agenda towards the government.
Having been the prime mover behind slicing 21 billion dollars off the national Budget, the All for Cuts party is now accusing the government of cutting fifty billion dollars from Budget by not incorporating the funds held by the National Industrial and Commercial Inc. Limited (NICIL). This is the AFC’s latest ploy to deflect attention from its incomprehensible actions.
Some of the newspapers, including Kaieteur News, seem only too willing to further the perception that somehow the government is sitting on fifty billion dollars which is hidden away. In so doing they are neglecting their duty to check on the facts so as to ensure that their readership is not misled.
Whether fifty billion dollars is involved is another issue altogether. Given its recent record, caution should be exercised before readily accepting the numbers that the AFC throws out for public consumption. It is yet to be determined just how the AFC arrived at this figure of fifty billion dollars. Perhaps this was part of the advice that it has been receiving lately.
However, even if it can be established that NICIL did over time cumulatively receive in excess of fifty billion dollars, it does mean that this sum is available for use in the Budget or that it is being hidden or is part of a slush fund.
NICIL is a body corporate. It was formed as a holding company for the shares which government has or had in a number of entities. It is also a parent company for a number of entities in which the government has a stake. It is also vested with the buying and selling of government properties and it is empowered to make investments.
NICIL is 100% owned by the government of Guyana and was formed not by the PPPC administration. It was incorporated under the Corporations Act, an Act of Parliament, in July 1990 during the PNC regime.
It is controlled by the government. This is not unusual for an entity that deals with the divestment of government properties. Under the PNC regime, responsibility for privatization was assigned to the Public Corporations Secretariat (PCS) which in turn reported to an economic subcommittee of Cabinet, with the Minister of Planning being responsible for overseeing the work of the PCS. The actual approval of recommendations for privatization was done by a standing committee of ministers of the government. The process of privatization as therefore always controlled by politicians and directly by the Cabinet. The present arrangements therefore in which there is a Privatization Unit and NICIL is not substantively different from what existed under the PNC.
The PNC after it opted to pursue economic liberalization, found itself with a huge financing gap in its Budget. As such, it was pushed faster into divestment.
There has always been a controversy as to whether the proceeds of privatization should be held in the Consolidated Fund. The then Auditor General had noted in the 1992 Auditor General’s Report that the proceeds from divestment were NOT paid into the Consolidated Fund but were instead kept in a separate account.
These were not the only proceeds that were so held in special accounts. The proceeds from the sale of gold were kept in a special account located outside of Guyana and controlled by Office of the President.
Long before that there was a lotteries fund. The monies here were also not transferred to the Consolidated Fund but were paid into a Government Lotteries Account. At the end of each year, the credit from that account was not passed into a Development Fund. So there is a host of precedents that debunks the idea that there is something illegal about holding money in NICIL.
Despite this, there still remained calls for the proceeds held by NICIL to pass through the Consolidated Fund. Even before the debate on the 2012 Budget, there were such calls. However, no legal authority has yet been produced to justify these funds being paid into the Consolidated Fund.
One former Auditor General has ventured to suggest that the legal opinion that the government received on the issue was flawed but no persuasive alternative legal argument has been offered.
If one existed, or if a credible case existed to legally justify the movement of these proceeds to the Consolidated Fund, approaches would have been already made to the courts for a ruling to this effect.
Instead what we have had are a set of opinions, many of which have the taint of politics, about what should happen. But no one is risking their reputation by asking the courts to rule that the holding of funds within NICIL, outside of the Consolidated Fund is unlawful.
There is of course a clearly obvious reason why the funds cannot be moved to the Consolidated Fund. The accounts held by NICIL are no ordinary accounts. NICIL is a body corporate. As such it cannot simply move its revenues to the Consolidated Fund since it has expenses and it has liabilities. It is the parent company for a number of existing public enterprises including the Guyana National Shipping Corporation, the Guyana National Printers Limited and the Guyana Oil Company. It has obligations to these entities; it may have to absorb losses, it has outstanding pension issues with bauxite workers that are not yet settled; and it is facing at least one major legal challenge to one of its privatization deals, which if it goes against it, could lead to an award reaching hundreds of millions.
The fact that NICIL may have, over a period of time, collected a large amount of revenues from the sale of government properties does not therefore mean that NICIL is simply sitting on this money. Nor is NICIL a slush fund. It is a body corporate established under the Corporation Act and is governed by that Act.
For this reason also NICIL is not in breach of the Constitution of Guyana by not paying its holdings into the Consolidated Fund.
Article 216 of the Constitution of Guyana provides that all funds received by Guyana should be paid into the Consolidated Fund, except for revenues or other monies that are payable or held, by or under an Act of parliament, into some other fund established for that specific purpose.
NICIL was formed under the Corporation Act which is an act of parliament and it has an account which is held for the specific purpose of holding the proceeds of government interests as well as for the proceeds of divestment. This account is therefore not in contravention of the Constitution of Guyana.
NICIL should be using the funds that it has to make money for the government so that it can pay dividends into the Consolidated Fund.
What the AFC needs to be concerned about is not the legality of holding these funds but whether the funds held in NICIL have been properly accounted for. If there is indeed a problem with the accounts of NICIL not being audited, then it is for the Auditor General, who is statutorily required to audit these accounts, to explain why this has not been done.
The Auditor General has promised to pay some interest to NICIL, the holding company that is responsible for the proceeds of privatization funds. When the Auditor General’s Report is made public, the people of Guyana will be in a better position to determine whether the AFC has again been misled, this time about the amount of proceeds that are held by NICIL.
Its fifty billion dollar figure may turn out to be far less.