The Private Sector ain’t ready

Nov 13, 2022 Features / Columnists, Peeping Tom

Kaieteur News – Finally, someone from within the PPP/C has mustered the courage to tell the local Private Sector “that it ain’t ready as yet”. Speaking at an event last Friday, President Irfaan Ali, reportedly departed from his prepared text and castigated the local Private Sector for not being prepared with proposals for financing by visiting Korean and Saudi Investment Teams.

The President went to give another example of where the Private Sector has failed to grab financing opportunities. The Government had mobilized US$100M in a line of credit from Republic Bank for the agricultural sector but there have not been many takers.

The perception has often been nurtured that the PPP/C is close to the Private Sector. How then did the PPP/C not realize that the local Private Sector was ill-prepared to grab the opportunities being facilitated by the Government?

The perception was wrong. It is in the nature of the local Private Sector to curry favour with Governments. It does not matter whether it is the PNC, the APNU+AFC or the PPP/C, the Private Sector will seek a close relationship with Government.

The PPP/C Government, believing that the Private Sector is its faithful lapdog, until now has closed its eyes to the shortcomings of the Private Sector. It is this reason that the President of Guyana must be commended for doing what none of his predecessors in the PPP/C has done before: publicly expose the local Private Sector.

The President was right about the Private Sector not grabbing opportunities for financing which were facilitated by his Government. But he was wrong in thinking that the local Private Sector needs financing.

The local Private Sector does not think big. Generally speaking – meaning this does not apply to all private sector players – the private sector consists of many hustlers. They want to make big money and to do so fast.

But they not have the aptitude to make investments that would lose money in the short-term but turn a profit over the medium and long term. Most Private Sector entities want to turn a profit within the first year of operation.

It is for these reasons that the Private Sector has limited scope for expansion. Years ago, a senior government official had thrown out a challenge to the private sector to think about expanding their horizons to become global players.

This idea of the local Private Sector becoming global was a gross overestimation of the ambitions of the private sector. At present, the global footprint of the country is still to be found in rice, sugar, bauxite and gold – all primary commodities from the colonial days – and rum, a manufactured product also dating back to the pre-Independence era.

The President was wrong in assuming that the local Private Sector has a problem with financing. Many private Businessmen only go to the bank in order to be able to show the tax authorities the source of their financing. But many of them are very liquid.

Most of their profits end up being transmitted overseas. In fact some of them have been known to borrow heavily from the banks and then send the disbursements overseas to support their bourgeois lifestyles. The profits many of them make in Guyana are expropriated abroad.

If a proper assessment were made of capital flight, the authorities would be shocked to know just how much profits generated in Guyana are not reinvested here but shipped overseas.

Each month millions of US dollars are transferred overseas from the sale of local properties. The bourgeois is buying up properties in Guyana, including in Government housing schemes, keeping real estate prices high and then flipping these for a fortune which is then transmitted overseas.

But there is another reason which constrains Private Sector expansion. The local market is much too small to allow for substantial expansion. This is why so many Private businesses are so predatory; and this is why they crave Government contracts and concessions, the latter of which is converted not to bring down costs but to bolster profits.

Now that one President has had the gumption to tell it as it is, it is hoped that he would take action to correct some of the missteps of his Government. The attack on Trinidadian and Suriname businesses operating in Guyana is a case in point. These firms have taken the risk of coming to Guyana because they are not as myopic as sections of the local private sector. Yet, there have been attempts, including ones which the Court has deemed as unlawful, to shut them out of doing business in Guyana. The government also has its friends in the private sector which it seeks to prop up.

The President made an important point about the lack of business plans. Well, he does not need to hold the private sector’s hands and guide them through this process; the Private Sector does not need help with the development of business plans.

But since the President sees this as important, perhaps he should insist that before the Government offers to any investor a fiscal incentive agreement – which today is accounting for the bulk of tax exemptions – he should insist that business plans and feasibility studies be a precondition for accessing such concessions. And for a six-man committee to examine these plans to determine the level of concessions which should be offered. Want to bet this will send the Private Sector in cardiac arrest?