The Economy: The Business Summit 2017 – a critical review of some of the key issues discussed


On October 11 – 12, 2017, the Private Sector Commission of Guyana held a Business Summit, an event that was perhaps the first of its kind, and I would say it was much needed and quite relevant. For this, the coordinators, sponsors and of course the participants inclusive of top government officials and business executives – must be commended. It was no doubt a good initiative. But, importantly, how effective it would prove to be and whether – as the President of the Chamber of Commerce assured – that there is a mechanism in place to ensure an appropriate action plan is being executed in light of the recommendations and so forth – arising from the summit – to execute that process – is another matter altogether.

Having read about some of the issues that were discussed at the forum and having viewed a few snippets of the videos on the Private Sector  Commission’s social media – Facebook page, I am inspired to weigh in on some of the key issues that were highlighted viz -á – viz the Business Summit, 2017. In doing so, I chose to extrapolate on what I consider to be some of the key issues and have thus attempted to contextualize and in some cases expound on, more or less in a practical and objective context. Chiefly, I will focus on the capital market in Guyana and access to financing, as these topics seemed to have dominated some parts of the sessions.

Before doing so, and for ease of reference, I wish to restate some extracts of the presentation made by the President of Chamber of Commerce in which he was speaking to the Head of State directly, seeking clarity with regards to “the government’s approach on economic development, taxation policy, incentive programme for businesses,” among other things. In this respect – the head of state responded in his presentation by saying to the private sector (business executives), that other countries such as Brazil, Russia, China, and India are investing in Guyana and so, why is it that the private sector cannot invest. Further, he went on to describe the six sisters – the productive sectors namely: gold, bauxite, sugar, rice, fisheries, and timber as a ‘curse’. Now, such a statement, I am hard pressed to debunk, respectfully for it is an appalling statement to be coming from the Head of State.

How could one label the sectors that have been the hallmark of growth, development, the livelihood and bloodline of the people of all walks of life of this nation and by extension the country itself – a curse? That is a dangerous statement with all due respect for the Head of State, and as a matter of fact, the principled thing for him to do at this point is to retract that statement – as it could have serious repercussions – it is sending perhaps unintentionally, the wrong signals. I cannot help but emphasize this as an analyst.

In the same statement, he charged the private sector for “lack of innovation, neglect of value-added manufacturing and absence of diversification”.  Clearly, in that remark, which is positive, indicates that he is aware of what are some of the critical elements needed to take the country forward and to achieve his agenda of creating the good life for all, but the question and the real problem at hand that he should have addressed, is what are the factors that are inhibiting the private sector from doing so and why and what are his plans to address them?

Readers of this column would recall that last week I highlighted two essential points that are of relevance and applicability to the matters discussed here. I spoke of the importance of confidence in an economy and I made the point that the reason the manufacturing sector has been deprived and struggling to innovate; exploit economies of scale; become more efficient and competitive is because the cost of energy or to be more precise, electricity, is extremely costly when compared to other countries in the region and that is one of the key reasons the manufacturing sector is unable to achieve the objectives advocated for by the Head of State.

That brings me now to the questions and discussions raised on access to financing for businesses, particularly small businesses and by extension the domestic capital market. There were talks and concerns raised by some business persons in attendance of the challenges to access and the cost of capital, venture capital for example for startups. Again, citing the Head of State, he made a bold statement, charging the commercial banks to become a ‘gold mine’ for investment capital.

To this end, I shall expound on the responses made by two of the panel members on that aspect, one being a member of the opposition and the other, the Chairman of the Guyana Bankers Association (GAB) and Managing Director of Republic Bank. First, let’s discuss the opposition member’s response:

He posited that the central government has crowded out the private sector in the domestic capital market in terms of accessing capital, given that the total central government borrowings is greater than that of the private sector.

The Chairman of GAB, however, refuted his claim to which I concur in absolute terms. The banking system is adequately capitalized which means liquidity is not a problem and therefore, the question of whether the central government is competing with the private sector in the capital market does not bear any merit. There is adequate liquidity in the system. In fact, there is excess liquidity in the system.

I distinctly recalled when the 2017 budget was presented and debated in parliament, the opposition in its presentation made the same assertion back then. And around that same time, I was delivering a lecture to some students of Accounting and Finance (ACCA) and I asserted the same position as that of the GAB’s Chairman. Politicians need to take responsibility for the things that they put out to the public, the things they say, especially on matters of the economic affairs of the country. Not everything must be politicized – I hasten to say that it is disappointing as it begs the question – are we really serious about developing this country?

Now, dealing with the matter at hand on this, perhaps, I am assuming, what the Head of State failed to recognize is that the banking system, which is dominated by commercial banks by their nature – cannot be the ‘gold mine’ as he insinuated, for investment capital. Why? Because commercial banks are deposit-taking institutions – deposits (savings) from householders – which they then channel to borrowers – borrowers are both individuals and firms. So, given this, they have a responsibility to protect depositor’s funds which means they have to engage in prudent and sensible lending and it is for this reason, they are naturally risk-averse.

I am trying to be mindful not to regurgitate everything that was discussed as space precludes me from having a more detailed discussion. But to come to the point I wish to make, and as was highlighted by GAB’s Chairman, the Banks wish to lend more, but with experience, businesses and firms ought to be more disciplined and prudent. This is a fact that I can truly endorse to be correct.  Many businesses, especially the very small businesses they do not keep proper records and engage in correct accounting practices, and/or do they even manage their enterprises properly and as such, these are the very factors that contribute to them not being able to access funding. Why? Because these limitations increase the risks for the banks.

Finally, what then, should be the solution? I heard no one made any reference to this but, my take on this is that the long-term solution lies in the need for a State Development Bank. Next week, I shall address this aspect in a separate article – given that it bears relevance to today’s presentation but it is a different subject matter altogether.

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