NICIL’s changing mandate over the years (Final Part)

In our last two articles, we discussed the operations of National Industrial and Commercial Investments Ltd. (NICIL) in light of the recent controversy over the State-owned company’s involvement in mainland bargains in Ogle on the East Coast Demerara, Peters Hall. on the East Bank Demerara and Wales on the West Bank Demerara. This was at a time when Government status was Carer Administrator status pending the outcome of the 2 March 2020 elections.

Some of the most troubling aspects of the land deals include allegations of: (i) the lack of transparency in the transactions, the absence of the valuation of the lands involved, and in some cases the lack of the required approval by the NICIL board and / or Cabinet; (ii) plotting to lease some of the lands in the Peters Hall area to persons and having them almost ‘flip’ to the intended beneficiaries in exchange for substantial sums of money; and (iii) serious conflicts of interest in these land deals involving a person (s) attached to NICIL.

Last week, it was reported that NICIL, through its Special Purpose Unit, had disposed of thousands of acres of Welsh Estates land through leases without evidence of following any proper procedures. Since then a number of people have received notices of cancellation of their leases although some have spent significant sums of money to develop the lands they own. NICIL has begun to carry out an occupational survey to identify the occupants and the size of the tenure. There were also allegations that the main lands and property were leased to people with no agricultural background, and it is not clear on what basis they were able to acquire such lands.

The Government has indicated that it intends to create a statutory body corporate, appoint a board and vest the lands in that body. The board will be responsible for, among others, establishing a transparent process by inviting expressions of interest in agriculture; assess the applications against specific agreed criteria; and lease the lands to individuals and organizations that meet the criteria. The objective is to ensure that the lands are leased to people who will occupy them beneficially, create jobs, and contribute generally to the economy. Former Welsh Estate employees who are advised to organize themselves in co-operative societies are given some priority.

Today’s article concludes our discussion of the changing mandate of NICIL over the years.

Repeat the previous two articles

NICIL was initially set up to monitor Government investments in public corporations and other entities where interest management is vested in the State, and collect and pay to the Treasury all dividends received. These investments were vested in NICIL without consideration, and although legally held by NICIL by virtue of the associated vesting orders, the State agency was effectively a State-owned company, subsidized by ‘ the national budget to cover its cost. operations. Indeed, NICIL was in a custodial relationship for these investments.

Effective from 2002, NICIL became an integral part of the Government’s privatization program through an approved Cabinet merger with the Ministry of Finance Privatization Unit. As a result, NICIL became responsible for diverting State assets set out in the Privatization Policy Framework Paper laid in the National Assembly in 1993. However, instead of paying the dividends it received as well as the privatization proceeds, it retained NICIL made such funds, claiming to be its revenue, and used them to undertake various government projects without parliamentary approval.

The agreement was to remain in force unless Cabinet decided otherwise. However, one would have thought that once the Government ‘s privatization program was over, NICIL would have returned to its original role. However, this was not to be the case, as more State assets were vested in NICIL, including lands formerly owned by GUYSUCO. Some of these assets have been disposed of, and profits have also been retained by NICIL.

During the period 2007 to 2012, NICIL assumed the role of Project Delivery Unit, receiving funding from various State agencies and paying them to carry out various government projects. These projects were not reflected in the national budget and would therefore have been without parliamentary approval. In effect, NICIL assumed a ‘parallel’ Treasury role. It also acted as GUYSUCO’s agent for the disposal of some of its assets but in this case the proceeds were transferred to GUYSUCO.

With the previous Ministry’s decision to close four of GUYSUCO’s seven sugar estates (Skeldon, Rose Hall, Enmore and Wales), a Special Purpose Unit was established at NICIL to oversee the disposal of these estate assets. By Order 45 of 2017 dated 29 December 2017, these assets were formally vested in NICIL. In mid-2018, NICIL secured a $ 30 billion bond to recapitalize GUYSUCO and bring it back to profitability, based on GUYSUCO’s strategic plan. The bond, which expires in 2022, is guaranteed by the Government. With the current Ministry’s decision to reopen the four estates and prevent the disposal of their assets, it is highly unlikely that sufficient funds will be carried to meet the bond obligations. As with the Marriott Hotel, the Government will have to find the necessary funds to repay this debt.

Financial reporting and audit

Government officials have reported that no audited reports of NICIL were received during the tenure of the previous Ministry’s post. Although the Auditor General’s reports for the years 2015 to 2018 indicate that this may be the case, the evidence suggests that the last set of audited accounts was to be produced by NICIL in respect of 2013.

Section 346 (1) of the Companies Act provides for a Government company to submit audited accounts to the Minister within six months at the end of the financial year and for those accounts to be laid in the National Assembly no later than three months thereafter. A Government company is defined as any company in which the Government holds not less than 51% of the paid up share capital and includes a company that is a subsidiary of a Government company. As the Government owns all of NICIL’s $ 100,000 paid-up share capital, it is therefore a Government company.

Section 107 requires company directors to convene an annual general meeting of shareholders not later than 18 months after the company comes into existence and thereafter, at least once every calendar year and no later than 15 months. having held the previous annual general meeting. The main purposes of the meeting are to: (i) consider the financial statements of the company; (ii) the auditor’s report; (iii) election of directors; and (iv) reappoint the existing auditor. Failure to hold such a meeting shall render the company and every officer of the company guilty of an offense and shall be liable on summary conviction to a fine of five thousand dollars.

In June 2012, NICIL was eleven years in arrears in financial and audit reporting and therefore violated the above company law requirements. The last set of audited accounts was in respect of 2001. Despite this, NICIL was not struck from the Register of Companies for its failure to submit the required annual returns, including its audited accounts, to the Registrar of Companies, as required by Sections 153. -154 of the Companies Act.

Concerned about the state of NICIL’s liability in general, and the lack of transparency and accountability associated with the disposal of State assets in particular, the National Assembly passed Resolution No. 14 of 27 June 2012 calling on the relevant Ministers to, among others :

(a) Report to the Assembly on the disposal by sale or otherwise of all state lands during the period 2000-2011, including the terms on which they were disposed of, and the criteria applied;

(b) That financial provision be made for the urgent commissioning of an independent financial audit of NICIL and the Privatization Unit;

(c) Provide a detailed report on the disposal, by sale or otherwise, of all State assets entrusted to NICIL and the Privatization Unit, the terms on which they were disposed of, and the criteria used; a

(d) To provide the biennial reports and annual audited accounts required by NICIL and the Privatization Unit under the relevant legislation.

Three months later, on 27 September 2012, the Auditor General published his reports on the financial statements of NICIL for the years 2002, 2003, 2004 and 2005. These statements were given unqualified opinions as well as subsequent years’ statements ie a “clean bill” health ”, despite the concerns expressed in the forensic audit report that would have had a significant impact on NICIL’s financial statements. For example, as a result of keeping dividends received from public corporations as well as profits from diverting and treating funds as their revenues, NICIL accounts showed unexpected gains so much that the 2002 audited accounts showed $ 1 per share earnings of $ 16,445!

Table I shows the trend in NICIL financial and audit reports for the period 2002-2013.

As noted above, there is no evidence that accounts have been audited following 2013.

The forensic audit report had argued that there is no holding company / subsidiary relationship between NICIL and the investments in public corporations vested in it. However, NICIL considered itself a “holding” company and began to produce consolidated or group accounts of itself and its “subsidiaries”. However, the activities of NICIL and those of its “subsidiaries” are so unlikely that any attempt to produce group accounts would be meaningless. Indeed, Section 160 (2) of the Companies Act provides for situations where group accounts are not required, as follows:

► If the directors are of the opinion that it is impracticable, or would not bring any real value to the company’s members, given the insignificant sums involved or would involve expenses or delay out of proportion to the value to the company members, to do so;

► The result of doing so would be misleading or detrimental to the business of the company or any of its subsidiaries; or

► The business of the company and the subsidiary’s business are so different that they cannot be treated as one undertaking.

It was therefore not surprising that, having produced consolidated financial statements for the years 2002 to 2006, the exercise appeared to have been aborted. Apart from that, there is evidence that consolidated accounts were prepared and audited before NICIL during the audit of a single company, which was clearly an anomalous situation, as shown below:


Given all the problems highlighted in the forensic audit report on NICIL, several recommendations were made, including:

(a) Termination of the Management Cooperation Agreement on 28 December 2001, as provided for under the Agreement;

(b) Dissolve NICIL as a company under the Companies Act 1991 and appoint a Receiver to oversee the liquidation process; a

(c) Re-activate the Privatization Unit as a department of the Ministry of Finance to manage the Government residual investments after the conclusion of liquidation proceedings. In this regard, existing NICIL staff could be transferred to the Ministry of Finance.

Finally, it must be acknowledged that NICIL has allowed an out of control spin for too long. It’s time to look carefully at all its operations. With the appointment of a new Chief Executive and a new board, there is a promise of hope that all the undesirable aspects of NICIL’s operations will be concluded as soon as possible. The proposed establishment of a public body corporate for the Welsh Estate assets seems to be a step in the right direction. However, the mandate of this body should extend to the other three estates – Skeldon, Rose Hall and Enmore – thereby ending the operation of the Special Purpose Unit under NICIL. The proposal is broadly in line with a paper I had prepared and submitted to Government at its request some time in 2017.