A report completed by the Extractive Industries Transparency Initiative of Guyana has revealed that the extractive industry in Guyana, particularly gold mining, has contributed to 65.1 per cent of Guyana’s total exports for 2017.Natural Resources Minister Raphael Trotman during the handing over of the EITI Report summary from Deputy Coordinator for the Guyana EITI (GYEITI) Diane BarkerIt is EITI’s first report to the Government of Guyana on the extractive sectors, in keeping with an April 25, 2019, deadline for presenting the report. According to the report, total revenues from the sector in the 2017 fiscal year amounted to $20.8 billion.The Guyana Gold Board, to which gold declarations are made, accounted for 33 per cent of this revenue. This is followed by the Guyana Revenue Authority, 32 per cent and the Ministry of Finance, 18 per cent.Gold and other minerals contributed $17.4 billion or 84 per cent of revenue from the extractive industries. On the other hand, oil and gas contributed $2.8 billion or 14 per cent. Bauxite, one of Guyana’s oldest industries, contributed $479 million or 2 per cent.The extractive industries’ contribution to exports has a dollar value of 193.2 billion. Besides the sector’s contribution to exports, it contributed 9.3 per cent to total Government revenues and 4.2 per cent to Guyana’s total employment. Its contribution to Guyana’s overall Gross Domestic Product (GDP) was 20 per cent.The report was presented to Natural Resources Minister, Raphael Trotman and according to a statement from the Ministry, it will be presented to Cabinet this week. The Minister was quoted in the statement reaffirming Government’s commitment to the EITI process.“For a country like Guyana where the bedrock of our economy is the extractive industries, this is very important… This has been a steady process. We trust that this is the part of the journey to full transparency. The Government is fully committed to this.” – Minister of Natural Resources Honourable Raphael TrotmanEITIThe EITI is a global standard to promote the open and accountable management of oil, gas, and mineral resources. Under the EITI standard, companies publish what they pay to Governments, and Governments publish what they receive in an annual EITI country report.In many countries, most of the revenues from natural resources accrued at subnational levels are not derived from company payments to Local Government entities, but from transfers to the Central Government.Depending on the revenue distribution frameworks in place, these transfers can be a considerably larger source of revenue for subnational entities than taxes and fees collected at local levels. The revised EITI standard requires that such transfers are reported where mandated by law and where material.Where companies are legally or contractually required to make social contributions, these must be disclosed, under EITI standards. Where countries collect significant revenues from the transportation of oil, gas and minerals, such as pipelines, the Government will also be required to disclose the revenues received.The requirement to publish annual activity reports is not limited to compliant countries, the EITI said. It is foreseen that countries will report on progress with meeting the EITI requirements as well as (on) efforts to achieve the objectives set out in their work plans.Validation is procured and managed by the EITI’s International Secretariat rather than by implementing countries. Countries undertake validation more frequently, with compliant countries being revalidated every three years as opposed to every five years under the old rule.Oil was discovered in commercial quantities in Guyana in 2015, after which Guyana applied and was approved to join EITI. This was done with the understanding that Guyana’s first EITI Report must be published within the next 18 months and the country will be required to commence validation within two and a half years.Where validation verifies that Guyana has made satisfactory progress on all of the requirements, the EITI Board will designate the country as EITI-compliant.
GuySuCo’s $30 billion bond…interest higher than on treasury billsThe Private Placement Memorandum for the Guyana Sugar Corporation (GuySuCo) $30 billion bond is now with Opposition Leader Bharrat Jagdeo. In revealing his thoughts, Jagdeo said that he was shocked by the contents of the agreement, which now leaves more questions than answers.Jagdeo reminded that several things were said about the agreement. At one time it was called a bond then a loan and then it was later revealed that Government pledged the assets of the National Industrial and Commercial Investments Limited (NICIL), because the Government did not give any explanations.“I’ve had a copy of the Private Placement Memorandum for the bond – the $30 billion bond and I was shocked,” the Opposition Leader said recently, noting that in reading the memo, he came across details that the proceeds would be used to fund long-term projects and capital expenditure.Jagdeo, an economist by training, said the general perception was that Government was raising $30 billion to spend on GuySuCo, on the remaining three estates. However, the memo tells a different story, as it has stated explicitly that the $30 billion that they agreed to will go to long-term projects instead.“We don’t know what the projects are as yet, but you would recall that this bond is only for five years. So, they’re borrowing on a short to medium term, for long-term projects. You tend to match your borrowing with the life of the project. Normally, we would borrow on concessional terms for long term-projects.”He used the example of the road and airport expansion projects, where there is an option of repayment of 20 or 30 years at one and two per cent interest. These, he said, are long-term projects, “so that you don’t have big balloon payments or like payment popping up like on the coupons here.”However, Jagdeo said in the case of the GuySuCo bond, this was different because, “In five years, at a 4.75 per cent interest, which is 355 basis points above our treasury bill. The Government of Guyana will have to pay back from the proceeds of NICIL, nearly US$40 million in about five years just to service $30 billion.”The former Head of State said that the sum could have been used to build an entire Marriott Hotel. “And you would recall the money we were trying to borrow against Marriott, the only collateral was the project itself, not a guarantee by NICIL but the project itself. If the project fails, the bank takes the project,” he reminded.In this case, the loan is guaranteed by NICIL, and NICIL would repay the loan and it has a State guarantee. “So, that is it. The borrowing cost is high, higher by treasure bills…significantly. Imagine the Government can borrow now on T-bills, just over one per cent and they want to borrow at 4.75 per cent,” he added.In addition to that, Jagdeo said that the bond would be free and clear of 40 per cent corporate tax, giving the Government a guarantee, which essentially means that it is a tax-free bond to the banks as well.NICIL’s Chief Executive Officer had recently confirmed that over the next few months, special emphasis would be placed on transforming GuySuCo’s economic misfortune into a situation where it was a fully self-sufficient, viable and competitive enterprise.He had disclosed that the Finance and Agriculture Ministries and all of the related industry partners were fully on board with the new Board of Directors’ vision for a new value-added industry and modernised company.Heath-London explained that when the restructuring plans were at a mature stage, then the real benefits would be realised to ensure GuySuCo’s modernisation and return to profitability.He spoke about the sale of prime GuySuCo lands around the country and the new approaches that were being employed by his technical officers.Since his announcement of the bond, concerns have been raised about Government’s vision for the industry and the genuineness of its actions thus far since that very $30 billion could have gone into restructuring the industry while keeping all of the estates open and GuySuCo’s workforce employed and engaged.