Minister in the Ministry of the Attorney General Stuart Young says the Government will not be interfering in the selection process for the Commissioner of Police.

Young said this in Parliament on Wednesday while contributing to a debate of a private motion by Opposition members to annul the order for changes to the selection process of the Commissioner of Police and Deputy Commissioner of Police.

Young, who responded to assertions from the Opposition that changes to the process could allow the Government to interfere with the appointment, said the Executive played a limited role.

“The only role the Executive plays is that the Minister of National Security requests that the Police Service Commission commence the selection process,” Young said.

“What we are looking to do is fix a problem that existed for the past three-and-a-half years to ensure there is a permanent Commissioner of Police.”

Young said Government had moved quickly to simply bring forward the process of the appointment.

He said there was nothing that could be argued to be wrong with the newly proposed process.

The new process allows the Minister of National Security to request that the Police Service Commission contract a local firm under the Central Tenders Board Act to conduct the recruitment process, which includes inviting applications for the posts.

“There is a desire by the Government to rebuild the country and move us to a first world status. A lot of fuss was made to the selection of the firm. 

“We have in no way shackled the Police Service Commission,” said Young.

“We have provided them with a simpler process. That task is completely mandated on the hand of the Police Service Commission working with a suitable local firm to find a local commissioner.”

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Opposition MP Prakash Ramadhar says the next Commissioner of Police must be one that the entire country has confidence in and must not be a political stooge.

Ramadhar was speaking during Wednesday’s motion in Parliament.

The former minister questioned whether the newly proposed process held to the principles of transparency and accountability.

He said in the past there had been allegations of the police being used as political tools and gave examples of voter padding in the early 2000s as well as a botched raid on the home of former UNC minister and MP Sadiq Baksh.

Ramadhar said the new process that is attempting to be instituted guts out the oversights that the independent Police Service Commission must have in the process of selecting the Commissioner of Police.

“If we should allow this to go forward, it is to subvert the powers of the commission. Why do you want to do this?” Ramadhar asked.

He said the unnecessary efforts to undermine the commission was dangerous.

“The commission had a step-by-step control and oversight of everything the firm did. With this new process, once the job is given to this firm hands off they could do what they want in silence and certainly in darkness. That is a dangerous thing,” Ramadhar said.

“If you want at the end of a selection process to choose a red poppy you just put four red poppys on the list. This new possibility goes against the grain of transparency.”

He said this could not be allowed to happen as the new Commissioner of Police must have the moral authority that he is above reproach and was not put their at the behest of political interference.

“The removal of certain oversight responsibility from the Police Service Commission is a dangerous thing for the country,” he said.

Ramadhar was supported by an earlier contribution made by Opposition MP Bhoe Tewarie.

Tewarie said if there was a situation where there was doubt about whether the process was fair and open and transparent and you have doubt on whether the process is controlled by the political directorate, or that the outcome has been predetermined then citizens were dealing with a situation that was troubling for the democracy in this country.

“I am raising the issues of the doubts, opportunity for control of the outcome, politicisation and I think it is something that is serious in the country,” Tewarie said.

He said he agreed the appointment of the commissioner was an urgent matter and needed to be dealt with expeditiously but it must also be dealt with properly. (KC)

The Government has “targeted” people for the post of Commissioner of Police (CoP) and Deputy CoP and names being heard in connection with this include DCP Harold Phillip, Snr Supt McDonald Phillip and ACP Vincel Edwards, says Opposition Senator Wade Mark.

“People are telling us these are some of the elements they (government) have in mind to become CoP and deputy CoP... tell us... we have been hearing names about who Government may be seeking to promote, they must deny it,” Mark said in the  Senate yesterday.

This occurred during debate of an Opposition motion to annul Government’s December 2015 Orders on the selection process for a CoP and deputy CoP. 

A similar motion was debated by Government and Opposition in the House of Representatives on Wednesday. When debate concluded at 12.30 am yesterday, the motion failed due to Government’s majority votes against it.

In yesterday’s Senate debate on the issue, Mark told the Government: “Go ahead, pass it (Orders). At the end of the day, the court will determine if you are right or wrong... you may have the majority here and defeat us but we will go to the Supreme Court and the Privy Council... there is the Privy Council. We will support retention of the Privy Council as we feel we will get fairness there.”

Saying the Opposition was not against a local CoP or deputy CoP, Mark said the Opposition had difficulty with the process since the CoP had 6,000 arms-bearing people under their command and “if you put the wrong person in charge, we would end up with an Eric (Gairy) like in Grenada with a Mongoose Gang, a Burnham in Guyana or a Papa Doc and Baby Doc in Haiti and a criminal in the Philippines named Marcos.”

Dismissing claims of consultation, Mark maintained there was no discussions with the Police Service Commission (PSC) or other stakeholders, including the Police Second Division Association and the Opposition.

Claiming the PSC was being undermined, he challenged the Government to say who was consulted before making the Orders.

Mark said there was a “massive difference” between the 2015 Orders and the 2009 Orders for the selection process and six aspects were left out. 

While the Director of Personnel Administration (DPA) had triggered the process in the 2009 Order, the 2015 Orders mandated that the PSC on request of the National Security Minister had to seek to contract “an appropriate local firm” to do recruitment of candidates and invite applications for the jobs. 

Claiming the PNM had been trying since 1994 to undermine the Police Service, he queried if the situation was an attempt to “hijack” the service.

Mark questioned how the firm would select candidates since, unlike 2009, the Orders didn’t speak of advertising. 

He said the Government also deleted clauses allowing the PSC to have input on the matter which existed in the 2009 Order.  Mark also questioned why the 2009 criteria, including leadership, management and communication skills, integrity, commitment to the Police Service’s cause and vision to guide the service, was omitted.

He said the Attorney General hinted last year the Orders would have been completed by the end of last November. They were eventually published on December 16, 2015, suggesting they had been completed by the end of November.

Mark said the situation suggested a surreptitious approach by the Government and denial of Parliament’s right to examine the Orders since lawmakers were subsequently debating the Orders after they became law when they were published in December.

The National Gas Company (NGC) has terminated its brand ambassadors programme as part of its cost-cutting initiatives in light of the country’s economic downturn and according to its acting corporate communications manager Christine Punnett the company is taking a “number of initiatives to rationalise its expenditure” which will result in double-digit savings.

Over the past two months the new NGC board, chaired by Gerry Brooks, took a number of cost-cutting initiatives, including a freeze on hiring and salaries, reduced staff bonuses and cutback of expenses on the annual staff Christmas party. 

 The brand ambassadors programme was conceptualised under the previous board, chaired by Roopchand Chadeesingh, and was launched in 2014 with some of the country’s top sporting personalities retained to encourage citizens to make the switch to the cheaper, cleaner compressed natural gas (CNG) fuel. 

Both parties were to benefit. The brand ambassadors—cricketers Daren Bravo, Anisa Mohammed, Denesh Ramdin and world champion hurdler Jehue Gordon—were to help sell the CNG concept and they were in turn paid a monthly stipend.

Punnett confirmed to the GML Enterprise Desk that, “NGC terminated its brand ambassador programme in 2015.” 

Former brand ambassadors told the GML Enterprise Desk that they were “surprised” that the programme was terminated “so soon.”

 They were paid a monthly stipend of over $10,000 as part of the initiative to encourage motorists to make the switch to CNG. They said the money was used to offset the cost of training to enhance their performance on the sporting field.

However, they were told in late December last year that the programme was being terminated with effect from December 31. They conceded that it was up to the company to determine what strategies it wanted to pursue.

 Ramdin told the GML Enterprise Desk he was in Australia when he was contacted and informed that the programme was being terminated. He said a letter was delivered to his mother two weeks ago and she was asked to sign as having received it.

He described the decision to cut the programme as “quite strange,” telling us that he felt the brand ambassadors programme was “a good initiative” and it was “unfortunate” that the programme was stopped. 

Ramdin said he did not think that the stipend they were paid would have “hampered the company” but he said the company indicated they had no choice because of the recession. 

Ramdin, who is currently engaged in the Nagico Super 50 Tournament, said he was “not stressed” over the decision.

He and the other brand ambassadors said they felt good being part of the initiative to market the NGC/CNG brand and were grateful for the support from NGC and for the opportunity offered to them. 

They attended CNG-related events when they were in the country. While they have no idea how successful the programme was for NGC they told us that many of their friends expressed an interest in converting to CNG and some even purchased the Honda City which has dual capacity of gasoline and CNG.

 Punnett did not respond to our query on the success of the programme but we were able to ascertain that there is no plan to resume it anytime soon. She told us “a series of new initiatives are in train as the group moves to open four new CNG stations in 2016. Other CNG initiatives are planned which will be announced shortly.”

The decision to terminate the programme was just one of the cost-cutting measures implemented by the company following the request by Prime Minister Keith Rowley for state companies to reduce expenditure by seven per cent. 

The company, according to Punnett, “has embarked on a number of initiatives to rationalise its expenditures within the group.” She said: “These measures are expected to realise double digit savings in expenditures.” She did not elaborate.

Asked whether those initiatives would involve staff cuts Punnett said: “NGC recognises the unprecedented decline in the last decade of commodity and natural gas prices and will continue to monitor the situation closely.” 

She confirmed that the company planned to continue its corporate social responsibility programmes, which over the years has lent its support to a range of causes and assisted in the developmental needs of communities across the country, adding:

 “Our CSR initiatives have targeted fence line communities and given the current economic climate, NGC will continue its long-standing tradition of working with communities in a constructive manner.”

GML ENTERPRISE DESK

Shelly Ann Cameron, 26, rises at 4 am every morning and while it is yet dark begins the half-mile trek, sometimes with her dog Sparkles, to her vegetable garden in North Manzanilla.

Shielded against the coming sun and insects in her tall boots and long pants and armed with her cutlass, Cameron strides along the pitch road prepared for battle on her plot of land.

She is on a mission to grow her own food, one inspired by a conviction that, sooner or later, there will be a food shortage crisis.

With her earnings from the garden, she takes care of her two-year old son. Her crops also help put food on the family’s table.

Cameron, born into a home of market vendors, began selling on her own at age 12. 

She has developed a passion for agriculture and has a never-ending sense of wonder of the miracle of growth.

“It’s awesome. I grow a plant and see the flowers and see the food later coming out of it and wonder how that happens.”

Cameron left her husband’s home in Las Lomas to return to her North Manzanilla hometown in May last year to cultivate seven acres she said her stepfather “blessed” her with.

With her swiper and a little help from her sisters, she cleared a small patch. “It’s all I could afford to clear. Three-quarters still in bush,” she said.

Cameron paid an “excavator man” to dig a pond at the bottom of a hill into which a canal flowed and, mostly on her own, began to plant the land.

Last week, she reaped four bags of pimentoes, three bags of baigan and two buckets of sweet peppers.

With her only helper, Carl, she toted the produce along a rough dirt trace to her waiting stepfather parked up on the pitch road.

Cameron does this every Thursday and her stepfather takes the produce to the Central Market in Port-of-Spain to sell it.

With the dry season coming in now, she started carrying her son, Aiden, with her to the garden when there is no one to watch him.

“I carry a hammock and tie it in a shed I have in the garden for him. Last week, he helped me pick sweet peppers.”

Cameron said she feels a joy working in her garden. “It’s so peaceful and quiet with me and my garden alone.

“When I am alone in the garden, I pray a lot. I talk to my plants. Sometimes, I kick off my boots and walk barefoot to feel the dirt and the grass.

“Sometimes, I want to sleep in the garden but the mosquitoes and them don’t want me to stay here,” she said.

Cameron was appointed secretary of the North Manzanilla Farmers Group and said president of the Agriculture Society of T&T, Dhano Sookoo, was a main source of inspiration to her.

Cameron tries to encourage unemployed young men in her village to get into agriculture and laments that, to date, there has never been any serious plan for that sector.

“If the Government saw agriculture as important as oil and gas, we would not have such a high food import bill.”

She feels, one day, imported food will not be so easy to come by. 

“I think one of the greatest things in life is to grow your own food. So you would not have to depend on others to get food,” she said.

Cameron has no easy time in her garden, however.

Thieves constantly lie in wait to reap the vegetables she and other farmers work so hard to grow.

With Carl, she has to go to the garden early in the morning and at night to try and keep them away. 

And there are snakes in the garden. “I killed a snake in the garden Monday night. I had to. If Aiden saw it, he would have wanted to play with it.”

Wetting her crops has been difficult and Cameron is bracing herself for the first dry season she will be encountering on the land.

“The pond is far from the crops and we tote water in buckets to wet them. I have to get some barrels. This is all I can afford right now. I don’t have the finance to do more.”

And the access road remains a challenge. “The pitch road stops at a point and there’s only a dirt trace in a very bad condition. We have to manually bring out all the produce from the garden.

“It’s hard but I am serious. I am not leaving this and going nowhere,” Cameron vowed.

The family of a Debe man is seeking the public’s assistance to find him after he went missing eleven days ago.

Mala Dookie told the T&T Guardian yesterday her uncle Basdeo Dookie was last seen on January 11, walking along Lalbeharry Trace, Debe.

Mala said Basdeo, 62, was dressed in a brown pants and cream shirt at the time. When relatives did not see him for several days, a report was made to the Barrackpore Police Station last Thursday.

Basdeo is described as approximately 5’4” tall and is said to weigh about 125 pounds. Mala said he has short gray hair and a graying beard.

Mala said her uncle, who works as a handyman, lives on his own in Lalbeharry Trace, a short distance away from other relatives.

She said none of his belongings seem to be missing.

She said the family has launched their own search for Basdeo, putting up posters bearing the man’s face in Debe and Penal over the last few days.

Anyone with information on Basdeo’s whereabouts is asked to contact Chan at 739-3715/ 342-5435 or Mitra at 344-7815 or Hansraj at 326-2369 or the nearest police station.

Elders living in the hills of Laventille have called on Prime Minister Keith Rowley to call out the troops in a bid to prevent any more innocent young men from being senselessly killed.

These calls were made subsequent to word spreading throughout Picton Road, Laventille, that more would be killed and before Rowley announced soldiers would be called out to patrol crime hotspots permanently.

One senior citizen, who has been living along Picton Road for the past 50 years, said he was shocked to learn that moments after 16-year-old Deneilson Smith and 15-year-old Mark Richards were gunned down, laughter was heard coming from the masked gunmen and other young men who were around. Both teens attended the Success Laventille Secondary School and were in Form Four and Form Three, respectively.

“Such shame that these good-for-nothing youths could kill someone in cold blood and beat their chest and laugh. They have no respect for human life, much less for God,” the resident said.

He, however, admitted that they were forced to remain quiet as they were also threatened.

“We cannot talk to the youths again. They have a mind of their own and they are heavily influenced by the bad guys around. Family or no family them will gun you down if you look to correct them or even call the police for them,” he said.

“It’s only the army can deal with them without mercy and to bring back a lawless society. The Devil take over,” he said.

Many residents yesterday described Smith and Richards as role model youths.

“A lot of times you would hear a pest being described as an angel when they are killed but God is my witness, these boys were really good boys, who studied their school work and took life and their families seriously,” another resident said, who also asked for her name to be withheld.

It is also the fear of some residents that there will be an upsurge in reprisal killings over Thursday’s murders.

Speaking with the T&T Guardian yesterday at her home in Mulrain Trace, Smith’s younger sister, Asante, said that she was in another taxi, two cars behind the one that her brother and Richards were in, and heard the gunshots. Asante also attends the same school.

“I heard the gunshots and the taxi I was in began to slow down. When I look I saw my brother lying on the ground. I jump out and ran to him and touched his face. Markie (Richards) tried to run but he too was shot. My brother just gone!” Asante said as she broke down in tears.

She added that on Thursday morning before leaving for school, she and Smith were making plans for her upcoming 15th birthday on February 10.

 “I told him, boy, since you love yuh belly, you will cut the birthday cake with me.” Asante again became inconsolable.

She said that just as they were leaving home for school, Smith walked up to his mother and rubbed her head and told her that he loved her.

She said she saw both her brother and Richards during school hours at school.

 “I would usually help out in the school’s cafeteria and Markie (Richards) came and said he want $5 in toffee, then he said no, he want a big peach instead so I looked for the biggest one and sold it to him. Earlier the morning he (Richards) came to my classroom and gave me a bounce and asked me if I was OK. My brother and Markie would always look out for me in school.”

Asante said her brother was a school prefect and a role model to the other students in the school. She added that he was an excellent cricket player and coach during vacation time where he would teach others to play cricket during camp sessions. Smith was the recipient of several trophies, awards and certificates for sports and academics. Richards, she said, loved football and played the sport “excellently.”

While at the Forensic Science Centre, yesterday, Richards’ uncle, Robert Phillip, also described his nephew as a role model young man.

 “He was never in no gang thing and never associated himself with no gang people, so wherever those things coming from are all lies. He loved music and loved to sing. He was all for hanging out with the family. Nobody have anything bad to say about Mark.”

Yesterday, police officers frequented the school and its environs where they conducted foot and mobile patrols.

Minister of Education Anthony Garcia, in a press release, gave the assurance that Student Support Services has already been contacted and would visit the Success Laventille Secondary School to provide grief counselling to both the classmates and teachers of Richards and Smith. 

A teacher at the school, who wished not to be identified, said she was heartbroken to hear about their demise. “Both boys were loved by us all. They were very nice and eager to learn children. I wish it had more like them out here. They both would look out for their teachers and, of course, they had their favourites so the extra love and attention would go to them.” 

An investigating officer yesterday confirmed that they already had two names of the alleged killers and that arrests were imminent.

T&T has lost two potential “bright stars” with the slaying of Laventille teens Deneilson Smith and Mark Richards who were well-adjusted young men, acting Education Minister Terrence Deyalsingh said yesterday.

Deyalsingh spoke about the slain youths during his contribution to an opposition motion on educational materials in Parliament, yesterday. 

Smith and Richards were murdered after they were pulled out of a taxi on their way home from school on Thursday afternoon and shot dead. 

It has prompted action from Prime Minister Keith Rowley who announced yesterday that soldiers would be deployed to patrol the hills of Laventille permanently. Two men described as being of interest in the case have also been held by police.

The murders of the teens also featured in remarks by MPs from both the Government and Opposition, in and out of  Parliament, yesterday.

 Deyalsingh said he wanted to correct a previous statement issued by the Ministry of Education which stated that one of the boys had missed school. He said he had checked with the Chief Education Officer and the ministry’s permanent secretary and confirmed that both teens had attended school that day and had been model students.

 He noted one had been captain of the school’s cricket team and the other was a school prefect.

“Excellent people...we have lost two potential bright stars,” Deyalsingh said.

 Deyalsingh said a high-level government team including the minister of Social Development, from the Office of the Prime Minister and MPs for the areas in which the boys lived would be visiting their school and parents and giving the community their full support.

“We’ve arranged counselling and this Government remains committed as it has always been to the community,” he added.

National Security Minister Edmund Dillon, expressing deep condolences to the families and community, condemned the murders. He told T&T Guardian the authorities would not stop until they had brought the perpetrators to justice.

Housing Minister and Port-of-Spain South MP Marlene McDonald told reporters she was sure the area MP would be taking care of  the youths’ funerals. She said she normally does that for her constituency and MPs usually take “up the slack” on this and a Social Development grant was also available.

She added, “I will be visiting the families tomorrow. This shows our concern and our support to let them know there are people who care about them. This situation is very sad. lt’s cause for concern. It happened in an area that borders two constituencies—Laventille West and Port-of-Spain South—though I understand the boys both live in Sogren Trace which is Laventille West.”

Soldiers are to return to the streets of T&T immediately to assist in searching and taking out criminals, and they will become a permanent fixture.

The decision came in the wake of the outrageous killing of two schoolboys on their way home in Laventille, on Thursday, by gunmen who dragged them out of a taxi and shot them dead.

Facing criticism over the surge in murders which now stand at 33 in 22 days, Prime Minister Keith Rowley announced at a media briefing in Parliament, yesterday, that soldiers would be assigned to patrol crime hotspots.

Rowley, National Security Minister Edmund Dillon and Minister in the Ministry of the Attorney General and Legal Affairs Stuart Young held a news conference at the Parliament yesterday to outline measures to combat the spate of murders.

Rowley said, yesterday, he had “instructed Dillon to instruct the Defence Force to operate in conditions determined by them, within the laws of T&T, virtually permanently, on the streets where criminals have armed themselves and have determined the population is in siege.”

Asked what will be different about this return of soldiers to the nation’s streets, Rowley said: “This time they will stay.” 

He said the crime situation usually got worse when the soldiers were taken off the streets.

The PM said while he expected some citizens to complain about this initiative, he insisted he preferred to hear those complaints “than to watch your children being slaughtered in their school uniform.”

He said whenever there was a police killing in Laventille there would usually be criticism from the residents but after the slaughter of the schoolboys, “there is silence and nobody knows who did it.”

He said he wanted to tell the people of Laventille and the rest of the country that if citizens encouraged their family and others “to arm themselves, to hide among you and you provide them with care, then you are as unpatriotic as the ones who pull the trigger.”

Rowley said the police and other security services “had no idea who were the ones that would have done what was done yesterday (Thursday).”

He called on citizens to share information with the authorities to help solve and prevent such murders.

Rowley said the law provides for the Defence Force to operate “freely and unimpeded in the presence of the police,” and “given what we are facing in this escalation of lawlessness, that the appropriate response must be forthcoming and it must be forthwith.”

He insisted his PNM Government “will do what has to be done to bring safety to the people of T&T,” and said the criminals were engaging in unpatriotic, destructive action and not a war. He said a war does not involve “innocent school children.”

“So if there is anybody taking over the streets in Laventille, Enterprise, Tobago, Diego Martin, it will be security services of T&T,” Rowley said. Rowley said the soldiers would also be stationed in other communities.

Dillon said he met yesterday with the acting Commissioner of Police Stephen Williams, the Chief of Defence Staff Rodney Smart and Prisons Commissioner Sterling Steward “and I literally read the riot act to them because I strongly believe we have to change the way we do business.”

He said a strategy of offence and deterrence would be employed.

“We are going to take the fight to the criminals, those who feel that they can bear arms illegally in T&T,” he added. 

Dillon said all his ministry’s available resources would be used in the fight to ensure citizens felt safer.

“It will be focussed and integrated, he said.

“All the forces will be mobilised,” he added.

In response to a question on his comment in Parliament days ago about there being no murder spike in the country, Dillon said it was not his responsibility to “create a state of panic and be alarmist in T&T because the fear of crime is worse than crime itself.”

Dillon said, in response to another question, “Wherever the criminals are we are going to search and take them out legally.”

Rowley and Dillon extended condolences to the family of the deceased students.

More info

Prime Minister Dr Keith Rowley yesterday warned people who used social media to make the “nastiest” comments about the schoolboys who were killed in Laventille on Thursday and other citizens that they might be in breach of the law. 

Rowley said his Government is “not prepared to allow that kind of behaviour to go unnoticed and would respond appropriately as required.”

There has been widespread condemnation on social media over racist comments celebrating the murders of two Success Laventille Secondary School students on Thursday. 

Two Facebook users, in particular, using the names Anita Persaud and Adrian Maharaj, came under heavy fire from other commentators for their comments on a post on the CNC3’s Facebook page. 

Persaud posted “4 o’ clock in the morning and a dancing right now lol lol lol two less criminal on the street, god a happy KILL THEM (expletive) OUT.”

After another user condemned the comment, Persaud replied, “Kerlene Dacosta that would not happen because my boys is not drug dealer, but don’t I am praying, praying for more a them get KILL. them little black (expletive).”

And then, “OMG hahaha i am really surprise at the amount of reply and attention i received from my comment, first of all i would like to thank all of you for your reply please keep it coming, and second I still think the freedom of tought and speech still lies in our country, if not well well i just say what is in my mind like it or not, so please feel free to say what is on your mind too. after all every one has their own thinking and that’s it our rights, so don’t feel bad no one will snatch that from you all, just know if you are trying to make me feel bad you are all doing a very bad job, I still feel that it’s a good thing KILL THEM ALL, by the next two decades Trinidad will be crime free.”

After users shared screenshots of Persaud’s comments thousands of times, she took to Facebook to claim that her account was hacked.

She wrote “please people try to understand, I am not the one that write these things, someone had a feast with my acc last night I reported this to the Toronto police and they are looking into it, I tought was only one post but I am shock a you all to see these other post, I must let you guys know that I will the person/persons that is responsible for this, and everyone that share this post will be investigated, this is not fair some just damage my character while I was sleeping, do you people think we in Canada really have the time to get up 4 am to dance. ent”​

Young professionals should invest in a pension plan early in their careers rather than waiting until they get older. That’s the advice from newly appointed managing director of Assuria Life T&T Ltd, Christopher Henriques.

He explained that pension plans and annuities are not affected by recession, so they are better than having a deposit in the bank. 

“Remember you are looking at getting your money down the line.”

The idea behind pension plans is that the customer must be making continuous payments, even if those payments are reduced, Henriques said.

“If you buy a pension plan when you are 25 years old and you pay $200 every month, 40 years later when you are retiring that $200 is big money. It is a huge amount because the interest compounds. Anybody who is in a pension plan now, do not give it up.”

In the event of retrenchment, Henriques explained, workers with pension plans can ask their provider for a hold on payments, so when they get another job, they can resume payments.

“People are cashing in their pension plans saying that things are real bad. Things don’t get better when you cash in your pension. When it comes to retirement you will have even less money.”

Pension plan premiums can be as little as $200 a month, said the insurance executive, whose advice is for a worker to put aside at least 10 per cent of salary.

“If you use Assuria, we contribute five per cent and the employee contributes five per cent and it ends up being the pension plan. What you are contributing is five per cent.

“What you need to do is take five per cent of your regular salary that you take home and put it there, so what you are getting is 15 per cent which over 20 years, 25 years adds up to a good pension.”

Depending on investment returns, that individual can take early retirement, Henriques said.

It is up to the individual to decide the highest contribution that can be made to the pension plan, he said, but tax relief stops at $50,000.

Not worried about recession

Assuria came into the T&T market last March after acquiring 77 per cent shareholding in Mega Insurance Company—15,791,682 of that company’s issued shares.

Henriques said the Assuria Group, which is celebrating its 25th anniversary this year, expects to achieve 10 per cent growth in this market. The company wrote just under $30 million in life insurance premiums in T&T this year, adding to the US$150 million in premiums written across the Assuria Group.

He said the focus is currently on providing improved customer service since the company wants to become a “boutique” insurer offering products must match their client’s needs.

Henriques, who sat down for an interview with the Business Guardian at company’s offices at 49 Dundonald Street, Port of Spain, gave an insight into their strategic direction.

He said the recession will not affect Assuria. While commercial banks are offering their clients less than one per cent on deposits, Assuria’s pension plan customers are getting between 2.5 per cent and three per cent interest.

Henriques highlighted the savings aspect of a life insurance policy.

“You buy a life insurance policy to cover your life, then you can put money into the investment side and we invest it. That money is accumulated into your fund.”

When that customer dies, the company pays the life insurance plus the money in the investment.

He said: “Buying at 40 and accumulating your money from 40 to 60 is not enough time. Not only that, at 40 to 60 your children are going to school. You need money for them. Your biggest expense is them. 

“Your lowest expenses are when you are 20 to 30: you are not married, you are at home. When you are 50, when the kids leave, you have free money again.”

Overall Henriques said there are “great” opportunities to be made in recessions. 

Brand recognition, a major goal

One of the main goals of the company is greater brand recognition and confidence in the company, especially by the younger members of the workforce in T&T.

Henriques said Assuria has less than one per cent of the T&T’s market but wants to increase its share to three per cent. 

“The first thing we want to do is change the company’s culture. We are vibrant. We are going to that next level. We are going to be here for the long haul.”

There are plans to re-open the Arima branch, located at Shops of Arima, as a service centre.

“We will be going into that kind of operation where we would have service centres throughout the country.”

Henriques added: “If things go better than expected we will actually be hiring internal staff. Definitely we will not be laying off. We will be maintaining the staff that we have.”

In 2016, five managers will be retiring from the company. 

Money laundering laws

Henriques expressed concern that the requirements in current money laundering laws are over regulated. 

“We have 20,000 clients so we had to post out 20,000 letters asking them to come in and fill out these forms. It costs $5 a letter to post, so you are talking about $100,000. Not looking at the money but the paper usage; that’s not good for the environment.”

He said every insurer in the market has to do the retroactive checking—updating customer files—every three years but the process has gone overboard.

In terms of date on the insurance sector, Henriques said the situation is “getting better”, with data coming from the Central Bank, the Association of T&T Insurance companies and sometimes the Central Statistical Office. 

However, he is recommending a review of the method by which the data was collected.

Dr Terrence Farrell, a respected economist, has advised that the exchange rate be allowed to depreciate to ensure it does not discourage exports and effective import substitution. This is in the context of a “real effective appreciation” of the T&T currency over the past 20 years, since our economy has been inflating faster than that of the US, our main trading partner. 

There are two concerns here. The first is that were we to depreciate the exchange rate, would it really continue to encourage exports and effective import substitution? The general economic theory supports Dr Farrell’s position. However, the Central Bank of Barbados Governor, Dr DeLisle Worrell, looks a bit closer at economies like ours: small open economies. In the circumstances of our severe reduction in foreign exchange (FE) being now earned, he does not recommend a devaluation/depreciation of our currency since it will not help with the fundamental problem of our economy; ie our economy cannot respond quickly to this fall in FE income by producing increased exports nor is it capable really of effective import substitution. 

Note that the energy sector brings in normally some 80-90 per cent of the FE earned. Hence stabilisation of the economy in the short term is more about reducing aggregate demand on shore as opposed to asking the private sector to expand exports or create substitutes for imports. Aggregate demand reduction can be done more directly if focussed on specific imports via fiscal measures.

Also, some 75 per cent of the FE available in the T&T market place is due to the energy sector exporters who earn FE, changing some to pay for local goods and services. If the exchange rate were to depreciate whatever little they now put into the market would be reduced assuming local goods/service rates remain the same.

Secondly, Prof Michael Porter warns that it is insufficient to focus on the macroeconomic inflation-based measure—the real effective exchange rate (REER)—when looking at the production in an economy since competitiveness is really a measure of the country firms’ productivity, which they have to relentlessly improve. This is not via the depreciation of their home currencies but by acts of innovation, including new technologies and new ways of doing things and anticipating global needs. 

The major exporters of T&T are in the energy sector and who source their competitiveness from cheaper natural resources and foreign technology. Our on-shore exporters who are in the main assemblers—importing much of their inputs—are not innovative. 

Hence attempting to evaluate the competitiveness of our economy by looking at the national measure, REER, is to answer the wrong question (according to Porter). We need to look at specific industries and segments if we require the correct answer, which is to diversify the economy into high productive sectors via innovation.

Dr Farrell gave the example of local tomatoes which are more expensive locally than those imported. Devaluation may reverse this situation. There are two problems here. The first is that agriculture in the US benefits from subsidies and this is well known as a brake on developing countries being able to build lucrative agricultural industries. 

Further, in T&T, agriculture is not far removed from the kitchen-garden type and does not benefit from scale, advanced technology or high productivity. Couple to this the culture of the private sector of import-markup-sell and particularly when imported vegetables are cheaper than the local products. If we wanted to control the import of vegetables then the fiscal measures of VAT/duty/taxes on such imports would clearly be a more vectored approach.

Mary K King

via e-mail

Jane Smith* is a single mother of a teenaged daughter and a middle manager at First Citizens. In 2013, she purchased 5,000 shares in the bank’s initial public offering (IPO). Although the shares were offered to the public at $22 a share, the Government—which owned 96.5 per cent of the bank before the IPO—decided that employees of the bank would pay $19.80, a ten per cent discount to the offer price. In addition, Jane took up the bank’s offer of an interest-free loan to partly finance the purchase of the shares.

Each of the 5,000 shares that Jane bought at the First Citizens IPO for $19.80 were worth $35 on Friday. That means that the 5,000 shares she purchased for $99,000 in September 2013 were worth $175,000 in January 2016. It means that Jane’s investment in the bank that she has worked at for more than 20 years is worth $76,000 more than what she paid for it. In technical language, the capital value of Jane’s investment has increased by 77 per cent in the two years and four month that she has held the shares.

But that is not the only way that Jane has benefitted from the Government’s privatisation programme. 

In the period since the IPO, First Citizens has made four dividend payments: $0.57 in May 2014; $0.61 in December 2014; $0.58 in May 2015 and $0.74 last December. Those dividend payments mean that Jane has received $2.50 in income. This translates into $12,500 in dividend payments.

If the dividend income and the capital gains are added together, Jane’s investment in her bank is today worth: $187,500.

Samuel Williams* is also an employee of First Citizens. He is a shop steward at one of the bank’s branches and, as such, defends the interests of his fellow employees as an elected representative of the First Citizens trade union—the Banking, Insurance and General Workers Union (BIGWU).

He listened to the video on YouTube in May 2013 titled, “Selling the people their own shares” in which the union’s leader, Comrade Vincent Cabrera said: “This word “privatisation,” you never could have found it in a dictionary before Ronald Reagan and Margaret Thatcher. Nobody knew what it was to privatise. We knew what it was to nationalise. Where, in a lot of the countries of the world, the State found it necessary to expropriate property from private capital. 

“In Cuba, Castro told them that you are lucky to be leaving with the shirts on your back. In the case of Trinidad, Eric Williams used the oil money to buy it. But whether you just took it from them, or you bought it from them, the State took over the shares on behalf of the people. They coming now and telling you they are selling shares to the people. So, if the State owes it on behalf of the people, how could you be selling the people their own shares?” 

In support of BIGWU’s policy on privatisation, Samuel took a decision not to purchase shares in the First Citizens IPO in 2013. 

Mainly as a result of his savings habit and the BIGWU’s ability to negotiate a 17 per cent wage increase for employees of the bank in the period January 2009 to December 2011, Samuel had $100,000 in savings. This was divided between two deposit accounts at the bank: one that paid 0.2 per cent a year and the other that paid 0.78 per cent. At an average rate of 0.49 per cent, Samuel received about $1,143 in interest in the 28 months between the IPO and today.

Samuel was fortified in his decision not to support the IPO when he attended the sixth biennial conference of delegates of the BIGWU in October 2014 and heard the union’s president Vincent Cabrera say: “The policy of the BIGWU does not support privatisation. We will not participate in the dismantling of the State sector. In the long run, privatisation through divestment leads to increasing levels of inequality.”

Samuel would also have been fortified in his decision not to buy shares in the First Citizens IPO by the statement in the Negotiations Report submitted to the sixth conference of BIGWU delegates that the union was in “the vanguard of the trade union movement during the review period in combating the scourge of privatisation of state enterprises, particularly in the financial services sector, and which experience has shown, invariably, leads to job losses, reduced benefits for workers and enrichment of private sector interests.”

By January 2016, Jane would have received $12,500 in dividend payments and the value of her investment would have increased from $99,000 to $175,000. Samuel, on the other hand, would have earned $1,143 in interest on his $100,000 in savings. 

Contrary to the experience cited in the BIGWU report, no jobs appear to have been lost at First Citizens as a result of privatisation and it does not seem that benefits have been reduced. In fact, as 1,073 of the bank’s employees did buy shares at a discounted price in the First Citizens IPO, it can be argued that those employees received a significant benefit from the IPO and they were among the “private sector interests” who were enriched by it. 

But why would only 65 per cent of the employees in the majority state-owned bank participate in an exercise that was almost destined to put money in their pockets? 

If only 1,073 First Citizens employees participated in the IPO, and the prospectus discloses that, as at March 2013, the bank had 1,664 employees, that would mean 35 per cent of the bank’s employees (about 600) decided they would not participate in the IPO. This is despite the fact that those First Citizens employees who bought shares in their own bank would have received a ten per cent discount on the price of the shares and an interest-free loan to purchase the shares.

Were some of them persuaded by the anti-privatisation stance of the representative trade union? Or was it a case of some of the bank employees at the lower end of the salary scale not being able to afford to purchase the bank’s shares? Did the management of the bank do enough to educate its employees about the long-term benefits of owning shares in the company that employs them?

At the end of the IPO process, employees of the bank subscribed to a little more than half of the shares allocated to them. A total of 48,495,665 shares were available to the investing public and the employees were allocated a block of 15 per cent of the IPO, which would have amounted to 7,274,350 shares. What does it say that the bank’s employees only subscribed to 7.8 per cent of the total allocation?

If each of the bank’s 1,664 employees had purchased the 5,000 shares that they were given the opportunity to buy at the discounted price of $19.80 and with an interest-free loans, the employees would have spent $164.73 million. Those shares would be worth $291.20 million today and the employees would have shared $20.8 million in dividend income.

Is the First Citizens IPO a rare and isolated case?

Employees of TSTT, NFM and Tringen who purchased shares in National Enterprises Ltd (NEL) at $4 a share at its IPO in 2001 and at $4.75 a share in its secondary offering in 2002 would also have received significant benefits from owning the stock over the last 15 years. It closed at $15.97 on Friday.

The T&T NGL IPO last year will eventually prove to be very profitable for shareholders, who will experience a sharp increase in the demand for the stock when its product prices improve. The outsized future dividend stream should attract shareholders to it. 

Do T&T workers benefit from privatisation? 

*Not their real names. 

Used for illustration purposes.

Carla Parris

Last week I suggested that in the attempt to diversify the economy, Carnival should be looked at with focused attention on the ability to sell broadcast rights to international audiences in the diaspora and elsewhere in the world where T&T’s indigenous products are used and valued.

The majority of responses to this perspective on Facebook, email and otherwise agreed that we should seek to sell rights to certain events and to also sell documentaries, film and TV packages of the best of Carnival. They have also suggested that, at this moment, attention needs to be paid to producing market ready products that can be captured on film. 

This week I wish to focus on the fact that though all events are not suitable for broadcast purposes and while this may not be the aim of an event producer, if the level of sponsorship for Carnival events continues to drop at the rate that it has this year, there may come a time when we do not have the plethora of events to choose from, either to broadcast or to simply enjoy as consumers of the product. Event producers therefore need to focus attention on the value of the sponsorship rights that they offer to prospective sponsors and investors of events. 

Reports coming in from event producers this year are grim. The injection of sponsorship capital from corporate, governmental and other sponsors has been reduced, no doubt due to the current projections for the economy. As such, some promoters have chosen not to produce some of their events and some have chosen to cancel outright midway through the production cycle due to lack of sponsorship funds. 

The impact of this is felt, not only on the income of the event producer, but in reduced job opportunities for service providers such as caterers, bar staff and companies that provide infrastructure such as stage erection, lighting, decor and other aspects of the production. 

Many of these jobs have been lost. I am of the view that after this season ends, event producers should re-group and focus their energies on ways in which they can increase the level of their offerings to retain and attract new sponsors and new investors in the years ahead.

Sometimes it seems like we are a people stuck in yesterday, resistant to the fact that our market is no longer as unsophisticated as it used to be in years gone by. Just as the tastes of patrons at events have evolved and they now demand value for money in the kinds of events they patronise, so too have the needs of corporate sponsors who are bombarded with sponsorship requests year round. They want more value for the sponsorship capital requested. 

What are some of the legal and business issues involved in sponsorship deals?

Typically, event promoters seek to entice sponsors with the promise that, in exchange for the injection of capital, certain sponsorship rights will accrue. Some of these rights are, for example, the right to erect branded paraphernalia, set up concession stands, or even to capture footage at events. 

However, in the age of social media where companies now have access to brand promotion opportunities on sites such as Facebook, Twitter and Instagram, the promise of traditional branding tools such as flags, banner ads and concessions stand is no longer as attractive as it was before. 

Many sponsors complain that they do not see a return on their investment in events because promoters fail to deliver on the sponsorship rights promised.

Some of the ways event promoters can improve on the delivery of sponsorship rights are by ensuring sponsors can do site visits well in advance of the actual day of the event so they have ample time to set up concessions stands and erect the branded paraphernalia they were promised. 

Many sponsorship deals has been lost because sponsors were unable to erect their branded material in a way that suited their needs and were denied the opportunities to get value from the monetary investment. The loss of potential income at concession stands increases the number of unsatisfied sponsors because placement in an area of the event where few patrons will view the booth can severely hamper opportunities to generate revenue if one is selling food or other branded items.

Gone are the days when a sponsor is satisfied simply to inject capital into an event on the basis of a promoter’s friendship with the artistes who promise to perform. More and more sponsors are want proof of the artiste’s obligation to perform at the event and require copies of contracts entered into with performers. 

Given the fact that in many cases the sponsorship money requested varies dependent on the level of artistes carded to perform, the fact that a promoter can actually produce a written and signed contract which demonstrates an artiste’s contractual obligation to the event can go a very long way in reassuring a hesitant sponsor that he or she is entering into an arrangement with a promoter who will honour commitments.

Clarifying the ownership of intellectual property rights in a sponsorship arrangement is another area where attention needs to be given well in advance of the event date. Many times, due to the capital invested and the efforts spent on marketing the event, questions arise as to ownership of material created to promote and publicise the event. Lack of clarity in these matters together with the current financial situation and the general informality with which these sponsorship deals are proposed have caused many sponsors to pull out of this year’s events. 

The onus is now on event promoters, who are no doubt operating in an extremely competitive environment, to set themselves apart by elevating the negotiation process and demonstrating to prospective sponsors or investors a level of business sophistication that is not currently the norm. The ability to provide documentary evidence of relationships with artistes, service providers and other parties whose involvement is required to produce the event is therefore crucial. 

Promoters ought to also consider creative new offerings apart from the traditional branded paraphernalia and perhaps offer statistical data which provides projected income, as well as market research on the audience and demographics of the event so sponsors can be more informed on the value of investing in one event over another. 

(Carla Parris is an entertainment and sports attorney (LLB, LLM) with 12 years practical experience in the creative sector with a client base spanning the music, film, fashion, broadcast and sport sector. Apart from running her law practice, she has participated in more than 12 local and regional conferences in intellectual property law and the creative sector and has appeared on local TV and radio stations discussing the importance of intellectual property law and creative industry development.)

Agostini’s Ltd had an eventful year in fiscal 2015. The year started with the completion of its debt refinancing exercise in early October 2014. After forming Caribbean Distribution Partners Ltd (CDP), that entity then bought 40 per cent of a Guyanese company, Desinco Ltd in January 2015. In February 2015, CDP bought Barbados-based Facey Trading Ltd.

On July 1, 2015, CDP Ltd acquired Hanschell Inniss Ltd (Barbados), Independent Agencies Ltd (Grenada), Coreas Distribution Ltd (St Vincent) and Peter and Company Ltd (St Lucia). In addition, Agostini’s Ltd transferred 100 per cent of Hand Arnold Trinidad Ltd to CDP. Then, Goddard Enterprises Ltd received a 50 per cent stake in CDP and US$11.6 million (from AGL).

Facey Trading was absorbed into Hanschell Inniss. Under accounting rules, Hand Arnold is deemed to be controlled by Agostini’s Ltd and thus the CDP operations are included in AGL’s results. The rationale for the formation of CDP was predicated on the need to improve operational efficiencies and to provide a focussed platform for future growth and expansion throughout the region.

Let us now look in some greater detail as to its performance for the year ended September 2015.

Changes in financial position

Helped by acquisitions, total assets rose to $1.51 billion from $955.4 million as at September 2014. With few exceptions, all major line items exhibited increases. Long-term assets grew from $423.4 million to $615.9 million. Here, property, plant and equipment increased to $379 million from $248 million. The major change was recorded under land, buildings and improvements, which advanced to $325.9 million from $209.3 million.

Intangible assets climbed to $125.1 million from $78 million. The major increase was generated by the transfer into Caribbean Distribution Partners Ltd of Hanschell Inniss Ltd, Independent Agencies Ltd, Coreas Distribution Ltd and Peter and Company Ltd; all these companies were formerly part of Goddard Enterprises Ltd.

Current assets rose from $531.9 million to $897.7 million. Inventories expanded to $414.4 million from $279.1 million. Due to the nature of most of its businesses, the bulk of this ($361.6 million) represented finished goods.

In a similar vein, trade and other receivables expanded to $341.4 million from $218.1 million. Cash at hand and in bank rose strongly to $137.3 million from $31.5 million as at September 2014. However, after allowing for overdrafts ($43.4 million) and bankers’ acceptances ($38.4 million), the net cash position closed at $55.5 million; this was a huge improvement over the negative $1.4 million as at year-end 2014.

Total liabilities rose to $766.3 million from $400 million. Total borrowings climbed by more than 100 per cent to $365.4 million from $180.3 million. The long-term portion advanced to $221.5 million from $129.1 million while the current portion rose to $143.9 million from $51.2 million.

In the case of the long-term borrowings, the portion that matures over 5 years stood at $107.4 million up from $60.3 million as at September 2014; this is a sign of confidence in the company. The company obtained new financing of $275 million at more favourable rates and flexible terms of which $184 million was used to settle existing loans and the remainder used to finance its expansion activities.

In line with its larger operating base, the other major increase saw trade and other payables increase to $372.5 million from $200.1 million. The higher figure includes $101.9 million (or B$31.9 million) due to Goddard Enterprises Ltd.

Equity improvements

Total equity rose to $747.4 million from 2014’s $555.3 million. The major change was recorded under non-controlling interests, which climbed to $160.3 million from $1.2 million. This was a direct result of the formation of CDP.

Stockholders’ equity advanced to $587 million from $554 million. The most notable change was recorded under retained earnings.

This component improved to $368.6 million from $335.6 million. The current year’s profit of $80.6 million was reduced by dividends of $32.3 million, comprehensive loss of $5.6 million and changes in the composition of the group totalling $9.7 million. With 58,704,219 shares outstanding, each share had a book value of $10.00 (September 2014: $9.44).

Income and profits

Total revenues advanced by 25.5 per cent to reach $1.7 billion from the comparative 2014 outturn of $1.36 billion. 

The cost of sales climbed disproportionally by 26.9 per cent, moving from $1.04 billion to $1.31 billion. This restrained the gross profit growth to 21.2 per cent, as it registered at $392.6 million from 2014’s $323.8 million.

Other operating income increased to $31.9 million from $28.1 million, thus boosting total net income to $424.5 million. This was 20.6 per cent greater than the $351.9 million recorded for 2014.

The largest component, handling fees, relates to the recovery of expenses incurred by foreign pharmaceutical representatives. Rental income rose to $6.2 million from the previous level of $5 million. (Unfortunately, these items are not adequately grouped in the financial report.)

Total expenses rose to $300.2 million from $228.2 million, or by 31.5 per cent. The increases were concentrated under the other segment, which climbed by $43.9 million or 33.1 per cent to reach $176.4 million from the previous year’s $132.5 million.

Administration expenses reached $89.4 million from 2014’s $61.7 million; this represented a climb of 47.3 per cent. However, marketing and distribution costs declined to $34.4 million from $35.1 million. Helping this reduction was lower advertising costs, which fell to $9.8 million from $16.7 million.

These changes resulted in an operating profit of $124.3 million; this was marginally higher than the $123.7 million recorded for the previous year. Notably, in line with expectations, finance costs fell by $4 million to $12.58 million from $16.58 million. In addition, the share of profit from its new associate, Desinco, contributed $2.14 million; that is a good return on the purchase price of $11.66 million.

These changes boosted pre-tax profit to $113.8 million from last year’s $107.1 million.

A higher effective tax rate of 27.8 per cent (2014: 24.8 per cent) pulled down profits to $82.18 million from 2014’s $80.55 million.

Of this sum, $1.6 million related to non-controlling interests, leaving shareholders with $80.58 million (2014: $79.9 million).

These net results translated into 2015 diluted EPS of $1.37 compared with $1.36 for 2014.

Segment performance

2015’s relatively disappointing results were constrained by a number of one-off events and transactions, most of which will not be repeated in the current period.

Penalties paid on the debt restructuring exercise, legal and other expenses related to the new regional investment, legal and arbitration costs concerning the outstanding matter with the Housing Development Corporation ($9.3 million). In addition, higher taxes regionally and now locally will continue to be a feature of business life.

The strongest performer was pharmaceutical and personal care, which includes Smith Robertson distributors and SuperPharm retail outlets. Both these business units are expected to continue to do well. Both revenues and after-tax profit exhibited growth.

Resulting from the formation of CDP, sales in the fast moving consumer goods category expanded robustly. Operating profit growth was not as strong, especially at Hand Arnold, but was helped by the contribution from its associate, Desinco, while taxes were less severe. The other five CDP operating subsidiaries experienced start-up and one-off challenges, all of which are being systematically addressed.

The industrial, construction and holdings segment experienced strong sales, which were driven by Agostini Marketing’s interior contracts and the higher sales of building materials. At the other extreme, Rosco Petroavance’s performance directly suffered from lower energy prices. The start of distribution of a range of lubricants from ExxonMobil should help improve the latter’s performance in 2016.

Dividends and share price

For its 2015 fiscal year, AGL paid dividends totalling $0.56 compared with $0.55 for 2014.

In 2015, the share price reached as high as $18.20 on September 21, 2015. Following the release of these mixed results, the price declined and was recently traded at $16.95.

At that price, the dividend yield is 3.30 per cent.

Future prospects

The new joint venture, CDP, only started life in July 2015, which comprised three months of last year’s results. The synergies and benefits of this initiative should become more apparent as changes are implemented incrementally over the course of the current year.

Property rationalisation will continue to feature as it moves to increase tenancy at its Nelson Street property; this property is still up for sale. At Chootoo Road, it purchased the Kimberly Clark property. During 2016, SuperPharm’s office and warehouse will move to that location, while surplus space will be rented.

These changes would bring in additional funds, which can be used to further expand its core businesses. Even in the face of slower economic growth and higher costs on a variety of fronts, AGL’s prospects for this year seem reasonably good. Its first quarter results, which are due in February, should give us our first indication about its 2016 trajectory.

Next week, we will look at the other CDP partner, Barbados-based, Goddard Enterprises Ltd.

Along with bank runs and market crashes, oil shocks have rare power to set monsters loose. Starting with the Arab oil embargo of 1973, people have learned that sudden surges in the price of oil cause economic havoc. Conversely, when the price slumps because of a glut, as in 1986, it has done the world a great deal of good. The rule of thumb is that a 10 per cent fall in oil prices boosts growth by 0.1 to 0.5 percentage points.

In the past 18 months, oil prices have fallen by 75 per cent, from US$110 a barrel to less than US$27. This time, though, the benefits are less certain. Although consumers have gained, producers are suffering grievously. The effects are spilling into financial markets and could yet depress consumer confidence. Perhaps the benefits of such ultra-cheap oil still outweigh the costs, but markets have fallen so far so fast that even this is no longer clear.

The world is drowning in oil. Saudi Arabia is pumping at almost full tilt. It is widely thought that the Saudis want to drive out higher-cost producers from the industry, including some of the fracking firms that have boosted oil output in the United States from five million barrels a day in 2008 to more than nine million barrels a day now. 

Saudi Arabia also will be prepared to suffer a great deal of pain to thwart Iran, its bitter rival, which this week was poised to rejoin oil markets as nuclear sanctions were lifted, with potential output of between three million and four million barrels a day.

Despite the Saudis’ efforts, however, producers have proved resilient. Many frackers have eked out efficiencies. They hate the idea of plugging their wells only to watch the wildcatter on the next block to reap the reward when prices rebound. They will not pack up so long as prices cover day-to-day costs, in some cases as low as US$15 a barrel.

Meanwhile oil stocks in the mostly rich-country Organisation for Economic Cooperation and Development stood at 267 days’ net imports in October, almost 50 per cent higher than five years earlier. They will continue to grow, especially if demand slows by more than expected in China and the rest of Asia. Forecasting the oil price is a mug’s game—The Economist once speculated about $5 oil—but few expect it to start rising before 2017. Today’s price could mark the bottom of the barrel, but some are predicting a trough of as low as US$10.

The lower the better, you might say. Look at how cheap oil has boosted importers, from Europe to South Asia. The euro area’s oil-import bill has fallen by two per cent of GDP since mid-2014. India has become the world’s fastest-growing large economy.

The latest lurch down also is a source of anxiety, however. Collapsing revenues could bring political instability to fragile parts of the world, such as Venezuela and the Persian Gulf, and fuel rivalries in the Middle East. Cheap oil has a green lining, because it drags down the global price of natural gas, which crowds out coal, a dirtier fuel. In the long run, though, cheap fossil fuels reduce the incentive to act on climate change.

Most worrying of all is the corrosive new economics of oil.

In the past cheap oil has buoyed the world economy because consumers spend much more out of one extra dollar in their pocket than producers do. Today that reckoning is less straightforward than it was. American consumers may have been saving more than was expected. Oil producers are tightening their belts, having spent extravagantly when prices were high. After the latest drop in crude prices, Russia announced a 10 per cent cut in public spending. Even Saudi Arabia is slashing its budget to deal with its deficit of 15 per cent of GDP.

Cheap oil also hurts demand in more important ways. When crude was over US$100 a barrel, it made sense to spend on exploration in out-of-the-way provinces, such as the Arctic, west Africa and deep below the saline rock off the coast of Brazil. As prices have tumbled, so has investment. Projects worth $380 billion have been put on hold. In America spending on fixed assets in the oil industry has fallen by half from its peak. The poison has spread: The purchasing managers’ index for December, of 48.2, registered an accelerating contraction across the whole of American manufacturing. In Brazil the harm to Petrobras, the national oil company, from the oil-price drop has been exacerbated by a corruption scandal that has paralysed the highest echelons of government.

The fall in investment and asset prices is all the more harmful because it is so rapid. As oil collapses against the backdrop of a fragile world economy, it could trigger defaults.

The possible financial spillovers are hard to assess. Much of the US$650 billion rise in emerging-market corporate debt since 2007 has been in oil and commodity industries. Oil plays a central role in a clutch of emerging markets prone to trouble. With GDP in Russia falling, the government could well face a budgetary crisis within months. Venezuela, where inflation is above 140 per cent, has declared an economic state of emergency.

Other oil producers are prone to a similar, if milder, cycle of weaker growth, a falling currency, imported inflation and tighter monetary policy. Central banks in Colombia and Mexico raised interest rates in December. Nigeria is rationing dollars in a desperate, probably doomed effort to boost its currency.

There are strains in rich countries too. Yields on corporate high-yield bonds have jumped from about 6.5 per cent in mid-2015 to 9.7 per cent today. Investors’ aversion spread quickly from energy companies to all borrowers. With bears stalking equity markets, global indices are plumbing 30-month lows. Central bankers in rich countries worry that persistent low inflation will feed expectations of static or falling prices, in effect raising real interest rates. Policy-makers’ ability to respond is constrained because rates, close to zero, cannot be cut much more.

The oil-price drop creates vast numbers of winners in China and India. It gives oil-dependent economies such as Saudi Arabia and Venezuela an urgent reason to embrace reform. It offers oil importers, such as South Korea, a chance to tear up wasteful energy subsidies—or to boost inflation and curb deficits by raising taxes.

However, this oil shock comes as the world economy is still coping with the aftermath of the financial crash. You might think that there could be no better time for a boost. In fact, though, the world could yet be laid low by an oil monster on the prowl. The Economist

The case

Pricilla, 38, owns and operates a seven-seater taxicab and tour service. The loan that she borrowed to finance this vehicle was repaid two months before time. Last year, she inherited a house from her grandmother but it is in dire need of repairs and could cost up to $350,000. 

Loans officer Billy, pleased with her track record, is willing to provide mortgage financing for a period of 25 years at a rate of six per cent per annum. The only condition is that she provides a term life insurance policy for at least $200,000 to cover a part of the loan, in the event of an untimely death. 

Pricilla approached her cousin Betty who works at an insurance brokerage firm. Betty advised Pricilla that she could get a $200,000, 25-year term policy with a monthly premium of $125. Betty reiterated that the only downside with the plan was that when it matures, she has nothing to get back. Pricilla was not impressed with that feature and asked if there was another policy that provided cash back in the future. 

Betty then took the opportunity to do an illustration of a plan that would provide the same level of coverage the bank required but would also refund all of her premiums at maturity as part of a guaranteed cash payout $200,000 plus a bonus of $150,000. If she dies anytime before the plan matures, the company will pay $200,000 plus a refund of the premiums paid as at that date. 

If she becomes disabled for more than six months, the company will keep the policy in force until she recovers or until maturity; whichever was sooner. If, for any reason, she cancels the policy before the end date, a projected cash surrender value will be paid, less any accumulated debt on the account. 

Pricilla was excited that she really had nothing to lose and shared the policy benefits with Billy to see if he would accept the alternative as collateral. Billy agreed but expressed his concerns as to why the same coverage was costing $689 more per month and wondered if she could have found a better use for the extra premium. 

Pricilla knows the term is cheaper because she has nothing to get back but she cannot evaluate if the extra cost would provide value for money down the road. She is now undecided as to which policy to select and is seeking our guidance. 

Nick’s assessment and advice

The policy that Betty has put on the table sounds very good especially the part about getting back all of the premiums whilst still enjoying the insurance coverage of $200,000 for the duration of the plan. In a way she is actually getting free protection if she keeps the plan in force for the contracted period. Even if she cancels the plan, there is something to get back. How much that would be is another question. 

The only thing that is a little difficult to come to terms with is the monthly payment of $814 ($689 + $125), which we will discuss below. 

Purpose of insurance

In the world of personal finances, it is sometimes easy to deviate from the real purpose of a particular financial instrument. Insurance’s primary function is to offer protection against the financial loss that could occur if a certain peril materialises. It is uncertain why the banker requested only $200,000 coverage for a $350,000 debt. Maybe the bank has its own plan in place that covers part of the debt or maybe Pricilla already has another policy for $150,000. 

Be that as it may, Pricilla’s confusion really started when Betty raised the point o.f “getting nothing back.” Pricilla’s attention shifted completely from the primary objective to that of saving and investment. 

If her objective were savings and investment, then the cash value policy would have to be evaluated alongside other scenarios or instruments that are comparable in order to make an informed decision. 

Savings and investment

This policy has a very tempting future value of $200,000 plus a bonus of $150,000. Of course, this is not free money because Pricilla still has to pay for it and the total cost of doing so is $244,200 ($814 x 12 months x 25 years). She will earn a profit or gain of $105,800 ($350,000 - $244,200). This amount would be even more impressive if we removed the monthly cost of a pure protection plan, that is, the term life premium of $125.

Whilst from an actuarial standpoint this may not exactly be the accurate approach, it might still be helpful for the sake of a rough comparison. 

Excluding the term premium component, Pricilla would have invested $206,700 ($689 x 12 months x 25 years) to obtain the same future value of $350,000, giving her a profit or gain of $143,300 ($350,000 - $206,700). 

Return on investment 

Looking at this return through the lenses of a financial practitioner, the first question is: what was the return on this investment over the period? 

When we plug in the numbers using time value of money calculations (monthly payments of $689, period of 25 years and a future value of $350,000) we find that the effective annual interest rate was 3.92 per cent (only if she stays for 25 years); not bad in a world where rates on guaranteed investments is less than half that figure. 

The use of the words “guarantee” and “investment” in the same sentence has the power to allay many fears from an investor’s mind. However, guarantees can also be secure in financial scenarios other than the usual savings and investment instruments. 

The real value of money

Looking back, it is not too far fetched to imagine that the cost of living can double (100 per cent) every 10 years; the equivalent of a rate of inflation of about seven per cent (6.95 per cent) per annum. This also means that the value of money is moving in the opposite direction of that rate. 

A good example is the cost of a loaf of bread. Ten years ago it was $6, today it is certainly more than $12. This means that $6 today would only be able to purchase half (50 per cent) of a loaf of bread. 

Applying this concept to the policy’s guaranteed future value we would find that in 25 years, the buying power of $350,000 would be just under $65,000 ($61,276) in today’s terms. What will Pricilla do with that money in 25 years time? 

The better use of money?

If Pricilla’s world only consisted of a cash value insurance policy that yielded 3.92 per cent per annum, a piece of real estate that could yield upwards of five per cent per annum; a mortgage interest rate (hopefully fixed) of six per cent per annum and an annual inflation rate of 6.95 per cent, then we could decide on a better use of the extra premium dollars she has to pay. 

Whilst it may be impossible to reduce inflation and impractical to buy or improve real estate in monthly installments; it would be sagacious to accelerate the repayment of her mortgage by the extra $689 per month and hopefully without penalty. She could even choose to rework the mortgage installment up front to include the $689.

A 25-year mortgage of $350,000 at six per cent would work out to $2,255 monthly. If she decided to pay $2,944 ($2,255 + $689) the term would be reduced to 181 months or 15 years. If she was prepared to live without this installment for 25 years, then she should be able to save it for the remaining 10 years of her investing time horizon, which is a total of $353,280 not including interest. If we applied a conservative annual interest rate of 1.96 per cent (3.92% / 2) she would see a future value of $389,928. 

Additionally, because she would have paid off her mortgage in only 15 years, the interest saved would be $146,580 (see table above). Also, the fact that she only needs the insurance for 15 years, the term policy for $125 could be discontinued after the debt is repaid saving a further $15,000 ($125 x 12 months x 10 years). 

Nicholas Dean (CertFa) is a qualified independent financial adviser and is the managing director of The Financial Coaching Centre Ltd. If you have any questions or need advice on today’s subject please email: nickadvice@gmail.com or visit Web site: www.FinancialCoachingCentre.com

Even as energy companies in T&T sector are reporting declines in revenue, Guyana and Barbados are putting measures in place to expand their energy sectors. 

Energy Ministers from the two neighbouring countries were part of a special plenary on Caribbean regional energy integration at the recently concluded T&T Energy Conference at the Hyatt Regency in Port-of-Spain.

Darcy Boyce, Minister in the Office of the Prime Minister of Barbados, referring to the size of T&T’s energy sector, said: “Barbados does not expect to see a large development of the oil and gas industry. I don’t think it is a matter of absorbing (T&T’s workers who were laid off. Our energy sector is small and quite diversified.”

Boyce said in the long term the market will determine whether there is any change in the size of the island’s energy sector.

“Numbers are down now but, your Prime Minister was very clear to point out in his speech...how your country was able to manage and recover. I wouldn’t want to second guess your Prime Minister,” he said.

Boyce said integration across the Caribbean is happening “under our noses” and is going unnoticed. He said trends are showing that investors are moving from one Caribbean country  into several Caribbean countries.

He added: “You see it in tourism, retail and in oil and gas a little bit, renewable industry and electricity as well.” He said incentives in solar energy existed before but are now being extended to other parts of the sector.

“We just decided that we will extend those same incentives...to encourage the generation of the renewable energy sector. 

“Remember oil prices in 2008 went up to US$147 per barrel, and then came back down to close to US$100 per barrel for the better part of 2008,” Boyce said. He said Barbados is not interested  in competing with the energy sectors in other Caribbean countries.

Raphael Trotman, Guyana’s Minister of Governance, natural Resources and Environment, said that country is looking to fill the loopholes T&T left out but competing with T&T or Caricom is not on the cards.

Asked whether Guyana could be the next energy powerhouse in the Caribbean, Trotman said: “I see us assuming a role, as we’ve always tried to do, as a good member of Caricom. We don’t want to play power politics because we are brothers and sisters.”

He added that it is about working in an integrated way to find synergies and competing is not an option.

A new report from the Association of Chartered Certified Accountants (ACCA) outlines the key things business leaders in the oil and gas sector need to master if they want to be successful in the most volatile and competitive era the sector has ever seen.

Faye Chua, head of futures at ACCA said: “Right now, the risk of going under is a very real one for many oil and gas companies. 

Three major factors have combined to create a perfect storm in the sector. One—lower cash-flows due to depressed oil prices. Two—the existing debt overhang. And three—the so-called ‘great crew change’ as the impending retirement of senior expert professionals over the next five years leaves a talent vacuum in its wake.”

Business chiefs who can successfully steer their organisation through this challenging period will be set to prosper. So what should the successful leader consider as he or she negotiates these challenges?

According to Chua, after analysing market conditions and taking the views of a range of key strategic players in the sector, four key areas of focus emerged.

“The key to navigating the choppy waters we are currently experiencing in the oil and gas sector is good management of growth, costs, funding and externalities. Get those four factors under control and you give your organisation the best chance of success.”

Growth management
Identify and postpone projects with a high degree of uncertainty. Be especially ruthless with any at the early stages of development which can be killed without much fuss. Seek partners to share in the risk—and of course, reward, of projects. For example, through part-sale of operating interest in new discoveries.

If you can, explore opportunistic growth via acquisition in areas with room for consolidation, for example oilfield services. There is no reason that the current environment should lead to a growth paralysis mindset. 

There could be valuable growth opportunities right now, for example via M&A or by continuing investment in nationally important, high-profile projects with longer-term value.

Cost management
Do not throw out the baby with the bath-water. Concentrate your asset sales on those not central to long-term strategy as much as possible. Organisations with a strong core focus are always better prepared in times of extreme stress or volatility.

Where redundancies are inevitable, manage them carefully to account for skills-gap impact, and ensure readiness for future growth when the oil price rebounds. 

Re-negotiate discounts with contractors to manage service costs and on-going expenditure. There could be room here as many suppliers may prefer lower margins to idle machinery in the challenging times we are currently experiencing.

Funding management
In the near term it can often all be about survival but do not lose sight of a credible growth story for the longer-term. To give your organisation the best chance of attracting funding, ensure the security of your current income stream, even if it is reduced. That stability is key to ensuring there is a consistent stream if income.

It is important to model the impact of rising interest rates on sourcing bank and debt funding. Seek a realistic picture as oil prices cannot be modelled on a safe, upward trajectory to pay for higher rates with future income as they have been in the past.

As minimising risk and exposure becomes critical, explore non-debt options for funding. For example, with specialist equity investors who play exclusively in the oil and gas sector. In short, private equity funds are going to be your friends.

Managing externalities
Your organisation should aspire to a clear and respected voice on key sector issues such as the advocating role of government, whether via regulations and global transparency frameworks, or tax incentives to support reduced revenues.

On a similar note, the inevitable short-term fire-fighting should not come at the expense of the long view. You should also be looking at on-going evaluation of strategic issues such as climate change policy (COP 21), and its implications in the near and longer term.