Cabinet approves $3B GGMC transfer to housing authority, loan bid abandoned

Cabinet on Tuesday approved a $3B transfer by the Guyana Geology and Mines Commission (GGMC) to the housing authority, CHPA, abandoning a plan for a loan between the two agencies that had attracted controversy and a court challenge.

The legal challenge had resulted in a court order on February 27, 2015 for the GGMC to justify an earlier decision for a loan between the two agencies. (An earlier version of this story had mistakenly described the $3B transfer as a loan.)

Authoritative sources say that following the presentation of a memorandum by the Ministry of Natural Resources and the Environment and the Ministry of Housing and Water, Cabinet approved the transfer of $3b to the Central Housing and Planning Authority (CH&PA) to support the development of housing infrastructure projects in mining communities.

It is unclear what impact Cabinet’s decision on the transfer will have on the case now before the court. The direct transfer of the money between the two agencies will likely attract further controversy. The government has not announced this transfer.

On February 27, Acting Chief Justice Ian Chang directed the GGMC and the CH&PA to account for the contentious $3B loan agreement signed by both agencies last month.

Justice Chang granted the orders based on applications by Working People’s Alliance member Desmond Trotman and city councillor and CH&PA board member Ranwell Jordan, who had moved to the court to prevent the disbursement, which critics say violate the GGMC Act and is a misuse of state funds.

The agreement caters for the GGMC to loan the CH&PA $3B for a period of one year to be used for the development of the housing sector.

Based on Trotman’s application, Justice Chang has ordered that the GGMC show cause why a Writ of Certiorari should not be issued to quash its decision to lend the funds to the CH&PA as an unsecured loan and why a Writ of Prohibition should not be issued prohibiting the GGMC from taking further action on the loan on the grounds that it is illegal.

Further, based on Jordan’s application, the judge has ordered the CH&PA to show why a Writ of Certiorari should not be issued to quash its decision to submit an investment proposal to the GGMC and enter into the loan agreement. It is Jordan’s claim that the CH&PA is not authorised by law to enter into any loan agreement for the borrowing of moneys. The court has also ordered that the CH&PA show cause why a Writ of Prohibition should not be issued to prevent it from taking further steps on any and all sums received from the GGMC as proceeds of the loan “on the grounds that the CHPA has no statutory authority to submit any Investment Proposal or to enter into any loan agreement with the GGMC,” among other things. The matter is returnable for March 13th.

Cabinet’s decision on Tuesday in relation to the $3b transfer differs from what the original intent of the loan was. The GGMC and the CH&PA in a joint statement on February 27th had said that the CH&PA project was “pivotal to the realisation of the Government of Guyana strategic target of allocating 30,000 lots under the Adequate and Affordable Housing Programme in order to maintain momentum in the provision of service land in several areas on the East and West Demerara.” Sources say Tuesday’s Cabinet decision referred to housing in mining communities and other areas where settlement by miners occurs. This amendment to the purposes of the financing appears aimed at making it relevant to the GGMC Act.  Some critics had argued that the proposed financing for housing in general was ultra vires the GGMC Act.

 Opinion

According to a source, following the controversy that erupted over the loan, an opinion was provided by law firm Cameron and Shepherd to the GGMC advising that the loan did not breach the GGMC Act. On February 4th, 2015, Cameron and Shepherd partner Ralph Ramkarran wrote GGMC Commissioner Rickford Vieira advising that authority for the loan existed in sub-section (f) of Section 4 of the Guyana Geology and Mines Act Chapter 66:02, which he said gave the Commission wide discretion in relation to its functions, in conjunction with Section 6 (1) C of the Act which permits loans. He noted that sub-section (f) stated that it was the business of the GGMC “…to carry on all activities, the carrying on of which appears to the Commission to be requisite, advantageous or convenient for, or in connection with, the exercise of its functions.

Analysts have argued that two state agencies should not be permitted to enter such a transaction outside of the Consolidated Fund. Such inter-agency transactions, they say, would lead to chaos in the public accounts and make a mockery of parliamentary oversight.

Although the announcement of the loan sparked concerns about government seeking to circumvent constraints on spending ahead of the May 11th general elections, the GGMC has claimed that it should not be seen as an isolated case and it has cited 33 instances where it provided financial assistance totalling over $8 billion between 2012 and 2015.

The GGMC’s loan to the CH&PA is the single largest outlay disbursed by the commission during that period. Additionally, the GGMC has said it made contributions to the Consolidated Fund in the sum of $6.8 billion from 2006 to 2012.

Economist Rawle Lucas in a recent Sunday Stabroek column said that the GGMC did not have the right to make that loan to the housing sector. “A reading of paragraph 10 of the GGMC Act should make it clear to all and sundry that the GGMC did not have the right to make the loan of the kind that it made to the CH&PA. Due diligence by the Commissioners under an act of fidelity would have alerted them to the fact that the loans that GGMC can make are circumscribed by the words “in the performance of its functions” that appear at the very end of the said paragraph,” he wrote.

He also noted that there has been an attempt to justify the loan as an investment by GGMC. “Any attempt to do so would bring paragraph 8 of the GGMC Act into play and would also activate the relevant provisions of paragraph 57 of the Securities Industry Act. The requirements of these Acts expose the irregularity of the loan deal and the apparent contempt for the laws of Guyana should the GGMC insist that the loan was an investment,” Lucas contended.

The economist pointed out too that Paragraph 8 of the GGMC Act says that GGMC can invest in securities and securities are generally understood to mean equity and debt instruments that can be bought and sold on a market like the Guyana Stock Exchange. “In other words, the expectation is that GGMC would buy and sell shares of stock or buy and sell bonds. The bond which is a loan would be the type of security in which the GGMC could invest,” he explained.

“However, for the loan to CH&PA to have qualified as a bond, the CH&PA would have had to issue it in accordance with paragraph 57 of the Securities Industry Act. To do so, the CH&PA would have had to use an underwriter who was registered with the Securities Council. Unless that happened, GGMC cannot claim that it made an investment in a marketable security. To date, there is no evidence that CH&PA took such action,” Lucas declared.

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