|A win-win deal? |
Monday, May 8 2017
IT MAY well be that the $255 million TSTT/Massy deal announced last Tuesday is beneficial to the State, but there is more to this transaction than just signatures on a dotted line. At least two key issues arise. Firstly, there is need for clarity when it comes to appropriate boundaries of the power of state-owned companies.
Secondly, what is the policy regarding procurement of assets for operational purposes at a company like TSTT? TSTT has said it entered into a share purchase agreement (SPA) to purchase 100 percent of Massy Communications and the Massy conglomerate has informed its staff the deal is a win win situation for both TSTT and Massy. The National Joint Action Committee (NJAC) however has called on Finance Minister Colm Imbert to ensure there is an investigation and full disclosure on the transaction.
NJAC argues, correctly in our view, that such a significant transaction involving a substantial amount of public funds “should not be shrouded in secrecy, especially at a time when citizens are being faced with so much economic hardship and increasing taxation”. NJAC also stated it considered the alleged failure of the TSTT board to disclose this acquisition to the Finance Minister, and by extension the Cabinet, to be a direct breach of the law governing State enterprises as outlined in the State Enterprises Performance Monitoring Manual.
Chapter three of the manual states, “Enterprises or their subsidiaries are required to obtain prior approval of the Minister of Finance for the acquisition of significant assets, new investments in non-government securities, the incurrence of new/additional long-term debt and entering into significant contracts”.
NJAC pointed to the Incorporation Act No. 5 of 1973, Chapter 69:03, which subjects to certain acquisitions to Presidential (and therefore presumably Cabinet) authority and specifies that all expenses of State companies are to be met by the Treasury.
Some questions will have to be asked in a review. Is the transaction subject to the terms of the State’s manual? Does it fall under the legislation? How is that legislation to be understood? If it is true that there was no Cabinet oversight in relation to this matter was this appropriate for a transaction of this value? Far smaller transactions by ministries, departments and even enterprises are, daily, subject to the long process of Cabinet approval.
But a more pressing question is whether this deal was done in conformance with the spirit of good procurement practices.
It is clear from the remarks of Massy Group chief executive officer Gervase Warner that Massy is of the view that it has benefitted (alongside the State).
In a private memo to staff he reportedly said the firm would be “much stronger and more effective competitor in the highspeed broadband and HD TV segment of the sector”. Was this deal fair to Massy’s competitors? Also, was it done in a way that conformed to public procurement principles? If a State enterprise can spend millions in such a way that benefits a private company, then there must be a regime of checks and balances.
It should not just be up to the individuals in that company to evaluate the benefits to the State.
That should fall to our elected representatives.
Finally, we note the fact that it has been stated that the transaction is subject to the approval of Telecommunications Authority of Trinidad and Tobago (TATT). If TATT must approve this transaction, why has Cabinet approval also not been required? For now, we are sure this was a win win deal for Massy and TSTT. But what about the taxpayer?