TALK, TALK, TALK!

During last year the Chairman of Banks DIH, Clifford Reis, complained about the functioning of the Stock Exchange. When the Chairman of the largest, pioneering, public company, speaks people usually listen. He had good cause. Between 2023 and the present, despite record profits, and a burgeoning economy, the share price of Banks DIH stock has dropped from $190 to $140.  Had this phenomenon affected Banks DIH only, it could have been argued that the fall in its share price had something to do with the management of the company. After Clifford Reis spoke, there was a flurry of activity in Government circles in relation to reforming the Stock Exchange. There was no follow through and nothing happened.

Clifford Reis could not have gone public if the drop in share prices had affected only Banks DIH. Over the past two years the vast majority of companies trading in the stock exchange have seen substantial increases in profits accompanied by falling share prices. With the discovery of oil and its extraction and sale, a vast expansion of the economy and increased profitability in the banking system were expected and realized. Over the past few years several banks have announced huge increases in profitability. At the same time, most of them have experienced substantial drop in share prices. If the economy is growing rapidly and confidently, investment is pouring into Guyana and profitability is increasing, the possible and rational reason for the substantial drop in share prices is that the mechanism that controls them, the Stock Exchange, is not functioning as it should.

The Guyana Stock Exchange was established pursuant to the Securities Act 1998 which provides for the registration of securities brokers and dealers, self-regulatory organisations and issuers of securities. It created the Guyana Securities Council as an autonomous, notionally independent body. The Stock Exchange was established by GASCI, the Guyana Association of Securities and Intermediaries Inc. Its members are: Trust Company (Guyana) Ltd, Guyana Americas Merchant Bank Inc, Beharry Stockbrokers Ltd, and Hand-in-Hand Trust Corporation Inc. These firms are registered as brokers with the Guyana Securities Council. GASCI organizes and supervises the Stock Exchange. Thirteen companies are currently active on the Stock Exchange. There is no indication that proposals have been put forward by the Guyana Securities Council for the reform or restructuring of the Stock Exchange or in relation to expanding or modernizing the securities or financial sector.

In a capitalist or market economy, an efficiently functioning stock exchange is necessary to mobilise capital, which in turn funds growth and provides a platform for offering investment opportunities for individuals and companies. The Stock Exchange provides, or should provide, a barometer of the functioning of the economy. In Guyana the statistics show that the economy is growing at a rapid rate with a high Gross Domestic Product and public companies are expanding and making huge profits. Contradictorily, the Stock Exchange, which should reflect what is happening in the economy, reflects the opposite – that the economy is stagnant or declining and profitability is low. The question therefore arises as to whether the Stock Exchange, as currently organized, is functioning as it should, is serving any useful purpose, and whether or not it should be disbanded.  

The Government has repeatedly indicated over several years that it would like, or intends to, reform the Stack Exchange and has solicited proposals. It has on its desk those proposals which have been sent repeatedly. Meetings have taken place over several years. Nothing has happened. The President has now intervened. As reported in SN yesterday, he announced in an address at a meeting of the Georgetown Chamber of Commerce on Friday that the Government would endeavour, with the help of the private sector, to establish a modern stock exchange as part of broader efforts to modernize Guyana’s financial sector. The President said: “Part of the financial modernization model would be the creation or upgrade of the stock exchange and look at the possibility of a junior stock exchange.”

When the President speaks, his words have to be taken seriously. When he makes proposals and advances plans, it is expected that his Government intends to implement them expeditiously. The President has announced that the Government would “upgrade” the stock exchange or “create” a new one. Following this announcement, it is expected that within the next few weeks the Government would dust off the several proposals sitting on its desk for the longest while and, having done that, would convene a meeting with all interested parties to advance work on the “creation or upgrade of the stock exchange.” Some people would not be holding their breath. All they have heard in the past from Government officials is talk, talk, talk.

Supplementing the “modernization” of the financial sector, as the President proposes, should be an effort to encourage large Guyanese companies, with an offer of amnesty for past tax delinquency, to go public and offer shares for purchase. This has two benefits, namely, provide capital for the companies to expand, which will benefit Guyana, and provide the vehicle for the Guyanese people who have savings languishing in banks with very little interest, to earn a decent income. The jury is out as to whether anything will materialize.