Equity still the key to Jamaica's economic turnaround

BY KEITH COLLISTER

Sunday, June 09, 2019

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In an article dated March 18, 2016 in the Jamaica Observer 'Equity is the key to Jamaica's economic turnaround', I argued that Jamaica was still badly in need of a turnaround, and that more equity was the key to Jamaica's economic turnaround, the other main issue being better governance. “Macroeconomic stabilisation is not enough. There is a huge shortage of equity capital, particularly for the industries that don't yet, but could exist in Jamaica.”

Next week the Development Bank of Jamaica (DBJ) is hosting a seminar “Delivering Economic Growth through Partnerships: Financing Regional Infrastructure, SME and Innovation” on Tuesday and Wednesday, June 11 – 12, with experienced practitioners and private sector investors from Canada, the United Kingdom, Jamaica, Barbados, Trinidad and Tobago, and the Bahamas, amongst others, to discuss how to generate growth through infrastructure development and private equity, and including an additional alternative session for small and medium-sized enterprises on entrepreneurship and innovation.

This is the fifth such seminar that the DBJ is hosting, and builds on the successes of previous ones that were held in 2013, 2014, 2016 and again in 2017, when the conference expanded through a strategic partnership between the Jamaica Venture Capital Programme and the Public Private Partnerships and Privatisation Division of the DBJ.

Pernell P Charles Jr, the minister without portfolio in the ministry of economic Growth and Job Creation, and Michael Lee-Chin, Jamaican-Canadian business magnate will deliver keynote presentations at the conference's official opening and cocktail reception on the evening of Monday, June 10.

In my 2016 article, I had observed “One of the answers is to encourage venture capital — a term broadly used here to include private equity (also infrastructure funds), as well as some junior stock exchange companies. Other measures to promote equity development include privatisation, and the more attractive employee share ownership schemes (ESOPs).”

The article was a follow-on to my 2006 online paper for the Economic Commission for Latin America and the Caribbean (ECLAC), “A new approach to development banking in Jamaica”.

I noted that the Development Bank of Jamaica (DBJ) correctly sought to be a catalyst for the creation of multiple private sector-led venture capital funds, rather than provide capital directly as a state-owned Development Bank, or as subsidised credit through approved financial intermediaries. It is now seeing the fruits of this better approach.

Three years on, the shortage of equity capital is now being addressed. Several private equity, mezzanine funds and vehicles now exist, and Jamaica has now had both its largest IPO (Wisynco), and largest privatisation by IPO (Wigton) in its history.

Both sharply expanded the number of shareholders, in the process showing the listed equity market is truly open. The main areas that still need further work are seed investing and ESOPS, as infrastructure is now apparently on its way.

In the same 2016 article I added, “However, the most powerful way of unlocking equity would be a combination of reduced titling costs and the acceleration of approvals and other titling procedures, combined with a sharp reduction in stamp duties and transfer taxes to unfreeze the massive amount of 'dead' capital residing in land — as outlined forcefully in the Planning Institute of Jamaica's growth-inducement strategy of 2011, the key consultant/author being Professor Donald Harris.” This has also now been addressed by Finance Minister Nigel Clarke at the last budget, who will also be a key speaker at the conference.

In 2016, serial entrepreneur and venture capitalist Paul Ahlstrom gave a seminar on his “Big Idea Challenge”, for his excellent monetisable “pain point” methodology, exciting over 250 mainly young Jamaican entrepreneurs — five teams of whom got to pitch their idea in 30 seconds.

The youngest team, a group of sixth form girls from St Andrew High School, emerged as the winners (chosen by the crowd) of $30,000 cash, plus a personalised copy of his book Nail it Then Scale It.

Paul Ahlstrom is back in 2019 for another important session aimed at smaller entrepreneurs entitled “Driving Innovation and Growth — Real experiences and successes of a fund manager investing in the US and Latin America”.

One of the key partners at this years Conference is the Canadian High Commission, which boasts a commercial relationship with the region valued at over $2 billion per year in just merchandise trade.

It is, therefore, no coincidence that heavy hitter John McKendrick, Executive Vice-President, Infrastructure Ontario, will be in attendance.

Jamaica's Private Equity & Venture Capital Programme and the Public-Private Partnership and Privatisation Programme have received international attention by being recognised on the 2018 LAVCA Scorecard and in the latest Infrascope Report, respectively, as among the top 10 in the region.

Adriana La Valley, Chief of Operations at Inter American Development Invest, said, “Jamaica has evolved in terms of being an attractive destination for investment and we're very proud to see also that local investors are believing in Jamaica because so do we. Jamaica is spearheading the region by analysing and understanding the importance of including resiliency analyses in evaluating infrastructure projects.”

We will leave the last word to Audrey Richards, the long time driver of the initiative (and of the Junior Stock exchange initiative preceding it) who as project coordinator of the (JVCP) states; “The timing of the conference is opportune and is set against the background of Jamaican entrepreneurs and local businesses becoming more receptive to equity funding and with private equity increasingly gaining traction in the local landscape. This is a significant achievement considering the previously debt-centric environment in the island, as MSMEs are now widely recognised as the engine of economic growth, especially in small economies such as Jamaica's”.


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