Surplus by 2028
PRINCIPAL of The University of the West Indies, Mona (The UWI), Professor Densil Williams, says he has set his sights on wiping out the $9 billion in accumulated deficit the Mona campus now carries and plans to have the institution posting a surplus by the end of his first term as CEO of the 75-year-old higher education facility. Williams, who was appointed head of the Mona campus of The UWI on August 1, 2023, will serve a five-year term which ends in 2028.
Speaking with the Jamaica Observer in an interview following a press briefing on Monday, Williams outlined the magnitude of the financial situation the Mona campus faces.
“We have an accumulated deficit of about $9 billion, coming from $2.4 billion five years ago, so the deficit has worsened,” he acknowledged, adding that the deficit worsens by “about $1 billion to $1.4 billion annually”. He also noted that The UWI, Mona has receivables of $4.9 billion – mostly owed by students and the Students’ Loan Bureau, and some commercial operations on the campus – as well as negative working capital of about $1 billion.
“So we really don’t have a good balance sheet, and that’s just the reality that we face,” he told the Business Observer.
But undaunted by the scale of the financial situation, Williams, a professor of international business, has set about taking on the task of changing the financial fortunes of The UWI, Mona, saying, in the short term, he wants to add $1 billion in new revenues while cutting $500 million in expenses.
“Our task is to change that around, and the first thing that I’m doing, I’m terming out the short-term liabilities because that is one of the major contributors to the negative working capital. We have short-term liabilities to the tune of about $8 billion, and we are servicing that each year to the tune of about $700 million and the idea is to term it out.”
‘Term out’ is a financial concept used to describe the transfer of debt internally, within a company’s balance sheet. This is done through the capitalisation of short-term debt to long-term debt. Changing the classification of debt on the balance sheet allows companies to improve their working capital and take advantage of lower interest rates.
“So we are going to go to the market to raise some financing of a longer term nature…and we are going to move these short-term liabilities from the top of the balance sheet…to the bottom of the balance sheet as long-term debt. So, really and truly, we will not be taking on any new debt. What we will be doing is to restructure the balance sheet so that we can have much more space in terms of working capital. So if we are spending $700 million now to service this liability on an annual basis, if we raise some financing that allows us to reduce that spend to about $250 million to $300 million per year, automatically you are realising $400 million to $450 million in savings, and that is real money, because you would have had to find it to service the liabilities,” Williams continued.
He said a financial advisor has already been selected for that refinancing project but declined to name the advisor, citing that “markets are sensitive”, adding that the advisors had asked to keep the information close until the technical details of raising the funds are sorted out. But he said details of the type of financing that will be on offer will be known by the end of February.
“They are suppose to get back to us by February 23 with a very clear indication of where we are going so that we can start the raise by roughly about March or April,” he said. “We are looking for at least $5 billion to cover some of the short-term liabilities.”
The savings from that, which is estimated to be around “$400 million to $450 million”, will help The UWI, Mona to improve its cash flow, Williams stated. But he also said the institution will also be reaching out to collect a significant portion of the $4.9 billion that is owed to it.
“We will also factor some of our receivables as well. Those receivables that we know have a high possibility of being collected, we want to factor those as well. And if we factor that and say we are willing to take a write-down of 10 per cent off that, we would still have some liquidity of about $3 billion to $4 billion coming into the system. If that were to happen, what we will do is to ease the cash flow burden in the short term and then on top of that, is what I am now trying to do, is the long-term projects which are going to give you a much bigger revenue stream.”
Williams did not say over what period of time the university intends to collect the outstanding sums, but he said projects like global health initiatives to be set up on a campus in western Jamaica to train health professionals for the global marketplace, reviewing self-financed programmes, and increasing fees charged to commercial entities operating on the campus as well as introducing short-cycle courses – especially in cultural studies on icons like Peter Tosh and Bob Marley – and becoming a bigger player in the knowledge process outsourcing sector should help to diversify the revenue stream. Those are expected to earn an extra $1 billion per annum.
“If we can get 2,000 people per year attending the global health school on an annual basis over the next five to six years, then you realise that we would have opened a new revenue stream for the campus,” he continued.
He said one of the main cost drivers for the university is post-employment benefits, which he said “is huge”, though he didn’t offer a figure. Will look at how pensions are invested so that the university doesn’t have to fund it from own resources but from the gains to be made to help cut costs as well.
“By 2028 we want to be able to turnaround the accumulated deficit position into an accumulated surplus, even if it is a very small surplus. So we are $9 billion [in deficit] now and we have to start making a profit by next year to eliminate this deficit over the next four years. So if we take the next three-year window and make a surplus of about $2 billion [each year], then we would have cut that by about two-thirds, and, therefore, by about 2027 we should reduce that deficit to about $3 billion. By 2028 that deficit could come down to $1 billion or to make a profit as well.”
Williams also said the campus will be looking to market itself more as a venue for various events, citing that between December 15 and January 1 a host of events, including parties, were held on the campus every day. Another area of new revenues being eyed is commercialising research coming out of the university.
“People will say, what are they doing up there at The UWI? We have an institute that is now researching a new strain of mushrooms for the global market. America has put a ban on mushrooms because of the negative perceptions around it. We are now developing a new strain that will revolutionise the industry. Take another one, you know that generally to treat cancer the cell lines they use come from caucasians and that is used to even treat black people. We have a researcher in the faculty of medical sciences who has developed the first black cell line in the world and that is going to revolutionise the treatment of cancer for black people.”
Other areas of focus Williams has for his first term as principal include getting more students who start degree programmes to complete them. Currently, only about 80 per cent of students complete their degrees. Williams wants to push that closer to 100 per cent and also to get them to complete the programmes within the stipulated time frame. He also wants to get more individuals and entities giving scholarships to students. Now, 3,000 scholarships are available annually for the campus, which has 16,000 students registered. Williams wants at least 10,000 to be on scholarship by the end of his first term.
“The truth is that the financial issues, while they are tremendous, I don’t think those are the issues that are going to be bothering us for the next five years because we are going to be dealing with those and ensure that we improve our revenue flow. The real big issue that needs to be bothering us now is the issue that is dealing with activism,” he said. “Issues like crime and violence, economic inequality, health and nutrition, greater enrolment in post-secondary education, and those things and more that will put The UWI, Mona at the forefront of people’s minds and in the minds of students seeing the university as a first choice for undergraduate and postgraduate degrees are what we want,” he closed.