The Board of Directors of the Social Security Board has approved the purchase of Government's shares in BEL and BTL, subject to the final negotiations with the Government of Belize. As we told you, the SSB Investment committee recommended that SSB purchase 40 million dollars worth of BEL's shares and 15 million dollars in BTL shares. The board met this afternoon, and after reviewing the investment committee's reasons on why this is a sound investment, there was unanimous support for the investment, including the representatives from the social partners.
This evening, the chairman of the Board of Directors, Doug Singh, told us why the board looked favorably at the proposal. He told us that the monies that will be invested in these shares are sitting in the bank and are growing at only a 2% rate of return, so 6 to 10% that the utilities have historically been making is a far more attractive opportunity:
Doug Singh, Chair. Board of Directors, SSB
"A thorough analysis was done by the investment committee, a very well done analysis I believe, to demonstrate what the historical return from these companies have been, what the projected return can be anticipated to be and also a demonstration of what our existing investments are in particular in liquid cash deposits at the bank. As a result of that, the investment committee recommended to the board of directors that it favorably considers purchasing some of these shares or the value of these shares. They also made a recommendation on a ceiling that should be paid for these shares which is as a result of a thorough analysis that was done. It is in light of that the social security reviewed it and it was a unanimous decision on the board of social security which include its social partners to forward this which means that the social security will be engaged with the government of Belize on their proposals. The social security reserves is approximately $503 million BZD and it is the responsibility of the board and investment committee to get the best possible return on the investments and to look at the palpable investments. In the past it was quite easy when deposits rates were at 9%-10%, the social security chose to put deposits in the bank and earn that kind of return. Those days are behind us at this point in time and we have watched our deposit rates at the bank drop from 9% to 8% to 7% to 5% and most of the deposits now range between 2% and probably 3 and 3/4% at a maximum. In fact a substantial amount of money are invested at 2% because the banks don't want it and they will only take it at 2% if they take it. That kind of return is not acceptable so it is critical for the fund to be able to sustain and not get to that point of equilibrium where you're paying out more than your getting in. Certainly it's better to invest your money that you're earning 2% interest on to get 7%-9%-10% return and that is precisely the kind of returns that BTL and BEL has been getting on their balance sheets and income statements over the last few years. In fact the average return from the BTL shares has been between 8% and 10%."
But, as you heard last night, the Opposition Party thinks it is a bad investment. They went a step further and urged SSB's Board to reject the investment, suggesting that if they do, they will put the Social Security fund in jeopardy to bail out a cash strapped government. Singh responded to that criticism:
"Can you give a categorical position that the investment in these particular instances is not directed from the political bosses?"
Doug Singh, Chair. Board of Directors, SSB
"In fact if you look at the context of the letter you will see, to the contrary, and the structure of the social security investments also tell you that it's rather difficult to have those kind of influences. first of all, the government asked if social security was interested, didn't say 'I'd like you to buy', it said 'if you're interested because it's getting a good return, etc. we would want to know if you would consider investing, we're looking for so much and if you are we are prepared to engage you on a purchase price'. That was the approach from the government of Belize. in addition to which it goes to the investment committee who must first look at it, evaluate it and then make a recommendation to the board. The board of directors can't even consider these kind of opportunities unless it is first recommended by the investment committee. That is the structure that is in place and is there to safeguard the resources of the social security, but beyond that I am pleased to say that all the members of the SSB which includes 2 from the business sector and 2 from the labor sector representing the unions, unanimously agreed to the investment. It is really an opportunity for social security."
Singh told us that the Social Security Board will now set up a meeting with the Government to negotiate the final price per share.