Cutting to the quick

Agricultural Development Bank (ADB) Chairman, Hubert Alleyne, is convinced that the offer to farmers to buy back their shares in the bank at $10 dollar each, is the best deal that will come to the table.

“If farmers feel that $10 dollars is not a proper price, let them see what is available on the market,” Alleyne said flatly, in a recent interview. When the ADB was founded 30 years ago, one condition of lending was that farmers take shares to the extent of five percent. This buy-out of farmers’ shares is just one of several decisions Alleyne and his new board, appointed a year ago, has had to execute. Cabinet gave the thumbs-up for the swap. “If you look at the stock market today, 70 percent of the stocks of profitable companies on the market are priced at less than $10,” he said, adding, “how could you be losing on that ?” An independent evaluation done recently by Price-WaterHouseCoopers (PWC) put the ADB share price at $1.26. As government was the major shareholder, “the ADB wanted to buy the shares back on behalf of the government and give the farmers what they paid for it initally -  $10. Some 4,400 farmers have outstanding shares and $8.1m has been allocated to settle this, he said, noting that this accounted for about 3-4 percent of the shareholding value of the bank. “There is nothing sinister about that,” he said as he deflected criticism concerning the share offer. “It is a reasonable offer, it has nothing to do with politics.” 

Already, Alleyne, former Exec-utive Director, RBTT and now Unit Trust Chairman, has been at the ADB’s helm for one year and trying to set tracks for the state-run company to run. His short tenure though has been overshadowed by controversy. Alleyne has had a stand-off with the Auditor General over the 2001 unaudited ADB accounts. ADB sources say that he refused to sign the accounts sent to the Board by the Auditor General. “He looked at it and saw something was wrong,” said one source close to the ADB. Sources said, when the board picked up discrepancies in the accounts, he immediately called in PWCoopers and hired them to do an internal audit. Sources said Alleyne sought to have the issue clarified by arranging a meeting between the entire ADB board and the Auditor General. But the Auditor General’s response, ADB sources said, was that it was “a management problem.” A former ADB clerk has since been charged with 28 counts of fraud that was not picked  up by the Auditor General. “I have a job to do,” is all Alleyne was prepared to say on the stand-off between him and the Auditor General which lasted for about a year, since he assumed office. 

On the hiring of PriceWaterhouseCoopers?  “It was the right thing to do,” he said. He says he’s not into politics and is in nobody’s backpocket. What he does want, he said, is to put the ADB back on sound financial footing and to put agriculture on the front burner. He is aware that the ADB lost about $220m over 30 years, almost all of their capital. There is about $40-$50m in capital left.  The ADB made a $6 million in profit in 2001, according to the unaudited accounts. He says he does not want a repeat of what happened in the 1980’s when the bank found itself financing big organisations in agriculture. “The bank had lost its way,” he said of those days, noting that twenty percent of the $220m lost by the ADB could be attributed to small farmers. “I am trying to make sure that people in agriculture who cannot gain access to the commercial banks would have a place to come and get finance,” he said. He hopes to make this one of the planks in the ADB’s new portfolio. He cringes when he thinks of the the plan that was put forward by the previous administration  and the InterAmerican Development Bank (IADB) to close down the ADB. Their joint formula was to liquidate the ADB and have its assets auctioned off to other banks, something that, to Alleyne, was and still is unpalatable.

The rationale behind the plan was that the ADB was losing money, and to stem the flow, the committee, headed by Jerry Hospedales, Head of the Divestment Secretariat, suggested that the bank’s portfolio be merged with other banks and that some of its functions transferred to other institutions. While the banks said they were not interested in assuming the ADB’s portfolio, their plan was to supply the farmers with credit cards, whereby the farmers could access credit from the banks. “It was a crazy plan,” was how Alleyne put it. “If the ADB closes down, where will the farmers go,” he said. Even now, local banks have indicated that they don’t want the ADB’s portfolio. “The banks don’t want want that business,” he says, adding, “it does not fly.”  Not only is the margin of profits low, but the risks are much too great, he notes. His financial expertise, honed from years of experience at RBTT, is proving to be a boon for the ADB. The board was able to take a $4.5 million debt settlement and put it into a guaranteed bond with insurance company, Clico, which was approved by the Supervisor of Insurance. It is projected that in about two years the ADB’s investment would have grown close to $6 million. This will liquidate the entire debt, plus interest.  

Alleyne is also to forge a strategic alliance with the Unit Trust Corporation (UTC). If a farmer buys units, Alleyne said he must be able to use his certificate to borrow against it, at attractive rates.  He would also like to bring down the rate of interest — which now stands at  eight percent per annum — to facilitate potential investors in agriculture. The contribution of agriculture to GDP is 2.2 percent — about $1.2 billion, Alleyne said. The ADB, he believes, still has a role to play in agricultural development and must return to its moorings : to fill the gap for credit not readily available or accessible from existing financial institutions. “Who else is going to lend money to the farmers?” he asks, adding, “the banks don’t want to do it. The government has a social responsibility to do that.” “To run a business, you must have capital, who else will provide it,” he says of the ADB’s effort to help the nation’s farmers. His goal, he says, is to make the ADB the leading source of finance in TT for agriculture to people who are not considered credit-worthy by the banks. For the naysayers who argue that the ADB must be able to show a large profit, Alleyne argues that the ADM is not a commercial bank, “it is a developmental, financial institution.” He is adamant when he says that the country can’t rely entirely on the private sector to feed the nation, noting that in Canada, Europe and USA, farms are heavily subsidised by the State. “Why would you not want to support the farmer ?” he asked. “You can’t import everything,” says Alleyne, who once owned a farm in Wallerfield, where poultry, pigs and a fruit orchard flourished under his hand. “I have a damn good idea of what it takes to run a farm,” he said. He still thinks that agriculture can be lucrative, but only to those who want it. “It is not quick, easy, money,” he said. “You have to work.”