By Dr. Ken Danns

THE local private sector comprises homegrown foundational business enterprises defined by the liberty and imperative of their economic actions, and which makes invaluable contributions to gross domestic product, government revenue, employment, and the very lives and sustenance of the Guyanese people. It has been historically dominated and marginalised by the state sector, the foreign private sector and the government.

Yet, it has been very resilient and survived. Some local private sector enterprises have thrived in areas such as beverage manufacturing, forestry and sawmilling, banking and financial services and rice-farming and ecotourism. As currently constituted, the local private sector in Guyana is transactional rather than transformational, and is limited in its capabilities to engender sustainable development of the country.

It is an open secret that the local private sector operatives in Guyana, with some exceptions, are by no means wealthy and are not enamoured of a dynamic entrepreneurial disposition. They are seemingly content to make a surplus on their investments and earn a living rather than to generate serious profits. They stick with what works and eschew the creative risk-taking that may result in major entrepreneurial successes. These local private-sector operatives are mainly businessmen who buy and sell products from abroad or locally, engage in farming, mining and the provision of limited services.

They are mainly small businesses with fewer than 20 employees. Many having as few as four or less employees. Few are involved in manufacturing and other value-added production. They do not embrace technology. Rather, technology embraces them. Their business mode is that of a sole proprietorship or family businesses. They invariably eschew the creation of corporations where ownership resides with shareholders and shares can be traded in the market. They are largely insular and uncurious and are more contented with survival rather than growth. They generally present little rivalry to the foreign private sector, and have very few partnerships with these. They seek favours from the government when necessary, circumvent regulations where possible and otherwise avoid engagement with public officialdom.

Major local companies such as Banks DIH, Demerara Distillers Limited (DDL), and the commercial banks are notable exceptions to the traditional local private sector. What distinguishes these companies and their successes is that they are neither sole proprietorships nor family businesses and are instead corporations. These companies have broken with the genre of ownership to which the traditional private sector has been clinging. They have embraced inclusive ownership. Their corporate growth and successes are reflective of this changed organisational mode. There are of course very successful family businesses such as Toolsie Persaud and Sons, Gafoors and Sons and Mazarally and Sons which are seemingly restricted in their creative expansion and effectiveness by their culture-driven persistence with exclusive family ownership.

But how did the local private sector get to be this way? Why is it that they are seemingly characterised by a poverty of purpose and of growth? The colonial government in British Guiana played a key role in inhibiting the development of the local private sector. Preference was given to the expatriate transnational companies such as Bookers McConnell and ALCAN, which were involved in sugar cane-farming and manufacturing, bauxite-mining, etc. The local private sector was largely confined to the commercial businesses, services and small and medium-sized farming. Portuguese and Chinese businesses were initially privileged in the commercial sector over those of the majority East Indian and African Guyanese populations.

The colonial economy relied almost exclusively on exports of primary commodities, and imports of everything else, which economists have argued have been the basis for sustained underdevelopment. The colonial government however, strongly encouraged and incentivised the local private sector to produce during World War Two because merchant ships could not have safely travelled to bring imported commodities on which the colony depended. This “Grow More Food” campaign was highly successful. British Guiana ably survived without accustomed imports. As soon as the war ended, the colonial government reversed this beneficial trend by ending the “Grow More Food” campaign and withdrawing its support and incentives, so that imported commodities would once again dominate. The lesson here is that the powers and policies of government can go a far way toward enabling or restricting the growth of the private sector.

An independent Guyana soon embraced cooperative socialism. The state sector, through nationalisation, replaced the foreign private sector as the dominant economic sector. Socialism often proves an anathema to the growth of a private sector. Deliberate socialist policies by the Forbes Burnham PNC Government from 1968 – 1985, resulted in the marginalisation of the local private sector. Guerilla entrepreneurs – traders and vendors – emerged as part of a thriving underground economic movement in marked resistance to the state-dominated economy. Private enterprise became an expression of freedom.

The Desmond Hoyte-led PNC Reform government abandoned the failed socialist development path. It ideologically restored the primacy of the private sector as the premier economic sector and engine of growth in Guyana. The local private sector, whose operatives were politically opposed to the government, was no longer discouraged.

Nationalised industries were subjected to divestment. Once again, the foreign private sector was privileged over the local private sector by the Hoyte government which pursued an “industrialisation by invitation” policy. Hoyte had declared that Guyana was open for business and granted generous tax and other concessions to foreign mining, forestry and other companies. One major foreign mining company which had polluted rivers and caused severe environmental damage, allegedly never paid any taxes to the Guyana Government. The company allegedly ended its operations in Guyana just before the generous tax holiday it was granted was scheduled to end.

The socialist Cheddi Jagan-led PPP/ Civic government replaced the Hoyte’s PNC Reform in 1992. Once again, the local private sector was confronted with a paramount socialist party that sustained an ambivalent disposition towards it. Hoyte’s policies towards the private sector and foreign investment were found to be politically expedient and were retained by the PPP/C in a country that had grown tired of failed socialist ideologies. Still, not enough was done to create a positive environment for business and empower the local private sector under the PPP/C government. Instead, it was widely reported that corruption and the payment of bribes to government officials and politicians became the mechanism for selected elements of the local private sector’s engagement with the government. Guyanese investors from the diaspora played leading roles in government/private sector partnerships. The sale of government property, the awarding of government contracts and government/private sector partnerships were widely reported to be tainted with venality.

The National Insurance Scheme (NIS) safety net monies were allegedly doled out gratuitously in a PPP government/private sector deal to finance the Berbice River Bridge Project. It is highly questionable whether these social security monies will ever be recouped.

Wary of each other
To blame the local private sector for not being ready to advance the country’s development is historical cecity. The local private sector is wary of the government and the government is in turn wary of the local private sector. The local private sector lamented that overly generous concessions are being guaranteed foreign investors from now until forever more, while local businesses are being heavily taxed and subjected to sometimes crippling regulations and processes to get things done. Consequently, they contend that not enough is being done to incentivise the growth and contribution of the local private sector.

Countries that have experienced rapid development have done so on the basis of constructive government and local private sector partnerships. Countries such as China, South Korea, Singapore, Hong Kong and Taiwan are flourishing because their local private sectors are invested in their respective country’s development and not just encouraged to play second fiddle to foreign investors. While foreign direct investment may contribute to economic growth of a country, it must be acknowledged that the goal of the foreign private sector is not to develop its host country. Rather, the singular purpose of the foreign private sector is to derive profit for itself and its external shareholders. The development of a local private sector is far more likely to contribute to the development of a country.
Coalition looks to private sector

The APNU+AFC coalition administration, which has been in control of the government for just over two years, has unequivocally targeted the private sector as the focal point for generating the country’s development. Strong initiatives are being made by the government to actively promote and incentivise entrepreneurial activities in the various regions of the country, particularly among the nation’s youth and its women. The aim is to generate employment and in the process expand and diversify the local private sector above and beyond its traditional existence.

The Minister of Finance, Winston Jordan, challenged the local private sector to readjust their thinking and way of doing business and to be willing to form partnerships with foreign companies rather than complain about them. The Finance Minister actually declared during his budget presentation in the nation’s Parliament: “We have to creep before we walk! Creep by forming partnerships with people who know. Learn the business. Accept the technology transfer; gain some financing before you can get out on your own.” The minister further called for a campaign to support local businesses and local products.

Further, he affirmed that the government was promulgating “Local Content” legislation in order to ensure that local businesses and workers have a fair share and opportunity within the developing oil industry. Additionally, the APNU+AFC government is accessing US$86.1 million in concessional financing from the IDB to enable Guyana to pursue inclusive growth by focusing on institutions to deliver services, critical infrastructure, and improve the basic conditions that enhance the private sector’s role in the economy.

Expansion and development
For the first time a Government of Guyana is unequivocally supporting the expansion and development of the local private sector while simultaneously courting foreign private sector investment. Still, much more needs to be done to empower and incentivise the growth and transformation of the traditional private sector which has literally survived centuries of discouragement and subordination. It is not enough to encourage the local private sector to partner with foreign businesses as subordinate partners, although this is a good way to enable some such enterprises to enter the 21st century. Indeed, some leading local businesses have long been doing so. Without giving away all of the treasury, the APNU+AFC government should equally establish partnerships with its own local private sector based on transparency, mutual respect and trust. It would be useful to invite prominent local companies such as Banks DIH and DDL and ask them what government could do to enable them to get to the next level, if this is not already being done. Make it less difficult for diaspora entrepreneurs to invest in Guyana and local start-up businesses to thrive. Grant tax holidays equally to the local private sector making major investments and capable of generating significant employment.

The motivation that our local private sector needs to unleash its entrepreneurial potential is the knowledge that their government believes in them and has their backs in the event they stumble going forward. In all of this, the local private sector needs to: increase its rapprochement with and reduce its instinctual opposition to the government; become more corporate and inclusive in its business ownership; be willing to aggressively engage with similar or related enterprises — both local and foreign.