Collectively there are 95 public listed companies on the four
exchanges… hardly a critical mass. Total market capitalization
amounts to USD31 billion. These numbers make an eloquent
case for the consolidation of the four markets into a single
market… “easier said than done”. At its peak in the early 90’s,
the JSE had approximately 51 listed companies.
Constraints to Caribbean Capital Market
Development
The first major and defining constraint is size, both in terms
of population size and size and number of businesses.
A second constraint is public ignorance of how stock
markets work and the benefits which can accrue to individual
investors and issuers. The need for financial literacy at all
levels of society is gaping. Caribbean businesses are still
very averse to the idea of public ownership and the attendant
benefits and responsibilities.
During the Manley years (democratic socialism) 1970’s to
1980 the state “acquired” a number of companies, hotels
and other assets as the economy ground to a halt. This was
followed by the Seaga regime and a return to a “market
economy”.
“The process of privatization or state divestment began in
Jamaica in early 1980s. A divestment policy, at that time,
was proposed to ensure that public funds were not used to
finance the operations of inefficient enterprises and to reduce
the burden on the budget of the Government of Jamaica
(GOJ)” . Table 2: shows companies sold via the Jamaica Stock
Exchange (JSE) in the 80s and early 90s.
Table 2:
No.
Companies Sold Via the JSE
Company
Year
% Sold to
the Public
1
The prevailing Caribbean macroeconomic environment also
mitigates against market development. Trinidad and Tobago,
is the only one of the four markets, whose economy is not in
dire crisis. St. Lucia’s Prime Minister, Dr. Kenny Anthony’s
summation is apt “make no mistake about it, our region is
in the throes of the greatest crisis since independence. The
spectre of evolving into failed societies is no longer a subject
of imagination. How our societies crawl out of this vicious
vortex of persistent LOW GROWTH, CRIPPLING DEBT,
HUGE FISCAL DIFICITS, and HIGH UNEMPLOYMENT is
the single most important question facing us at this time”.
Students of the market would recall that there was a “bear
market” at the NYSE from 1929 to 1954, i.e. the beginning of
Great Depression to the end of the Korean War.
Governments’ Divestment/Privatization Policy
Privatization/Divestment, in its most basic form, is the
transfer of state assets to the private sector. The focus of this
comment is the transfer of these state assets to the public
using the stock market, i.e. offers of shares to the public.
The experiences of the four markets are varied, with Jamaica
being at the forefront.
National Commercial Bank (NCB)
Limited
1986
51%
2
Caribbean Cement Company (CCC)
Limited
1987
72%
3
West Indies Pulp and Paper Limited
1989
89%
4
Telecommunications of Jamaica
(previously Cable and Wireless)*
5
Workers Bank*
6
Caribbean Steel*
Source: TTSE, JSE, BSE, ECSE
In a 2012 revised privatization policy