In a Stabroek News Article posted in its online platform today (December 6th, 2024), with the caption “Natural Resource Fund Board is a rubber stamp – opposition representative”, the article quoted an opposition representative on the Investment Committee of the Natural Resource Fund (NRF), Mr. Terrence Campbell, who intimidated the following:
- “that the rate of depletion of the fund requires urgent attention,
- that he’s been pressing internally for the NRF’s Board to demand justification for withdrawals from the Fund in accordance with Section 16(2) subsections (a) and (b) of the NRF Act,
- that these subsections specify that withdrawals must be made for national development priorities and essential projects to ameliorate the effects of natural disaster,
- that in essence, the Board signs a blank cheque with each withdrawal, and
- with the current rate of depletion, it will be years before the investment committee has any work to do.”
It would appear that the opposition representative, Mr. Campbell, is completely unaware of his function, role and responsibilities on the investment committee of the NRF pursuant to the NRF Act. His interpretation of the Act and relevant subsections thereof is woefully flawed.
First and foremost, let’s look at the withdrawals from the Fund in accordance with the NRF Act. All withdrawals from the NRF are subject to the approval of the National Assembly in accordance with the NRF Act in keeping with the prescribed procedures and formula therein. As such, the Investment Committee of the NRF has absolutely no approval, oversight or any other responsibility in respect of the withdrawals from the NRF.
The function of the Investment Committee established under Section 8 of the NRF Act, “shall be responsible for advising the Board of Directors on the Investment Mandate referred to in Section 5”. Section 5 (5) states that “the Board of Directors shall (a) be responsible for preparing the Investment Mandate…” of the Fund.
In other words, the Board of Directors, which is to be advised by the Investment Committee on the Investment Mandate of the Fundis responsible for investing the funds remaining in the NRF net of the withdrawals to finance the National Budget.
There is no provision whatsoever in the NRF Act granting any jurisdiction or role for the Investment Committee or the Board of Directors over the withdrawals from the Fund. These are distinctly separate functions of the Fund carried out by distinctly separate institutions, pursuant to the provisions set out in the NRF Act.
It should be noted that in the previous version of the NRF Act by the former APNU+AFC Government, the investment mandate was the function of the Bank of Guyana. In this current PPP/C version, the investment mandate is carried out by a Board of Directors that was never in place under the APNU+AFC’s version.
On the issue of the rate of depletion of the Fund, it is worthwhile to note that Norway, a country that is often referenced as the benchmark for international best practices for Sovereign Wealth Funds (SWFs), established their SWF nearly two (2) decades later from the time they became and oil producing country.
In the case of Guyana, a NRF was put in place at the outset of oil production.
Be that as it may, Mr. Campbell may have exposed not only his ignorance of the NRF Act and his function as an Investment Committee member, but he’s also inadvertently exposed his deficiencies and / or delinquencies as it relates to his role. In his own words, he said that there is no work for the Investment Committee because of the depletion rate of the Fund. But this is inaccurate. There is work for the Investment Committee and the Investment Committee is actively doing its work in accordance with the NRF Act.
To this end, as of September 30, 2024, the market value of the Fund was US$3.193 billion, with a portfolio return of 1.318%. The third quarter report of the NRF published by the Bank of Guyana noted the following on page 9:
“The Board of Directors of the Natural Resources Fund at its meeting held on May 16, 2024, approved the investment mandate for the Fund. It was mandated that the funds be maintained in the deposit account held at the Federal Reserve Bank of New York earning overnight deposit interest at the prevailing federal funds rate of 5.30%. It was also agreed that the Bank of Guyana will continue to monitor the overnight interest rate and inform the Chairman of any changes by the Federal Reserve Bank to consider the feasibility of redeploying cash…As at end-September 2024, there has been no changes made to the investment mandate as the Fund continues to earn overnight deposit interest at 4.8%”.
Considering the prevailing market conditions, the balance of the Fund net of withdrawals, and the risk profile within which the NRF is restricted to, pursuant to the NRF Act, the current investment mandate is well in order.
Accordingly, this does not mean that the members of the Investment Committee has no work to do. Sitting on an investment committee of any Fund, especially a Natural Resources Fund, those persons ought to actively monitor financial markets, regionally and globally, especially the markets in which the Funds are invested, the instruments they are invested in, and constantly keeping abreast with market developments and analysis. This constitutes the work of an investment committee, all year round. It therefore means that the opposition representative, Mr. Campbell is not doing his work and is collecting a remuneration under false pretense.