Your Money eZine

e can’t say that the recession did not help us as a country. Thanks

to the recession, we’ve seen investors di-vorcing government paper and bonds to move more towards Entrepreneurship. How did this happen?

Over the past couple of years, we’ve been seeing an interesting trend that is so pow-erful that it has been a total game chang-er in Jamaica. What is it? Interest rates have hit a 40-year, all time low! With this happening, government paper and tradi-tional loans from commercial banks have become so ‘uncool’ that they’ve lost all their friends. Entrepreneurship has sud-denly become ‘popular’, with all the new friends.

Financial institutions can no longer depend on government paper and other ‘high interest-yielding products’ as a means to make record profits like before. In fact, they now have to become extremely in-novative to earn money. Yes, that’s right. Innovation has become the order of the day.

Just this month, we’ve seen PanCaribbean launch a product called Sigma Venture, which is a 100% equity product that will be used as a fund to invest in start-ups, existing small businesses looking towards growth and even companies on the Ja-maica Stock Exchange ( JSE) Junior Mar-ket. PanCaribbean, which has the largest market share in the investment banking arena, has once again changed the game and made entrepreneurship the ‘coolest kid on the block’.

Thanks to the recession, Jamaica is now on a level where we have a variety of tools available to us that ensure our long-term viability. An additional move which we saw coming out of the budget debate is the Prime Minister announcing a plan to build a regulatory framework for a ven-ture capital funding infrastructure. This will see a legitimization of the term ‘ven-ture capital’ in Jamaica and enable other major financial institutions to legally par-ticipate in this industry that has created so many opportunities for companies in first world countries. Facebook, Google and Skype are only a few of the world’s top companies that have benefitted from venture capital. Imagine the possibilities for Jamaica!

#thatisall

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EntrEprEnEurship – thE CoolEst Kid on thE BloCK

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CEO’s Think Tank is a weekly discus-sion between Your Money reporters and our CEO, Tyrone Wilson. It will focus on pertinent business issues that are discussed on a regular basis among corporate executives, entre-preneurs, small business owners, po-litical leaders and other key leaders in our society.

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Tyrone WilsonCEO of eZines Limited

Real Business. Real Talk.

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he 2010/2011 fiscal year has cer-tainly been a period of change. The exchange rate has been vir-

tually stabilized, interest rates have hit a 40-year low and overall, there are signs of life returning to the Jamaican economy post-recession. The lower in-terest rates brought on by the Jamaica Debt Exchange ( JDX) programme has changed the local investment climate as the traditionally lucrative government paper has lost pride of place as the pre-ferred asset. As a result, there is stron-ger demand for other asset classes such as real estate and equities. Responding to this trend, PanCaribbean has added two new products, the Sigma Venture and Sigma Corporate, to its unitized investment pool with the aim of broad-ening the investment opportunities for its clients. The two new products bring to five PanCaribbean’s unit trust pool, which already includes Sigma Optima, a regional equity portfolio, Sigma Solu-tion, a JMD-denominated fixed income portfolio, and Sigma Liberty, the USD-indexed fixed income portfolio. Sigma Venture is the equity portfolio, invested in private and public equity securities and venture capital holdings domiciled in the Caribbean. Sigma Cor-porate is a fixed income portfolio, also invested in corporate debt securities of companies that are locally, regionally and internationally based. Both Sigma Venture and Sigma Cor-porate are decidedly more aggres-sively focused on growth. Investors of varying size can now finance leverage buyouts, start-ups, private companies, companies listed on the Jamaica Stock Exchange Junior Market as well as es-tablished businesses. The funds aim to provide investors who have a longer-

term investment horizon and limited liquidity needs within the first year of investing, with above-average returns on these emerging asset classes. Kevin Donaldson, PanCaribbean Finan-cial Services Equities Unit Manager,noted the advantages that the new products of-fer to the more aggressive and growth-focused investors. “These products are not ordinarily available to investors in our marketplace. The Venture fund is the first of its kind, as is the corporate bond portfolio. They both provide an investor with the exposure to a new and emerging asset class, geographical diversification, potentially higher yields and higher growth,” he said. The initial minimum investment in both Sigma Venture and Sigma Corporate are 50,000 units, with subsequent mini-mum amounts of 5000 units per port-folio. The initial offer price is $1.00 per

unit. The Sigma Venture portfolio in-cludes a preliminary charge of four per-cent, provided the investment is held at the minimum investment period of one year. The Sigma Corporate port-folio also includes a preliminary charge of one percent; however, units will not attract this fee if held for the minimum one year holding period. Portfolios are priced daily and valuations are done based on each particular asset, plus all income is accrued to investors after fees are subtracted. Donaldson noted that the funds would be managed to provide investors with the highest possible returns on the carefully selected portfolio of invest-ments. “At PanCaribbean, we have the first mover advantage on these prod-ucts and the experienced management to make it work. The overall investment market is changing and there is demand for investment options like Sigma Ven-ture and Sigma Corporate,” he said.

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“Investors of varying size can now finance leverage buyouts, start-ups, private companies, compa-nies listed on the Jamaica Stock Exchange Junior Market as well as established businesses.”

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PAnCARIBBEAn LAUnCHES InnOVATIVE EqUITY AnD DEBT PRODUCTSEntrEprEnEurship rECEivEs shot in thE Arm:

Jeffrey Cobham (Left), Director Pan Caribbean Fi-nancial Services Limited, Tanya Miller (center), Vice President Group Marketing, and Donovan Perkins (right), President & CEO at the Sigma Fund Launch this morning (Tuesday, May 17). PanCaribbean launched two groundbreaking products, the Sigma Venture (Equity Fund) and Sigma Corporate (Bond

Fund) unit trusts.

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insights

he Growth Inducement Strategy (GIS) put forward by the Planning

Institute of Jamaica (PIOJ), aims to ad-dress the need for strong, visible growth in the Jamaican economy, presenting “a strategic framework and a structured program of actions designed to achieve a quick turnaround in the economy and build a platform and momentum for medium-term growth.” The Univer-sity of Technology recently hosted a panel discussion entitled ‘The Growth Inducement Strategy and the Fiscal Budget 2011-2012’, aimed at examin-ing the J$544.721 billion budget tabled by Finance Minister Audley Shaw. The discussions focused on the Estimates of Expenditure; Tax Policy and Revenue and Fiscal Policy and Debt.

In his presentation on Fiscal Policy and Debt in the context of the GIS, Vice President of Scotia Investments Limited, Dr. Adrian Stokes, noted that unlike the two previous budgets, the 2011/2012 plan is balanced. “If you look at the defi-cit that [Scotia Investments is] projecting of J$64 billion and you see the govern-ment’s number, J$61 billion, and you add back capital expenditure of J$60 bil-lion, then the budget actually balances, which is a good thing. It means you’re not borrowing to fund recurrent expen-diture, you’re borrowing to expand the economic base as far as capital expen-diture is concerned,” he said. However, he added, interest expenditure remains relatively flat.

As a result of Jamaica’s weak economic background, growth in the Gross Do-mestic Product (GDP), although trend-

ing upwards, is still below zero. Dr. Stokes is not convinced by the Prime Minister’s assessment that Jamaica achieved one percent positive growth over the first quarter of this year and is now officially

out of the recession. “When you have these kinds of situations, even though the arrow is pointing up, because of the negatives, it’s not moving the needle as far as people’s lives and feeling the ef-fects,” he said. The outlook for private sector growth, which is a key indicator of economic strength, is also bleak as expansion has tapered off. In fact, no significant growth is expected within the next six months or so.

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“When you have these kinds of situations, even though the ar-row is pointing up, because of the negatives, it’s not moving the needle as far as people’s lives and feeling the effects.”

BudgEt BAlAnCEd, but Faster Growth Needed

Dr. Adrian Stokes, Vice President of Scotia Investments Limited.

byTracey-Ann Wisdom

BudgEt BAlAnCEd, but Faster Growth Needed

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insights

“Don’t be fooled by what’s happening or the debates that are taking place. Tax revenues have slowed, pace of growth has slowed – in fact, it has declined sig-nificantly, notwithstanding the fact that we’ve had tax increases over the last two years,” Dr. Stokes said.

In terms of debt, our current accounts receipts and what we receive from ex-ports are not robust enough to cover our interest payments. As a result, Ja-maica has become more vulnerable to external economic shocks, highly sus-ceptible to changes in the balance of payment.

The Importance of GrowthOne of the key indicators of growth is the minimum primary surplus, which measures whether the country is mov-ing in the right direction to lower its debt burden. Jamaica’s current surplus is five percent, but according to Dr. Stokes’ projections, if we are to grow by one percent this year and maintain our current debt ratio of 128% at the pres-ent rate of 12% interest, we would need a primary surplus of 7.6%. The current rate also exposes the government to pressure from the IMF, which typically advocates reduced spending. However, Dr. Stokes noted that in a recession, if the government has fiscal room and space, increasing spending – at a reason-able rate – is actually advisable.

Speaking to the importance of solid growth in the economy, Dr. Stokes ex-plained that if Jamaica should have a compound annual growth rate of two

percent, it would take eight to nine years to reduce our debt to GDP ratio from 128% to 100%, whereas if we managed to grow by five percent, we could reach that target in as little as five years. He also noted that international ratings agency Standard and Poor’s uses such simulations to arrive at their annual rat-ings ( Jamaica’s current rating is B-).

“The fiscal targets for this year, as far as credibility is concerned, are reasonable in the sense that the number is achiev-able… There might be slippage, but the number is reasonable,” Dr. Stokes said. However, he deemed the J$1.5 billion set aside for contingencies insufficient as emergencies such as natural disasters can cost up to one percent of the GDP. Other problems Dr. Stokes highlighted include the low return on investment and our “highly distorted tax system” where waivers are granted to certain industries which don’t benefit the coun-try in real terms. He suggested that we increase the multipliers from these in-dustries by clustering. For example, the tourism and agriculture industries could be better integrated to ensure that more

tourism dollars remain in Jamaica. Addi-tionally, labour productivity needs to be addressed as 60% of the unemployed work force and 50% of those employed have no formal training.

Join us next week when we feature the presentations from business and finance journalist Ralston Hyman and UTech Accounting lecturer, Georgia Silvera-Finnikin.

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“The fiscal targets for this year, as far as credibility is concerned, are reasonable in the sense that the number is achievable… There might be slippage, but the number is reasonable.”

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Small Business Banking

amion Chambers has been fascinated with computers since he was introduced

to repairs as a third form student at St. Mary High School. It seems his destiny was set from that tender age as he has gone on to make a name for himself in the Information Technology field. Chambers graduated second in his class from the Caribbean Institute of Technol-ogy, receiving the Sanjay Panhannabhan award for best Java Programmer. Like many graduates, he entered the working world and soon found himself discon-tented with his Systems Engineer job, where growth prospects were narrow. Even though his ideas were embraced, they were not being rewarded. He even-tually decided to step out on his own and started SMART Technologies Jamaica in 2003.

Since its establishment, the company has distinguished itself as the region’s lead-ing developer and service provider of Human Resource Management software systems. “My main motivation [to start the company] was the opportunity to express my creativity through computer programming,” Chambers said. “I saw a need for Human Resource Manage-ment software based on the requests of business owners I knew at the time. The only viable options that were avail-able were overseas products that didn’t fit well with our labour laws and the way we calculate leave balances. This is why I opted to create a local product that can be customized.”

SMART Technologies offers two top-of-the-line software packages: SMART Staff Manager, a Human Capital Management system and SMART ScheduleMaster Pro, a Work Flow, Time and Attendance Management system. With SMART Staff Manager, HR directors can assess each employee’s work patterns, including at-tendance, absences and job-related inci-dents, as well as calculate compensation and benefits such as insurance. SMART ScheduleMaster Pro helps managers to organize and monitor their employees’

shifts, clock-in/clock-out times, tabulate work hours and export data to payroll software, eliminating time-consuming data entry. It also uses Biometric technol-ogy, which uses fingerprint identification to eliminate the need for passwords.

SMART Technologies works with a num-ber of partners that provide software and/or hardware, which are customized with its own technology based on the company’s clients’ specific needs. These partners include Microsoft, M2SYS Ac-celerated Biometrics, SecuGen Biomet-rics Solutions and Easy CGI, which offers web hosting.

“We have clients from all sectors: manu-facturing, supermarkets, major distribu-tors, power companies, hotels, govern-ment and major groups of companies. Totally, [we have] over 80 installations locally and growing,” Chambers noted.

Having created a niche in the Jamaican market, SMART Technologies is now looking to expand its services across the Caribbean and other regions worldwide. “We are creating a version for the web that is a do-it-yourself concept that can be downloaded by anyone. Finding local or Caribbean partners to fuel this ef-fort would greatly increase the speed of implementation,” Chambers stated. His goal over the next five years is to posi-tion SMART Technologies as the hub for biometric technology in the Caribbean.

Damion Chambers streamliNiNG humaN resource maNaGemeNt

throuGh smart techNoloGy

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start ups

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“We have clients from all sec-tors: manufacturing, supermar-kets, major distributors, power companies, hotels, government and major groups of companies. Totally, [we have] over 80 instal-lations locally and growing.”

byTracey-Ann Wisdom

Damion Chambers (left) meets Wayne Chen (right) the President of the Jamaica Employers’

Federation.

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