PwC report: Nedco not sustainable

The National Entrepreneurship Development Company Ltd has not been well managed since it was established in 2002, as evidenced by a 77 per cent non-performing loan ratio averaged at $94 million and an accumulated deficit of almost $150 million.

This was revealed yesterday by Nedco chairman Clarry Benn at the Public Accounts Enterprise Committee (PAEC) hearing into the operation of Nedco at Parliament, Port of Spain, where the state-owned company’s accounts for 2008 to 2014 were under review. Some 4,000 accounts were responsible for the non-performing loans.

The new board appointed in December 2015, Benn said, was given a mandate to turn things around, and in January 2016 enlisted Pricewaterhouse Coopers (PwC) at a cost of $398,953 to undertake a comprehensive review of Nedco’s operations. PwC submitted its findings and recommendations in April 2016.

Based on the recommendations Nedco engaged the services of collection company Av Notes, which has been recovering from defaulters about $1.5 million a month.

“We have seen an improvement in the non-performing loan ratio. It is now nearer to 20 per cent,” Benn said.

Nedco clients tend to have high-risk profiles and many who took loans, Benn said, may have interpreted them as grant financing. “Some said they never knew they had to repay the loans.” The maximum loan is $500,000 and the minimum, $5,000.

Merely because this was being administered by a government agency, he said, “The sentiment was that there was no need to repay the loans.”

PAEC member David Small suggested that Nedco needed to be completely overhauled, as $30 million was allocated annually for a staff of 100 in 12 offices. “Something is wrong there.”

Having looked at the numbers, he said, “They would scare any person. You had revenue granted by Government of $70 million in 2011, but loan losses of $44 million. It cannot work.”

He noted, too, that eight loans were administered by 100 staff in 12 offices, which was about 400 loans a year. Some years it was about 300, and one year it was 200.

Questioning an anomaly in the 2014 accounts, he said, it “suggests some type of activity where down to the last cent balanced to zero. That is an accounting impossibility.” In the previous years there were net deficits.

Newly appointed CEO Albert Chow noted that with $5 million a year in rent for 12 offices, consolidation was on the cards. One office was already closed and coming to the end of rental contracts, he said. “We are actively considering whether we should continue.”

The reduction in the allocation of Government’s subvention of $20 million in 2018 down from $24 million in 2017, he said, may also mean the rationalisation of staff.

On the basis of the PWC report, Benn said, effective stakeholder management is needed for implementation. To this end, he said, a new executive management will be in place with benchmarks that include quality of asset, level of efficiency, level of productivity and level of viability.