– Are the charges against former Finance Minister and NICIL’s former CEO meritorious?
Today’s article seeks to weigh in on one of the most politically controversial matters, in which former Finance Minister Dr. Ashni Singh and former Chief Executive Officer of NICIL, Mr. Winston Brassington, were both charged for misconduct in public office. According to information in the press, the two former senior government officials were charged for the sale of several state lands without obtaining a valuation (s) from a competent valuator.
Now, this may sound, to any sound-minded finance professional and any rational thinker, as an extremely absurd ideology from a strict and prudent business sense, especially in Guyana’s context. It is now, however, a rare development characterized as a phenomenon unique to Guyana – described by this author as a politically inspired paradoxism – albeit, an unfortunate scenario.
Theoretical concepts of Value and Definition
Definition of Appraisal: To appraise means the act or process of developing an opinion of value (USPAP, 2010 – 2011 edition). It may be said that value is the present worth of all rights to future benefits arising out of property ownership, to typical users or investors. An appraisal report, or a valuation, is usually a written statement of the appraiser’s opinion of value of an adequately described property as at a specified date. It is a conclusion which results from the process of research and analysis of factual and relevant data. Real estate (this applies to land valuation as well) appraisal methods are usually standardized by virtue of the experience and practice of qualified persons in different parts of a country, who encounter the same types of valuation problems, and who, by various methods and processes, succeed in solving those problems in an equitable manner.
It is natural, however, that differences of opinion may exist as to the value of specific parcels of real estate and the means of estimating their value.
Principles and practices of property valuation
Moreover, property rights in real estate are normally appraised at Market Value. There are many definitions of Market Value, but a good working definition is the most probable price the property/land would bring if freely offered on the open market with both a willing buyer and a willing seller. Further, according to the International Standards Council, market value is the estimated amount for which a property should exchange for on the date of valuation between a willing buyer and a willing seller, in an arm’s length transaction after proper marketing wherein the parties had each exchanged knowledgeably, prudently and without compulsion. This definition assumes that the parties to the transaction are prudent, act without compulsion, and have adequate knowledge of the potential and worth of the property. The vendor will only sell at the price he requires, and the purchaser will only buy at the price he considers to be a satisfactory price. They are both willing parties because they both consider the deal to their advantage. Generally, property professionals are more concerned about the assumption of a willing seller. This is because it is most likely for a seller to be under undue pressure to sell than a purchaser to be under similar pressure to buy. In addition, it is worthwhile to mention that appraisal or valuation by literal ‘Chinese’ translation is normally referred to as “price guessing”. But the word ‘valuation’ implies the objective is to assess “value”, and not to find “price”. In this context, it does not help very much in defining the exact rationale of appraisal. Appraisal is the process of collecting data, analyzing the variables, and making a judgement.
Misconceptions about valuations
Conclusion
Putting these into Guyana’s context, first of all, Guyana does not have any form of a proper real estate market index in which to truly perform a real appraisal of a property, much less for a land – to derive a reasonable estimation of a market value. In the more developed countries, there are better developed and structured property markets in which the valuation principles alluded to here can be more fully applied. Finally, based on what is being reported in the press on this matter, if a public tendering process was carried out, then there is absolutely no basis whatsoever for such charges to be instituted against these two gentlemen.
The Author is the holder of a MSc. Degree in Business Management, with concentration in Global Finance, Financial Markets, Institutions & Banking from a UK university of international standing.
