Africa-Press – Cape verde. Pró-Garante had a net profit of around 35 million escudos in 2021. However, the income from the capital of this company is practically absorbed by general administrative expenses. Last year alone, more than 25 thousand escudos were paid in remuneration of its governing bodies and around 850 thousand escudos in fees.
With seven months delay, and after much insistence from A NAÇÃO, Pró-Garante ended up making its report and accounts available for the 2021 financial year, which had been ready since the end of March.
From the consultation made to the document, on the positive side, it appears that, with the support and within the scope of a World Bank project, a partial credit guarantee scheme was set up, in professional terms.
However, this scheme, endowed with a capital of around 1 billion escudos from a loan from the World Bank to the State of Cape Verde, has been avoiding doing what it was essentially created for: sharing in its balance sheet the risk of financing, especially the small and medium enterprises.
State assumes 90% of the risk of operations
In fact, almost all the risk of the operations (90%) remains with the State, which maintains it as a contingent liability resulting from the guarantees and guarantees granted.
On the other hand, income from Pró-Garante’s capital is practically absorbed by general administrative expenses. In addition, this company, without practically assuming any risk, charges commissions from the beneficiaries of the guarantees, thus being able to record positive results.
According to an economist contacted by A NAÇÃO, if the Pro-guarantor had to set up provisions according to the risk of the guaranteed operations, “the sustainability of the business would be at stake”.
“The current architecture, although implemented in an extraordinary context of crisis, is neither transparent nor sustainable. Indeed, the responsibility assumed by the State is kept “off balance sheet”, and the State has not set up a Counter-Guarantee Fund to bear the foreseeable costs”, he stresses.
Our interlocutor also considers that, given the “likely high loss ratio” of the guaranteed credits, the materialization of this contingent liability “may cause serious disturbances in budget management, since the internal financing of the budget deficit is limited by law”.
Uncertainties and internal control system
NAÇÃO also found that both the external audit and the Single Auditor gave favorable opinions to the Accounts.
“In our opinion, the accompanying financial statements fairly present, in all material respects, the financial position of the Pro-guarantor as of December 31, 2021, and its financial performance and cash flows for the year then ended, in accordance with International Financial Reporting Standards and in accordance with Notice no. 2/2007 of the Bank of Cape Verde”.
The audit carried out by AUDITEC highlights, however, that 2022 will still be a year of “uncertainties”, especially because “it will be the year in which they will be able to observe the real behavior of guaranteed credits, when the moratoriums given by banks due to COVID-19 end, and also by the War in Ukraine which is generating the first symptoms of stagflation in the world and coherently specifically in Cape Verde”.
The auditors evaluated with Pró-Garante the possible effects of these uncertainties on that company, having concluded that, “although it is not possible to quantify the effects of these uncertainties on the financial position, financial performance and future cash flows, the continuity of operation of Pró -Guarantee is not in question”.
However, the Single Auditor only recommended the following: “implementation of the internal control system in accordance with the provisions of notice nº4/2017; appointment of the Advisory Board as provided for in article 8 of the Pro-Garante’s statutes”.
Impact on the economy
The positive results achieved by Pró-garante in 2021, according to the report and accounts of this Sociedade de Garantia Partial de Crédito SA, derive mainly from the fact that it “fully” achieved all its objectives, “exceeding all the goals established in the business plan”. ”.
The report also highlights the fact that Pro-guarantee has recorded profits for the third consecutive year, which means that during the design, implementation and start-up phases of the activities “it did not incur any costs for the State.
According to the same source, the results also highlighted the impact of Pró-Garante’s activity on the country’s economy.
“In fact, when looking at the performance indicators, the amount of guaranteed credits over GDP, and the number of guaranteed companies over the total number of companies, indicators used in the guarantees industry, it is possible to point out that they are equivalent to the best guarantee systems in the world. ”.
According to the Pró-Garante report and accounts, within the scope of the covid-19 lines, in 2021 this company provided guarantees to 820 micro-enterprises, corresponding to 45 percent (%) of the total guaranteed companies. These guarantees were provided within the scope of the Micro-enterprise Development Program (FME), which “constituted a valuable instrument for accessing credit for these companies, in a particularly sensitive phase of the national economy”.
Regarding access to credit, Pró-Garante highlights the fact that approximately 70% of micro-enterprises served by the FME program have opened accounts at the bank for the first time, which demonstrates “a good additional increment for the program”.
According to the report and accounts, the activity of the Pró-garante, in 2021, proved to be “satisfactory” for having managed to mobilize 2.5 billion escudos in credits for companies, which allowed it to reach a portfolio, or outstanding balance of about 3 million of contos and approximately 5,500 million in credits mobilized from June 2020 to the end of the year 2021.
According to the same source, the cost of risks affects only a small part of its capital, as it managed to structure most of the portfolio, 87.7%, with State counter-guarantees and the United Nations’ net fund. In other words, the sovereign risk, in relation to the “expected loss” is “very low”, as the recoveries are considered “very high”.
Challenges and projections
Participation in the recovery program proposed by the Ministry of Finance, as well as the implementation of the individual model to serve medium and large companies, are challenges for Pró-Garante.
Another challenge for this company is the elaboration of a new strategic plan, upon completion of the current project to create the Pro-guarantee, with funding from the World Bank, which will end in January 2023.
Another challenge is related to the structuring of a risk transfer system, “different from the current one”, of State counter-guarantees, “to maintain the growth of placements with a high degree of solvency”.
Regarding the projections, Pró-Garante considers that 2022 will continue to be a year of uncertainty for this Partial Credit Guarantee Society in view of the “unpredictable” behavior of guaranteed credits after the end of the moratoriums and the effects of the war in Ukraine, which “the first signs are beginning to appear with the general increase in prices in the world and, specifically, specifically in Cape Verde”.
Remunerations and fees
The members of the Board of Directors and the members of the Board of the Pro-Garante Meeting received in remuneration, throughout 2021, the amount of 25,413,845 CVE.
The Board of the General Meeting is chaired by Patrick Barreto Lopes, with Júlio Fortes as secretary. The Single Auditor is Abílio Rogério Rocha, with Bruno Lopes as his substitute.
The Board of Directors is composed of Pedro Barros (chairman), Andrés Espinosa (executive director), Antónia Cardoso (non-executive director) and Lígia Pinto (alternate director).
The external auditor of Pró-Garante received, in fees in 2021, the amount of 843 thousand escudos, for the audit carried out on the company’s 2020 accounts.
Regarding the results obtained, net income of 34,662,593 escudos, the Board of Directors proposed to the General Meeting that it be added to the legal reserve, “as established by law and capitalize all remaining income”.
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