‘We cannot allow it to fail’: councillors agree to underwrite £500,000 loan to government’s own hotel

After voicing misgivings about risk, unfairness and public distrust, St Helena’s councillors have agreed to underwrite a half-million pound loan to the government’s own hotel.

The money is needed partly to pay the contractor for converting run-down offices into four-star luxury accommodation at 1, 2 and 3 Main Street in Jamestown.

Councillor Cruyff Buckley said he would support the guarantee for the loan solely to save the jobs of 32 Saints.

The Hon. Tony Green said: “We cannot possibly allow the hotel to fail.”

The decision was taken by Legislative Council yesterday, after members were told that there was “no risk” that the government would have to pay the full half-million pounds if  St Helena Hotel Development Ltd defaulted on the loan.

Four councillors voted against the guarantee: Gavin Elliot, Brian Isaac, Kylie Hercules and Clint Beard. Others voiced their reluctant support.

The coffers in The Castle would only have to cover any instalment that was missed by the company – which is 100% owned by the government itself.

Councillors also heard that the Bank of St Helena had yet to decide whether to approve the loan.

The government decided to fund the hotel in May 2016 after failing to attract an investor willing to take a risk on a remote island with barely any established tourism.

It went over budget by 13.9 per cent because of international currency fluctuations, delays to RMS St Helena sailings, and the cost of bringing artisans to the island to finish the work.

The acting Financial Secretary, Nicholas Yon, said councillors had legitimate concerns about the risks of guaranteeing a loan to pay off the contractor – and keep the hotel running.

But there were “equally significant risks” to the viability of the hotel company without the loan. The hotel could close and jobs would be lost, along with all the investment already made.

“This would have significant economic implications for St Helena in building a sustainable economy and taking full advantage of air access.”

Revenue would be closely monitored to ensure payments were kept. And the government would firm up an “exit strategy” for selling the hotel when it could.

Councillor Tony Green said that if the hotel failed, it was unlikely that “anybody would then have confidence” in development on St Helena.

But he believed the hotel would be a success.

Dr Corinda Essex said she refused to call it the Mantis Hotel because it implied it was owned by the South African boutique hotel chain that runs it.

She said the level of public concern “should not be underestimated.”

“The current undesirable financial situation, however justified it may be, has only fanned the flames of public opinion once again.

“It cannot be denied that SHG should not usually be competing directly with the local private sector and this is a key reason why a clear exit strategy has been developed.”

But she said the island now had a valuable asset at 1, 2, 3 Main Street that enhanced the island’s reputation.

It had yet to bring much return but had great potential. “Those who point out there is considerable risk are correct in their view. We can only hope for the best.

“To effectively pull the plug on such a new venture… is convincingly not in the best interest of St Helena as a whole.”

The Hon. Cruyff Buckley said he supported the guarantee with reluctance.

“I feel I have no choice, bearing in mind the 32 people who work at the hotel,” he said.

“It has been perceived that the hotel is in direct competition with many accomodation providers here, but they have no safety net under their belts when they invest their hard earned cash, unlike the St Helena Hotel Development company.

He wanted Saints to be able to buy shares in the hotel and eventually take a controlling interest.

He expressed doubts about the high cost of loan repayments of at least £50,000 a year.

“On a place like St Helena that is a lot of money, so to downplay any repercussions of what we are about to do is not only misleading, it is unrealistic, and we have to be honest.”

He said people who stayed at the Mantis Hotel had told him they were unhappy to find themselves in a high-end hotel, on top of the high cost of reaching the island.

“Had they known there was other accommodation they would not have been in the Mantis,” he said.

The Hon. Christine Scipio O’Dean questioned the financial projections that had been made in 2016.

“Once more the business plan has turned out to be a dream without much practical realisation, and here we have once more to pick up the broken pieces.

“There is a huge risk the guarantee may crystalise into a liability for St Helena Government.”

Councillor Brian Isaac said he could not vote for the loan guarantee. “I must listen to the people,” he said.

The Hon. Cyril Leo quoted failures by the UK’s Department for International Development in supporting St Helena.

He said the island government’s decision to fund the hotel was made in good faith.

He supported the guarantee with “profound reservations” but called for “an urgent, thorough investigative review of the project oversight, the project spend and the running costs of the hotel”.

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