0

Web Shops Gaining ‘Unfair Advantage’ In Other Sectors

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Opposition politicians yesterday voiced fears that web shop operators may be using pre-legalisation profits to gain “an unfair advantage” over competitors in other Bahamian industries.

Both K P Turnquest, the FNM’s deputy leader, and Branville McCartney, the Democratic National Alliance’s (DNA) leader, argued that the Government had failed to tackle the fate of web shop operators’ untaxed, illegal profits prior to the 2014 legalisation.

These concerns have resurfaced due to the rapid expansion of some web shop groups into multiple sectors of the Bahamian economy, ranging from investment banking to public-private partnerships (PPPs).

While there is nothing to prove these expansions are being financed and underwritten with pre-legalisation profits, the issue is causing increasing concern - especially since the web shop operators have persuaded the Government to grant a 10-year moratorium on new entrants coming into THEIR market.

Mr Turnquest told Tribune Business he was opposed to the web shop moratorium, arguing that it “stifled competition” and would lead to the creation of “de facto oligarchies”.

“We are getting to the point in our country where we have to put in antitrust legislation that prevents the monopolisation of industries by any one group,” he said, “because it does stifle competition and limit opportunities for entrepreneurial Bahamians who intend to enter these sectors.

“The Government must not be in the business of picking winners and losers, because when they do it opens the door to such situations. To the extent there are quality Bahamians with capital and their own companies, they ought to be able to participate.”

Mr Turnquest said web shops’ previously illegal profits, and what would happen to them, was raised by the FNM during the debate on the Gaming Act 2014, which legalised the sector.

“It’s very difficult for any regulatory body to determine what was pre-legalisation and post-legalisation money,” he told Tribune Business. “You are going to have some co-mingling of funds.”

With some web shop groups seeking to expand into other sectors of the Bahamian economy, and compete against rivals who have long been legitimate, Mr Turnquest added: “It is an unfair, or potentially unfair, advantage that these companies may have.

“I think, at the end of the day, it comes back to the original question of monopolies and domination in the Bahamian economy by a particular group.

“We have to be very careful,” he continued. “We don’t want to establish de facto oligarchies. We want to ensure Bahamians have opportunities. We want to ensure barriers to entry to economic sectors are as low as possible, so that every Bahamian, regardless of where they start, has an opportunity.”

Mr Turnquest’s sentiments were echoed by Mr McCartney, who said all Bahamas-based banks - apart from Bank of the Bahamas - will not do business with web shops because of concerns over “where the funds originated from at the time they were made legal”.

He told Tribune Business: “There was a significant amount of funds that they had from then that would not have been legal, and if they are able to use those funds, it would certainly be to the disadvantage of legitimate businesses competing with them. That would certainly be a concern.”

Mr McCartney added that the Government still did not know where all the funds circulating in the web shop gaming industry originate from, and it was still reliant on the operators and their auditors for this.

The Island Luck group has been the most aggressive expansionist among the web shop operators, moving into sectors such as construction, property development and management with Brickell Management Group, plus investment banking, securities and insurance.

Investar Securities, a newly-created broker/dealer and investment house, lists Mr Bastian as a director, while Paul Major, head of Brickell Management group, also sits on Investar’s Board as vice-president and secretary.

Another group entity is understood to be BMG Insurance Agents and Brokers, which shares the same initials as Brickell Management Group, and is chaired by Mr Major, who is also head of the Bahamas National Festival Commission (Junkanoo Carnival). Brickell Management Group and BMG Insurance Agents and Brokers share the same address at 601 East Bay Street.

One financial industry source, speaking on condition of anonymity, questioned the speed with which these entities had been able to obtain licenses from the likes of the Securities Commission and Insurance Commission.

And Tribune Business revealed earlier this week that Brickell Management Group (BMG) has entered the public-private partnership (PPP) market through a contract to construct a new “multi-purpose” government office complex on Harbour Island.

Brickell’s real estate developments include the Venetian West out at Old Fort Bay, and the Venito West at Westridge. It also manages a property portfolio that includes Aventura Plaza on JFK Drive, plus assets on Madeira Street and Rosetta Street.

There is nothing to suggest that these businesses are being financed with illegal, illegitimate profits from the web shops’ pre-legalisation days.

However, Venetian West was launched in 2013 prior to the Gaming Act’s passage. Media coverage at the time said it was being developed by the Quantas Investment Group, whose president was named as Jeffrey Kerr.

Mr Kerr was named in recent Gaming Board advertisements, relating to Island Luck’s acquisition of a majority 65 per cent equity stake in the Bahama Dreams web shop chain, as the owner of 50 per cent of Island Luck.

Several private sector sources have expressed concern to Tribune Business that the web shops’ arguments in favour of their 10-year moratorium were “disingenuous”, given the speed at which they have entered other industries.

“They’re going to run the politics and the economy,” said one businessman ruefully.

Prior to legalisation, some web shops - unable to deposit monies with the commercial banks - were investing in legitimate sectors of the Bahamian economy, and lending monies in a bid to generate returns. The industry also remains in the money transmission business.

Comments

JohnDoe 8 months ago

One of the reasons I am so pessimistic about our future is that we have party leaders like Bran whose lack of substance on a range of issues is just stunning. At least Turnquest on occasions make a little sense, however, on this issue he has missed the mark. Whereas lack of access to capital is certainly a barrier to business success, merely having capital is certainly no guaranty of success which makes the above statements in my view absolutely nonsensical. Success requires not only capital but innovation, successful market offerings, value creation as well as sound business acumen. Prior to webshops over 95% of the capital in this country resided in the hands of less than 2% of the population. Turnquest says we do not want to establish oligarchies but the fact of the matter is that is what we have had way before webshops. Wake-up everybody. Due to structural constraints in our economy, capital and access to capital have historically remained stagnant in the hands of the privileged few with the average Bahamian having little to no access to risk capital. Our economic system and traditional financial institutions have reinforced these structural constraints by the manner in which they have operated in our country over their entire one-sided relationship with us. The seminal economic question for all of us should be "why has capital remained so stagnant in this country and what are the institutional or other barriers to access to risk capital and business related credit in this country and why do these barriers exist". That is where the real conversation and dialogue about national economic development should begin. We can develop a thousand national economic plans but until we find answers to those basic questions we are only wasting time and we will remain stuck at the starting line in the get set position without equality of opportunity that allows the full expression of Bahamian entrepreneurship. In my view the only thing these guys have proven is that if Bahamians have access to capital or in other words access to opportunity, average Bahamians can drive first world quality economic development even in the Bahamas. I and many of my expat friends own units in Venetian, and for Bahamians to have designed, construct, develop and operate a real estate project the scope of Venetian, which in my view is comparable to any high-end gated community in the USA, proves that with capital average Bahamians can compete with any foreign firm if given the opportunity.

0

Sign in to comment