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Business Bites: Shifting Sands In The Way We Spend Money

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Richard Coulson

By RICHARD COULSON

I have been reading about a new Sand Dollar - not the physical sea urchin, but an immaterial financial concept based on digital technology. We will never see a Sand Dollar to hold in our hand, just a numeral in an account statement.

The digital Sand Dollar is a work-in-progress by our Central Bank. It will not be a separate currency from the Bahamian Dollar, unlike the Bitcoin and its many competitors. It can best be described as a procedure, a process to allow Bahamian Dollars (B$) to be transferred more easily and cheaply than at present, whether by a shopper to a merchant, a diner to a restaurant, or a company to an employee, with the long-range objective to “ensure minimum levels of access to banking and payments services to geographically remote parts of The Bahamas.” This clearly implies a sharp reduction in the use of cash and even cheques.

To reach these admirable objectives and make the procedure work, a great deal of technology must be put in place, as when Paypal was first created. It’s all summarised in reports and press releases from the Central Bank, but of course is far too complex to be understood by the typical end users. The Central Bank on May 30 signed an agreement with a technical services firm named NZIA Limited, enjoying close links with IBM and a digital specialist in Singapore.

NZIA will now be analysing the potential market for the Sand Dollar procedure in Exuma and figuring how best to introduce it. The Bank chose Exuma for a trial run, presumably because it has fewer bank branches and ATMs per capita than New Providence and yet a large enough population (about 8,000) and commercial activity for a meaningful experiment.

NZIA, with the Bank firmly behind it paying installation expenses, will undertake a major campaign to convince Exumans that it’s really easier than carrying cash around or writing cheques and cheaper than using a card. As I see it, the required steps must include the following:

Identifier log-in: every individual user must have a confidential way of accessing his bank account. Since cards will not be used, a PIN code must be memorised to tap into a computer or smart-phone. (For those few Bahamians still without a current account, apparently the Central Bank will provide one.)

Two-way street: every transaction will have two ends - the originator with his PIN and the counterparty recipient with an electronic link, not a clunky physical verifier device.

As soon as the technology is in place, Governor Rolle tells me the Bank will put its publicity department to work devising the brochures and online pictures explaining how it will work. I foresee one of our expert graphic artists creating a new family of stick-figure cartoons. They will be needed - even in sophisticated Sweden, I understand the older generation has been slow to evolve away from cash usage.

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Randy Butler

Govt right to rule out direct aid to Sky Bahamas

I have often urged that our domestic airline routes be privatised, with Bahamasair sold off to an investor-owned company. Recent events show that privatisation alone is not the answer for a successful airline business. Sky Bahamas is owned by Capt Randy Butler and other Bahamians and now seems on the verge of collapse, an unhappy outcome for an airline that was always my favourite choice for Georgetown, Exuma, with three reliable daily round trips.

Capt Butler puts the blame on government, pointing at unfair subsidised competition from Bahamasair, as well as wrongful suspension of the essential operating licence by the Civil Aviation Authority. But any impartial observer cannot avoid speculating about either extreme family misfortunes or bad management practices.

The fleet has shrunk to two aircraft making fewer flights, with passenger complaints about delays and cancellations. The once key destination of Freeport was abandoned last year, although Sky’s competitor Western Air operates its principal hub there, with its own terminal facility. Further, Sky’s debt service obligations to Lynden Pindling International for landing fees and passenger charges are only partly paid.

As the continued licence suspension has killed off operating revenue for several weeks, it’s hard to see how Sky can survive unless helped by “strategic investors”, who Capt Butler claims are in negotiation. Any such result may not restore Sky as an independent operation, but leave it simply swallowed up as part of a bigger airline, possibly Western, as neither American nor Delta are likely interested in offering a bailout.

Government quite rightly will remain aloof from direct aid to Sky Bahamas’ owners but will want to see a solution giving fair employment to the trained pilots, flight attendants, ground crew and mechanics who served Sky so well. And the decks will then be cleared for arranging a Bahamasair privatisation, using local capital and expertise.

Bonds now listed on BISX - overcoming political indifference

Another example of the more enlightened policies being followed by our Ministry of Finance and Central Bank is the announcement that government bonds (officially Bahamas Government Registered Stock, or BGRS) are now listed on BISX.

Awaited ever since BISX was founded 20 years ago, it took the initiative of Minister Turnquest and Governor Rolle to overcome the political indifference and bureaucratic inertia that stalled this logical move.

BISX chief executive Keith Davies is naturally elated at the success of his long campaign. Now, over $3 billion principal amount of bonds are added to the All-Share Index, nearly doubling its value from the corporate equities and debt securities already listed. The BGRS’ original listing fees and eventual trading fees will provide a revenue increase to fund improved BISX trading platforms and education and publicity campaigns.

Once BGRS trading begins in early November, about 200 outstanding BGRS tranches will be available, all with the same “Bahamian Triple-A” rating but with different interest coupons and maturity periods. Thus, the differing yields to maturity will cause each tranche to trade at a separate price, so that a true transparent “yield curve” will soon evolve. This will set a benchmark for prices of all lower rated corporate or agency bonds, and encourage active trading.

Although present publicity speaks only about improved management of public debt and lower costs for bond trading, I hope to see a spill-over into the capital market for equities. With the present 11,000 small shareholders in APD, I estimate there must be close to 20,000 total BISX equity investors, and Government policy is clearly in favour of wider wealth ownership.

One positive step in this direction would be granting a two-year business licence exemption to any viable company that “goes public” with a distribution plan to attract at least 5000 shareholders. Doubtless other incentives could be offered, without ever the socialist measure of compelling public ownership.

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